For the first time since hitting bottom, U.S. freight capacity and for-hire rates are showing real signs of recuperation; while in Canada, the president of the Canadian Trucking Alliance (CTA) is surprised—and, frankly, a little disappointed—that more unsustainable, inefficient truckers didn’t die following the global economic collapse.

Speaking at an industry event in Toronto recently, CTA boss David Bradley said too many trucking companies are still chasing too little freight, driving rates ever downward.

“I’m sure we’re all going to talk about our failures,” he said, referring to the conference theme of successes and failures in transportation and logistics trends. “If I had to pick the failure of the trucking industry in the last couple of years, it would be that not enough companies failed. We were hoping for the great cleansing to come and it didn’t happen.”

Bradley was mostly referring to carriers, big and small, who arguably should have been squeezed out of the market months ago but instead have been strategically buoyed by banks and financiers whose interest in getting paid doesn’t necessarily supercede the sour taste left by foreclosure and seizure of near-valueless iron.

But even as balance sheets are in tatters as debt:equity ratios have climbed, Bradley notes, perhaps even with a hint of admiration, that truckers have always been a tenacious bunch.

“It takes a lot to kill a trucking company,” he mused.

Especially, apparently, in Canada. Following a solid start out of the gates in the first quarter, freight base rates for general trucking dipped back down in the spring, according to the Canadian General Freight Index (CGFI).

Compare that to the trend south of the border, where brokers and shippers are reporting equipment shortages in certain markets and companies are surprised to find themselves in bidding wars to guarantee space, long-term. As a result, truck rates are driving up faster than expected on several lanes.

The Journal of Commerce recently quoted providers who report truckload rate increases at around 10 percent; and more than double that in a few niche lanes.

“In certain markets I’d put it as high as 30 percent,” Gail Rutkowski, president of Wabash Worldwide Logistics in Chicago, told the JOC.

“In some markets you can’t even buy a truck.” 

Eventually truckers will follow the money, but the
big response to changes is going to come late

In a follow-up interview, Bradley offers a few theories as to why the freight rebound is much less pronounced in Canada.

First off, the recession in the U.S. was far deeper and, simply, the ceiling for recovery is higher. But more importantly, the price of the Canadian loonie, specifically dollar-aggregate demand, “led to a diminution of the southbound market, which represented the major source of our industry’s growth for the previous 15 to 20 years.”

While he feels things are stable in Canada and there’s early signs of a turnaround, carriers are still feeling the effects of cross-border capacity shifting to the less valuable domestic market.

In effect, the northbound run back into Canada has now become the headhaul. The problem, though, is getting loaded trucks down there in the first place.

Nowhere is that truer than on our Atlantic wing where most of the major southbound lanes have dried up. Truckers have been known to head south partially or even fully empty in order to get U.S. freight back home, says Shane Esson of Moncton-based Keltic Transportation.

“We’re having a very difficult time with exports. In our typical industries like pulp and paper, frozen foods, seafood and peat moss, there are fewer players in manufacturing. Less freight coming out of here has taken the rates and driven them down.”

Luckily, many American truckers still don’t like crossing the northern border. “The only thing we’re seeing rates come back up on is freight coming from the U.S. over the last couple of months,” says Esson.

While volumes are still far below the record levels of a few years ago, the quantity of freight is steadily climbing in both countries. The biggest problem, then, remains the chasm between base load pricing and volume; and while there are market forces at play, closing the gap ultimately rests with truckers, says Noël Perry, a partner with FTR Associates.

“Truckers,” he says, “are, quite frankly, lousy pricers. They’re notoriously complacent and often extremely afraid to take any leadership position in the market and therefore pricing always lags in an upturn.

“Many seem to think they can turn a switch on and prices get raised and they don’t seem to understand the kind of preparation it takes to get a price increase.”

It’s possible, says Perry in response to a query on the differences between current U.S. and Canadian market trends, that there are simply fewer Canadian carriers with the kind of leverage to influence new pricing ­standards in the infancy of the economic recovery.

Perry also notes that while bankruptcies have a major role in capacity supply, relatedly, shortages are principally caused by carriers not adding capacity when the market expands.

That’s particularly the case in the spot-market/random-freight sector, which is arguably experiencing the most acute capacity crunch and rate increases. Perry says the implications for the overall supply chain are significant.

Like the loans market during the ought years, the price gap between “good and bad” freight — that is to say nicely balanced, scheduled, and easy-to-move loads compared to sporadic, random stuff — narrowed to the point where asset-intensive carriers left the spot-market lanes, explains Perry. Although much of the slack was picked up by brokerages, smaller, more versatile (but more vulnerable) carriers and owner-ops became the principal haulers.

Today, they’re also the transport providers most likely to be shut out by banks at a time when capacity expansion is starting to make some sense. “What we know is that the economy produces more random freight in an upturn. So, if we’re going to have capacity problems, they’re going to be much worse in the random route segment.”

Perry says customers are being confronted with much higher costs on their activities that require random freight such as emergency, inventory re-supply, promotions “and, generally, the kind of stuff where you need 200 trucks for two weeks.

“In the old days you handled that by ordering up a truck. That’s not going to be as easy anymore.”

Eventually, more truckers will follow the money, but not without some delay. How long will it take for banks to start lending to truckers, especially smaller players, again? “They’ll probably have to prove themselves with a couple of years of profits,” says Perry.

“So,” he predicts, “the big response to these changes is going to be a year or two late.”