The View with Lou: Pandemic Pain

First, it’s important to understand just how different from the norm 2020 has been. Our recently completed Transportation Buying Trends Survey of Canadian shippers (using all modes) found that a whopping 59 percent ended up decreasing their freight volumes this year over the previous year. In the almost 20 years since I started this survey with the help of CITT and FMA, that’s by far the highest number of shippers reporting a decline in their freight volumes year over year. Even in the midst of the Great Recession a little over a decade ago, the number of Canadian shippers reporting a drop in freight volumes was 12 percent lower.

It would take quite the economic recovery, one would think, for freight volumes to climb out of such a hole and transportation pricing should be a bargain in the meantime. After our economy started shutting down as a response to Covid-19, the truck-to-load ratio on the Canadian spot market had ballooned in April to a mind-boggling 5.64. That meant there were more than five trucks available for every spot load that needed to be moved. I had never seen anything like it.

And yet, the freight recovery did begin soon after. By July, a quiet month that normally registers a drop in freight activity, spot market load volumes actually increased from the previous month. More importantly they showed a slight increase year over year. The economy was showing signs of life and so were freight volumes. By October, we had experienced six straight months of load volume growth and the month showed an 18 percent year-over-year increase.

This increase in freight volumes combined with capacity starting to tighten once again. The pandemic had hastened the retirements of many senior drivers, and licensing and training facility closures were preventing new entrants from obtaining commercial licences to take their places, keeping capacity tight.

Shippers responding to our Transportation Buying Trends Survey thought both Truckload and LTL to be at balanced capacity and heading towards tightening capacity, a distinct difference from the abundance of capacity witnessed a few months earlier. And, of course, tightening capacity contributed to expectations among motor carrier executives of higher contract pricing for 2021.

Certainly, motor carrier executives are becoming demonstrably more optimistic. Trailer orders from U.S. and Canadian fleets, a leading indicator of trucking market conditions, shot up to 54,200 units in October compared to just 300 units in April, their lowest point in the modern era. Class 8 truck orders also surged, from a record low 4,000 units in April, to a robust 40,100 in October.

But can the economic recovery be sustained in the face of a surge in Covid-19 infections in Canada, and a calamitous situation south of the border? (As I write this, more than 2,000 have died in the U.S. in one day, for the second day in a row.)

In the U.S., for-hire truck tonnage dropped 6.3 percent in October and was down 8.7 percent year over year.

The Canadian Spot Market Report, produced monthly by Loadlink Technologies, shows what an impact Covid-19 has had on truck freight and how quickly that impact has been felt. As pandemic cases surged in October across Canada in October, new efforts to stem the outbreaks impacted the economy and altered freight flows, particularly in the hard-hit provinces of Ontario and Quebec.

Although the overall spot market improved, Loadlink’s busiest corridor between Ontario and Quebec saw an average of 15 percent less freight, both inbound and outbound. Intra-provincial freight within Ontario and Quebec also fell three and nine percent, respectively.

It’s exactly this kind of volatility that will plague this year’s contract negotiations with a great deal of uncertainty.