TORONTO, Ont. — Current concerns about rising transportation rates and insufficient capacity are widespread and point to long-term issues, particularly in the trucking sector, editorial director Lou Smyrlis told members of the Canadian Industrial Transportation Association (CITA) this week.
Smyrlis was a guest speaker at the CITA’s annual conference held in conjunction with the TRANSPO 2005 show. CITA members spend more than $6 billion annually on transportation services.
He presented the results from the Transportation Buying Trends survey recently completed by B.I.G.Transportation Media (the parent company of Truck News, Truck West and Motortruck) in partnership with CITA and CITT. The survey included the responses of more than 600 shippers across Canada.
"More than 60% of respondents said their rates have increased over the past year, regardless of mode. And 80% of those using truck transport were paying higher rates," Smyrlis told the sold-out conference. In comparison, only 25% of shippers reported a rise in truck rates back in 1999, the last year CITA conducted a similar survey of transportation buying trends.
Smyrlis added that transportation rates are rising even faster on the other side of the border, pointing out 82% of American shippers reported higher transportation prices in the fourth quarter of 2004 and expected freight rates across all modes to go up another 4.5% on average, across all modes, for 2005.
Part of the reason for the increase in costs can be attributed to the improving economy manufacturing shipments were up a brisk 8.2% the first three quarters of 2004 compared to the previous year and despite a slowdown in the final quarter, end-of-year volumes finished much higher than 2003 and 2002.
"But there is something different about the way transportation prices are being affected by the current improvement in the economy and the boost in demand for transportation services. We didn’t experience such rate increases over the past 15 years. So why now?" Smyrlis said.
Central to the rise in pricing are several surcharges. More than 90% of shippers using either courier, truck, or air freight transportation are now paying fuel surcharges, according to the results of the Transportation Buying Trends Survey.
Fuel costs are representing almost 25% of truckload costs for some shippers in certain lanes, according to Smyrlis.
The survey also found that about a third of shippers are paying detention charges for keeping their carriers tied up at the loading dock; a quarter are paying a surcharge for border delays; another quarter are paying a surcharge to reimburse carriers for costs related to the new border security programs; and 13% re paying a currency surcharge.
Smyrlis told CITA members that while there’s reason to be optimistic for a drop in fuel surcharges, the situation for border-related surcharges will likely worsen.
"We are not seeing a relaxation in legislative activity as may have been hoped three years after 9/11. In fact, the opposite will be true over the next couple of years and much of the focus will be on transportation, which is now considered the weak link in the security chain by many in Washington," Smyrlis said. "Congress is putting pressure on U.S. Customs and they in turn are putting the screws to American importers to hold their foreign suppliers — shippers and their carriers — to stricter standards of security."
The Transportation Buying Trends Survey also found a great degree of concern about capacity among users of truck transportation. Almost half of the shippers surveyed said they were concerned there was not enough market capacity to handle their shipment needs.
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