TORONTO – Shippers and freight carriers are feeling pretty good about 2011 as truckload, LTL, and rail are all poised to operate at "suitable levels of capacity," according to the latest ‘Road & Rail’ industry expectations survey conducted by Cormark Securities and the Canadian Institute of Traffic and Transportation.

That bodes particularly well for highway carriers who emerged from the downturn relatively healthy "given (how) overcapacity and difficult pricing significantly contributed to undermining profitability during the recession" in that sector.

However, shippers indicate that they expect rail to maintain its edge in pricing power given that many truckload fleets are still facing difficult conditions due to overcapacity in certain sectors and low barriers to entry.

"That said, TL capacity can be adjusted quickly, while LTL capacity is sticky given it is far more terminal-intensive," the report stated.  

Shippers expect transport rates to increase,
although how much will vary by sector.

Catalysts that could tighten supply in trucking further, the survey noted, include the new CSA safety rating system and revised hours-of-service rules in the U.S, which is likely to decrease allowable driving hours.

Most shippers, though, find trucks’ service performance holding firm or increasing, "driven by trucks’ efforts to recover lost business," and as a result don’t plan on shifting their transportation spending to other modes in 2011.

"The industry had become far more competitive last year, given the intensity of the downturn and growing uncertainty surrounding customer demand," the reports states. ‘The level of competition amongst providers appears to be moderating, given capacity has been reigned in and modest economic growth this year, aided by improved confidence, stimulus spending and strong import/export trade, especially with Asia."

Both carriers and shippers are confident they’ll grow next year, but in a complete role reversal from last year’s survey, shippers this time indicated they’re slightly less optimistic than service providers," which, the authors add, "is understandable given perhaps shippers’ increasing concern regarding the pace of economic recovery."

Overall, industry players expect volumes to increase in the mid to high single-digit range next year (compared to their projection last year of high single-digit growth), which Cormark says is a good sign "considering volume comparables have become more difficult as 2010 has progressed."

As well, respondents appeared equally confident about core pricing growth (excluding fuel surcharge), projecting a low single-digit increase in 2011 compared to their projection last year of flat rates.