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2013 Outlook Unclear for Ontario Truckers: Survey

TORONTO — "Contrasting trajectories of truck freight volumes and freight pricing appears to be further muddying the trucking economic forecast for the next several months," the Ontario Trucking Association (OTA) said in its first-quarter 2013 (1Q13) Business Survey.

The less-than-peak shipping season that closed out 2012 is also contributing to uncertainty for Ontario carriers, OTA said. The number of respondents who said they were “unsure” about the industry’s prospects jumped from 32 percent in the last survey to 56 percent. That's more than double from 2012's first-quarter survey, and, noted the OTA, "the highest level of uncertainty the OTA survey series has ever recorded."

The level of optimism about the industry’s prospects softened: 44 percent indicated they were confident about the next three months (down from 52% last quarter).

Outright pessimism also subsided as the rate of carriers who were not confident fell seven points to 9 percent, OTA noted.

The Gulf Between Freight Volumes and Rates

The gulf between rising freight volume expectations and a flattish pricing environment could be contributing to the lack of clarity, OTA said.

"Volumes in all sectors experienced only modest fluctuations over the last three months, with a majority of carriers continuing to report unchanged volumes from quarter to quarter," OTA said in its report.

There were fewer respondents reporting improved volumes in Intra-Ontario and southbound U.S. compared to 4Q12, however Inter-provincial and northbound U.S. volumes improved slightly.

Volume expectations for the next six months jumped across the board, OTA said. Fifty- to 60 percent of carriers surveyed don't expect changes in any of the four sectors, but there was significant increase in the percentage of carriers predicting near-term improvements:

Intra-Ontario: 40 percent from 32 percent in the last quarter — highest level since 2Q11.

Inter-provincial: 41 percent from 27 percent.

Southbound U.S: 34 percent from 25 percent (highest expectation for improved volumes in this market for two years)

Northbound U.S: 37 percent from 28 percent.

Pricing has not kept pace with carriers' high freight volume expectations, but it has remained stable throughout the recent soft economic conditions, OTA said. When asked to characterize the rate environment for Intra-Ontario:

69 percent indicated no significant movement

5 percent reported improved rates (down 18 percent from 4Q12)

"There is virtually no volatility inter-provincially as well, as 82 percent report an unaffected rate environment," OTA reported.

There was no change in carriers reporting lower rates in southbound U.S., OTA said, while northbound rate improvements rebounded up to 37 percent from the previous quarter's 27 percent.

The Song Remains the Same

Capacity is still at a standstill, OTA said, as carriers are being disciplined when it comes to adding equipment and drivers.

64 percent: carriers that said capacity in their segment remained the same compared to last quarter.

3 percent: the drop from last quarter in carriers that said capacity increased.

"Those rates are virtually identical to the responses of carriers projecting capacity for the next six months," OTA added.

The rate of carriers indicating customers are lengthening timeframes of contracts fell: from 27 percent to 13 percent. Carriers indicating no net change rose from 70 percent to 84 percent. Only 2 percent said timeframes were shrinking.

Money. Where is it?

The number of carriers that reported customers taking longer to pay their bills jumped to 30 percent from 4Q12's 20 percent. That's the second highest level in three years, OTA noted, and double 2Q12 reports. "Meanwhile, the percentage of respondents who say they collect accessorial charges from most of their customers remained at about a third — higher than the 24 percent who reported that was the case a year ago in the 1Q12 survey, but still a far cry from the 45-55 percent who indicated successful accessorial collection in late 2010 and early 2011.

Operating Costs Increasing

"While receivables are being extended, there is no such deferment for carriers in terms of their own costs," OTA said. "The vast majority of carriers continue to report increases in all the major components of operating cost, such as equipment and maintenance fuel, and labour. On the latter point, 66% of carriers indicate wage increases of 2-5% for drivers."

 
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