OTTAWA, Ont. — Although it may be late 2009 before the economic picture brightens, Canadian Trucking Alliance chief David Bradley says trucking companies should enjoy better times as demand for trucking services will eventually outweigh supply.
Bradley predicted trucking rates, which have been hammered over the past 18 months, will rebound as the North American economy rebounds late next year.
“It’s been a tough year for everyone, motor carriers and shippers, and this has resulted in downward pressure on freight rates in 2008. But shippers would be advised to partner with carriers now to lock-in capacity for when things do inevitably start to come back, which we hope will be sometime in 2009,” he said. “Some shippers get it and are now entering into multi-year agreements with carriers.”
The current downturn has decimated the industry, wiping many small – and some not so small – trucking companies out of the market. Sky-high diesel prices and a lack of freight demand, especially in north-south lanes, has taken its toll, noted Bradley. However, he said this will present opportunities for survivors.
“Most carriers experienced softer freight demand in 2008, though some sectors of the industry and some regions of the country have, like the economy, been harder hit,” he said. “It doesn’t matter where you operate, all carriers faced a major challenge this year with sky-rocketing diesel fuel prices and a slowing economy. Obviously, the appreciation in the value of the Canadian dollar and slump in the US economy continued to have a profound negative impact on the Central Canadian economies and therefore on the volume of freight, especially in southbound freight to the US which had been the underpinning of industry growth for the past 20 years.”
“Carriers have been reducing their fleet sizes, getting rid of trucks and not buying new ones,” he continued. “Many trucking companies have left the market; either because they decided they’d had enough, or they couldn’t get sufficient credit and/or they went bankrupt. Tighter credit has also made it more difficult for people to enter the marketplace. While there will continue to be tough sledding in 2009 – reflecting current global economic concerns and, as always, punctuated by a chronic long-term labour shortage – capacity of trucking services will be that much lower when things do turn the corner.”.
In 2009, Bradley hopes to see the Canadian dollar stabilize.
“The modest depreciation of the Canadian dollar that we have seen this autumn is not unwelcome, but when a currency loses almost 20% of its value over a period of weeks, then jumps back by 4% in one day, it’s hard to run a business.”
Bradley also welcomed the declining cost of fuel, however, he warned fuel prices have only dropped as a result of the world being on the brink of recession.
“The price of diesel fuel is still extremely high compared to where it was just a couple of years ago and is subject to wide fluctuation day-by-day. The industry still needs fuel surcharges,” he advised.
Bradley also took the opportunity to recognize several achievements made by the CTA over the past year, including: receiving a promise from PM Stephen Harper to slash the federal excise tax on diesel by 50%; securing funding from Transport Canada for the ecoFreight program; receiving an excise tax refund for fuel used to power anti-idling systems; harmonization of the PIP/CTPAT border programs; defeating anti-replacement worker legislation; and lobbying for more border funding.
“We have our work cut out for us in 2009, there are plenty of issues to keep CTA and our partners in the provincial associations busy,” said Bradley. “We will still have a minority government in Canada, with a new cabinet supposedly designed to deal more effectively with the economic challenges that confront the nation. It will be interesting to see how they manage the need for action on so many fronts (e.g., business input taxation, infrastructure investment) in the face of a very tight fiscal situation. There will be a new administration in the US and it will be interesting to see how it tackles trade and security issues, infrastructure financing, EOBRs, etc.”
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