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Motor carrier confidence weak despite volume increases in Q2: OTA survey

TORONTO, Ont. -- Ontario motor carriers continue to be uncertain about industry prospects despite recent improvements in volumes, according to the results of the Ontario Trucking Association’s (OTA) second quarter survey of business...

TORONTO, Ont. — Ontario motor carriers continue to be uncertain about industry prospects despite recent improvements in volumes, according to the results of the Ontario Trucking Association’s (OTA) second quarter survey of business conditions in the sector. In the survey, which was conducted electronically throughout the month of April, Ontario motor carriers reported increased freight volumes in three of the four lane segments monitored by the OTA (intra-Ontario, interprovincial, US southbound, US northbound) in the last three months.

“But it doesn’t appear the recent boost is translating into confidence that volume will continue to increase during the third and fourth quarters,” OTA officials said in a release.

Despite what is considered a traditionally soft season for shipping, 28% of carriers in the second-quarter survey reported intra-Ontario freight volumes improved over the last three months (compared to 19% and 21% in the last two quarters, respectively). That is the highest rate surveyed since the fourth quarter of 2011. At the same time, however, those who indicated decreased volumes also jumped from 16% to 31%. The “bipolar” signals naturally led to a fall in the rate of carriers who indicated volumes had not changed (from 65% to 42%), the OTA reported.

Inter-provincially, though, the rate of carriers who reported increased volumes rose to 33% from 21%, while northbound US volume increases were reported by 39% of carriers, compared to 26% three months ago. The only segment where carriers did not indicate improving volumes was southbound US (14% down from 17% while 59% maintain no change), although those who said volumes dipped in this lane also fell from 34% to 28%.

Still, the improved freight volume isn’t reflected optimistically in carriers’ outlook for the next six months, according to the OTA’s report. In fact, only 25% of carriers indicated they expect improved volumes during that span, down from 40% last quarter. Inter-provincially, carriers who expect no change didn’t budge from 59%, while there was a 10% shift away from carriers who foresee improvements to those that anticipate volume decreases. Over half of carriers continue to expect both southbound and northbound US volumes to be frozen, although there was a small boost upward in carrier optimism regarding the latter, from 37% of carriers to 44%.

Pricing remains flat overall, but with red flags of softening rates in most segments, the survey indicated. While nearly 60% of carriers indicate no change in Ontario trucking and 71% echo the same thing on inter-provincial business, carriers who reported decreased pricing rose from 26% to 35% and 12% to 21%, respectively. Southbound US rates continue to be in a major slump, with nearly half of carriers (48%) reporting depressed pricing – the highest level since the fourth quarter of 2009. Northbound pricing – considered the lone bright spot for the past couple of years – also appears to have softened. After rebounding from a three-year low last quarter, the percentage of carriers reporting improved pricing tumbled once again to 24% from 37%. Nearly 60% of carriers, however, reported no significant changes.

Capacity remains frozen for the most part as a large majority of carriers (67%) say they haven’t seen any change. In fact, the percentage of carriers who say capacity increased dropped to just 15% – tied for the lowest level since the second quarter of 2010. Those who expect increased capacity over the next months also fell to 13% – the lowest OTA’s survey has ever recorded. Only 18% of carriers said they plan to add drivers in the next three months, down from 42% last quarter. For several consecutive previous quarters, between 40% and 49% indicated they would add drivers going forward.

Despite clear indications that capacity is tightening, shippers still don’t appear to be locking in capacity at a greater rate. Only 15% of carriers indicated customers are lengthening timeframes of contracts. On the flip side, however, customer stability is high as 80% said contracts remain unchanged.

On the bright side, shippers are doing a relatively good job paying their bills in a timely manner, the OTA reports. After jumping 10 points to 30% last time, the percentage of respondents who say customers are taking longer to pay freight bills quarter-to-quarter settled back down to 23%; while those who said receivables are delayed compared to the previous year fell to just 18%, the lowest since the first quarter of 2011.

What doesn’t change from quarter to quarter are carriers’ largest expenses. As usual, fuel, equipment and labour rank highest in carrier operating costs. On the latter point, carriers continue to make more of an effort to recruit and retain drivers. A whopping 80% say they are paying 2-5% in wage increases for drivers compared to 66% who said so last quarter.

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