Ontario trucking survey shows summer slowdown

TORONTO: A drop in optimism regarding prospects over the next three months may reflect growing economic uncertainty, according to the latest Ontario Trucking Association (OTA) quarterly survey of the trucking industry in Ontario. While the majority of responding carriers (64 percent) said they were optimistic about future prospects, the figure was down eight percentage points as compared to the second quarter.

The number of carriers who reported they were unsure about the industry’s prospects increased to 26 percent—up five percent from last quarter. Still, only nine percent of carriers reported pessimism. Over 50 carriers participated in the survey, conducted electronically between July 4 and 25.

Freight volumes
Overall, 67 percent of respondents said freight volumes had increased compared to a year ago.  However, fewer respondents indicated freight volumes have improved compared to three months ago. Sixty-two percent of respondents indicated intra-Ontario freight volumes are about the same as volumes three months ago, while 32 percent said volumes had improved.

A similar performance was reported in the inter-provincial market, with 49 percent indicating freight volumes had stayed the same (up 13 percentage points) and 44 percent indicating volumes had improved, down 16 percentage points from last quarter.

Carriers reported a softening in US markets. Thirty-one percent of respondents said southbound US volumes had decreased compared to three months ago, up 14 percentage points from last quarter. Only 19 percent of respondents said volumes were improving and half of respondents said volumes were about the same. In the northbound US market, just over half (51 percent) of respondents said freight volumes were still improving, but this was down 10 percentage points from last quarter.

All costs increasing for carriers

Carriers are facing across-the-board increases in all major operating costs compared to last year, the survey said. Thirty-eight percent reported fuel cost increases of between 15 and 20 percent over the past year, while 23 percent of respondents reported increases of greater than 20 percent.

The costs of maintenance and tires are on the rise with 98 percent and 89 percent of respondents reporting increases, respectively. Sixty-four percent reported maintenance cost increases of 5 percent to ten percent, while 61 percent reported similar tire cost increases . Labour costs are rising, the survey said, with 91 per cent of carriers reporting increases in driver wages.

Loaded miles/length of haul

Forty-five percent of respondents indicated loaded miles are increasing.  Seventy-two percent reported that the average length of haul is staying the same, while 18 percent reported it is increasing.

Rate Environment

Twenty-six percent of respondents said intra-Ontario freight rates were improving, up four percent from 2Q11, but 61 percent reported that rates were about the same. Forty-six percent of respondents reported improving rates in the inter-provincial market. Continued weakness was reported in the southbound US market, with only 14 percent reporting rates were improving—down 11 percentage points since last quarter.  Fifty-eight percent reported rates were about the same.

Northbound US rates remain stronger. Over half (55 percent) of respondents reported rates were improving, down four percent from last quarter. Forty-one percent indicated rates were about the same.

Capacity

Thirty-nine percent of respondents reported capacity had stayed the same over the last quarter, up 11 percent from 2Q11. In addition, 29 percent reported capacity had decreased from last quarter.

Drivers/owner-operators
Carriers remain split on whether to hire or not. Fifty-one percent said they plan to add more company drivers while 47 percent said they have no planned changes to the net number of drivers. Forty-nine percent said they plan to add more owner-operators, while 51 percent said they plan no net change. However, no respondents are planning on reducing the number of owner-operators over the next three months.

Equipment

Further indications of tight capacity to come are from the majority of respondents (54 percent) who said they plan no new additions to their fleet of tractors. Similarly, 53 percent plan no net change in the number of trailers in their fleet.

Shippers

As fuel prices continue to drive up carrier costs, most shippers appear willing to accept fuel surcharges, as 85 percent of respondents reported customers are paying a reasonable fuel surcharge. The majority of respondents (70 percent) report contract timeframes are not changing, although 21 percent reported customers are lengthening contract timeframes, locking in capacity. A third of carriers reported shippers are taking longer to pay bills, again reflecting a softening in economic activity.