TORONTO — The rising cost of fuel and the possible supply chain fallout from the Japanese tsunami is having a minor dampening effect on Ontario carriers’ business outlook.

In its latest Business e-Pulse survey, the Ontario Trucking Association says optimism about the industry’s prospects over the next three months is still high – at 72 percent – but slightly down 3 percentage points from the peak level of optimism recorded in the 1Q11 survey.

Still only 7 percent of respondents reported pessimism about the industry’s prospects, while 21 percent said they were unsure.
As well, a majority (58%) said their freight volumes had increased compared to last year in all regional markets – an improvement over three months ago.

(53% reported increased intra-Ontario freight, inter-provincial volumes jumped impressively by 60%; while northbound US freight remains strong at 61% — up 18 points from the last survey – and even weaker southbound lanes were reported by 39 percent to be higher).

RATES & CAPACITY

Respondents reported cautious improvement in the freight rates, with percent characterizing the pricing environment for intra-Ontario freight holding steady, while those who reported an improvement increased from 16 percent to 22 percent this quarter.

Ontario freight rates finally have a stronger pulse,
but capacity starting to trend up again, “possibly
reflecting some economic slowing.”

Northbound U.S. freight reportedly increased by the largest margin (up 20% to 59 % of respondents). Thirty-nine percent (+14%) reported stronger rates for inter-provincial freight.

Meanwhile, there are tentative signs of improvement in southbound U.S. freight, OTA carriers report, with 25 percent indicating an improvement, up modestly from last quarter. Still, 27 percent continue to report slumping rates on these lanes.

The share of respondents who said that capacity decreased jumped by 15 percentage points to 38 percent.

"While this shows capacity tightening, things will remain choppy for a time," states OTA.

Thirty-four percent said capacity increased over the past quarter, and another 39 percent expect it to tend upwards over the next six months, "possibly reflecting concerns over economic slowing."

Meanwhile, carriers remain split as to whether they should begin to add manpower or not. Forty-eight percent said they will look at hiring more company drivers while 49 percent said they have no planned changes.

The same split exists for plans to hire more owner-ops.
Faced with increasing fuel prices, carriers appear to be running into some headwinds in terms of recouping fuel surcharges.

While a strong majority (78%) report that customers are generally paying a reasonable surcharge, this is down 10 points from last quarter and the lowest number ever reported in the history of OTA’s survey.

There’s some indication, though, that more shippers are beginning to lock in capacity as 39 percent reported customers are lengthening timeframes in contracts, up 9 points from last quarter.