TORONTO, Ont. – Shipper concerns about capacity are easing but even if there is slight improvement in the short term, the capacity crunch will prove a long-term issue, Transportation Media editorial director Lou Smyrlis informed shippers and carriers attending Transpo 2006 this week.

The annually held Transpo is put on by the Canadian Industrial Transportation Association. Truck News’ sister publication,Canadian Transportation & Logistics, is the media sponsor.

Smyrlis acknowledged there is good reason at the moment for shippers to look forward to an improving capacity situation, and with that perhaps some relief in rate pricing.

The North American economy is expected to slow in the second half of next year, particularly if the predicted pullback in consumer spending occurs and new housing starts fall off. There are also some sectors that are definite soft spots. Manufacturing in general is feeling less optimistic than the rest of economy, particularly in the Canadian heartland.

There’s also concern with regard to inventory levels. If managers who got caught with insufficient supplies after the hurricane season last year are responding by holding more safety stock this could make for surplus inventories by mid-year.

And looking at things on a more global basis, China’s GDP growth is expected to hold steady at above 9%. But the US accounts for up to 40% of Chinese exports. And therein lies the risk. If US demand sputters in the second half because of a slowdown in consumer purchases, it will certainly have an impact on China, which has served as the global economy’s engine of growth.

“And looking specifically at capacity increases for each mode, it’s hard not to notice the amount of new iron being purchased in the trucking sector. Class 8 sales have been breaking records on both sides of the border,” Smyrlis said.

In rail, CPR’s Western Corridor expansion is expected to add about 12% to capacity between Moose Jaw and Vancouver. CN’ expansion plans up to 2007 include about 30 siding extensions in Western Canada, and 20% boost to intermodal capacity. Domestic container capacity has also been increased by 10%. And there’s the plans for a 2 million TEU intermodal facility in Prince Rupert.

On the marine side, the decelarating trend in world trade combined with an expansion of the world’s container fleet has some experts predicting that rates will fall by 15% this year and another 5% in 2007.

“So you can see why shippers looking at a variety of factors may not be as concerned about capacity as they were in 2004 and 2005 and why they’re hoping rate relief. But I think there’s equally strong evidence that the capacity crunch will prove a long-term issue,” Smyrlis said. “I know shippers remain concerned about rail capacity but I’m not sure marine and particularly truck capacity will improve as much as may be hoped.”

He pointed out the shipping lines are going through another round of aggressive consolidation . And as long as port infrastructure remains inadequate there will continue to be pressure on capacity.

The trucking industry’s continuing inability to solve its severe driver shortage is a strong indicator that capacity will continue to be a problem. The average age of a Teamster’s driver is 57 and the the Canadian truck market hit an ominous mark in 2004, according to a study by Statistics Canada. For the first time, truckers aged 55 and over outnumbered those under 30, indicating that the occupation may be hit by a large number of retirements in the coming years.

“Only 5% of drivers were under 25 in 2004, compared with 15 per cent in the labour force as a whole. This indicates that today’s young workers are less inclined than the previous generation to enter the occupation,” Smyrlis said.

Owner/operator numbers are also in decline on both sides of the border. In Canada, for example, owner/operator numbers are down more than 12% since their height in the late 90s.

“There’s no point adding trucks if they don’t have the people to drive them,” Smyrlis pointed out.

Getting more out their existing human resources is also not a viable option for many motor carriers, Smyrlis cautioned. Productivity increases for US carriers peaked 6-7 years ago. In Canada trucking productivity has not seen a significant increase for more than a decade. And the new hours of service regulations in both Canada and the US will only makes things worse in terms of productivity.

Nor is there any significant increase in the number of small carriers or any significant improvement to their financial performance, both usual indicators of an increase in capacity.

In fact, he pointed out truck repossessions in the US shot up 188% in the third quarter of 2005 compared to the same period the year before. And the number of shipments handled by small truckload carriers in the first three quarters of 2005 declined 2.4 per cent.

“In Canada 25% of the small carrier sector has disappeared over the past 7 years or so, and I don’t think it’s coming back,” Smyrlis said.

“You also have to take issue with the significance of the record volumes of truck purchases among North American fleets. The truck manufacturers themselves feel that a good 97% of those purchases are for replacement purposes, not growth,” Smyrlis said.