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Carriers Less Pessimistic About Third Quarter
Monday, 27 July 2009 00:00

More trucking companies are not looking back on the first two quarters of this year, as pessimism in the industry subsides somewhat, according to a recent survey by the Ontario Trucking Association. The OTA's Business Pulse e-Survey, conducted between July 6 through 20, indicates that the industry has less of a dim outlook for the future. However, respondents are still unsure about the prospects ahead, with the majority saying that the U.S. and Ontario have yet to hit the bottom.

The gap between those carriers with a positive versus negative outlook for the third quarter was nonexistent, at 32 percent each. The second quarter had 43 percent in the pessimist corner and 27 percent on the optimist side. While sentiments about the economic environment are definitely improving each quarter, there are still 35 percent of carriers that are unsure about the coming quarter.

Carriers did seem hopeful about the Canadian economy overall, with 52 percent who believe the country has reached a bottom. At the beginning of last quarter, only 25 percent felt the country had hit bottom. However, the U.S. and Ontario, in particular, did not fare as well. Those who were not convinced that the U.S. and Ontario will start improving amounted to 66 percent and 54 percent, respectively.

"While the results may indicate that the economy is inching its way towards staunching the bleeding, things are still very uncertain, especially for Ontario," said David Bradley, OTA president. "What we are seeing is an indication that economic activity may have or may be approaching the point where it has found the bottom; we are not seeing signs of meaningful growth and recovery at this point. There are so many variables right now—the US economy, the recent appreciation of the dollar, the availability of credit—that continue to overhang our view of things. I would characterize our outlook as being slightly more hopeful than optimistic at this point."

Meanwhile, the percentage of carriers who think Ontario has reached bottom increased to 46 percent from only 19 percent in the second quarter survey. Also, more carriers are hopeful that southbound freight volumes will improve over the next months, with 26 percent this quarter, compared to 16 percent who anticipate further deterioration.

Still, the survey points out that carriers are concerned that their services are being underappreciated as a result of decreases in freight rates.

"Most carriers would say recent rate discounts are way overdone," said Bradley. "We can blame shippers for being greedy and taking advantage of the desperation that some carriers are feeling, through using tendering processes that pit incumbent carriers against illusory rates suggested by unproven carriers who may or may not be willing and able to provide the service at those prices, or by changing the rules of the game. We can blame them for using load brokers who have no accountability to the actual cost of hauling a load."

Another major issue the survey points out is overcapacity. The survey found that 34 percent said capacity in their sector had increased over the last quarter, while 31 percent said it had stayed the same. Sixty-six percent of carriers do not expect to add to the net number of tractors or trailers in their fleets, and more expect to reduce these numbers in the period ahead.

"There are simply too many trucks for the volume of freight," Bradley said. "The industry has been shedding capacity and will continue to do so, but the decline in volumes has out-paced the reduction in capacity."

"The major reckoning in terms of capacity is yet to come in order to bring some semblance of equilibrium to the supply-demand equation," said Bradley. "But, it will and when it does—maybe even before the recession is over—whatever the surviving carriers have given up in rates will have to be restored. As fast as rates went down, they can go back up again. The question now should be when the correction takes place, not if."

Truckinginfo.com, 7/27/2009