The Ontario Trucking Association (OTA) used a weather analogy to characterize its latest Q3 business survey. And it's not a bad forecast: Partly sunny with reduced chance of showers.
The Q3 business survey of member carriers found rising optimism and a southbound US market that's primed for a turnaround. The association said this marks the most optimism expressed by fleets in the current year, with signs freight volumes and rates are stabilized and/or primed for growth.
The survey was conducted in July, with 67% of fleets saying their optimistic about their prospects for the coming quarter, up 22% from the start of 2013, reaching the highest level of optimism expressed since the third quarter of 2012. Only 23% of responding carrier said they were uncertain about their prospects, while twice that amount were uncertain in the Q1 survey. Here are the results, as reported by OTA:
Turn up the volume
Although there was a slight drop in the rate of carriers who reported improved intra-Ontario freight volumes over the last three months (28% to 23%), encouragingly, those who indicated decreased volumes plummeted down to 12% from 31% in the previous quarter. Carriers felt that stability had also been restored as 65% indicated no change, compared to 42% last time.
Carrier responses for freight volumes in Inter-provincial, southbound US, and northbound US lanes all mirrored the last quarterly survey, where 33%, 14% and 39% respectively indicated improvements and between 40 -60% reported unchanged freight levels.
While the average length of haul remains relatively unchanged for 77% of carriers, those who report overall loaded miles increased dramatically over the last year, from the mid 20-percent to 40%.
Looking ahead, 35% of carriers expect improvements in Ontario over the next six months (up from 30%), while, once again, the level of pessimistic respondents fell precipitously to 4% from 19%. Over two-thirds of carriers forecast no change. Inter-provincially, the 30% who predicted an improvement matched the last quarter. Southbound expectations are holding steady as 28% expect a boost, but more interestingly, pessimism waned down to 8% -- the lowest level reported by carriers since 1Q2011. Over two-third of carriers say northbound volumes are unchanged.
The price is righting
Rates, meanwhile, are on a more horizontal trajectory. However, the good news is only 15% expect shaved rates in the next three month – the second-lowest level in nearly two years. Additionally, 77% said rates have firmed, which is 18-points higher than last quarter and the highest level of reported stability ever recorded in the OTA survey. Perhaps most encouragingly, southbound rates bucked four straight quarters of falling expectations in the persistently soft sector and posted the highest rate since 3Q12.
Capacity squeeze
Sixty-three percent of carriers said capacity remains the same while 28% expect decreases – 10 points higher than the last quarter. For the second straight quarter, the rate of carriers expect to add capacity is under 15% -- in line with historic lows of 2008. Nearly half of carriers (47%) suggest they plan to add drivers, a level that's consistent with the last several quarters. However, judging by the low capacity expectations – as well as the number of carriers who plan to add power units remains relatively low (22%) – the increased hiring activity appears more indicative of replacement capacity than fleet expansions.
Paying the bills
Not surprisingly, labour, the price of equipment and diesel continue to be carriers' biggest operating costs. Seventy-three percent of carriers say they are paying 2-5% in wage increases, which is slightly lower than last quarter but still above the 60-70% who reported the same level of increases throughout most of 2011-2012. Fuel costs, meanwhile, appear to be creeping back up. Thirty-six percent report diesel price hikes of 2-5% while an additional third of respondents say they're forking over 10% more for fuel. An average of nearly 20% of carriers indicated the same fuel increases during the last three quarters.
