3Q11 Ontario Trucking Survey Shows Signs of Summer Slowdown

TORONTO, ONTARIO--(Marketwire - Aug. 24, 2011) - The latest Ontario Trucking Association (OTA) quarterly survey of the pulse of the trucking industry in Ontario shows a majority (64 per cent) of responding carriers were optimistic about the industry's overall prospects for the next three months. But, this was down eight percentage points from 2nd quarter survey possibly reflecting growing economic uncertainty. The number of carriers who reported they were unsure about the industry's prospects increased to 26 per cent -- up five percentage points from last quarter. Still, only nine per cent of carriers reported pessimism.

Freight Volumes

Overall, 67 per cent of respondents said freight volumes had increased compared to a year ago. However, fewer respondents indicated that freight volumes have improved compared to three months ago. Sixty-two per cent of respondents indicated that intra-Ontario freight volumes are about the same as volumes three months ago (up 22 percentage points), while 32 per cent of respondents indicated volumes had improved, down 21 percentage points from 2Q11.

Similar performance was reported in the interprovincial market, with 49 per cent of respondents indicating freight volumes had stayed the same (up 13 percentage points) and 44 per cent indicating volumes had improved, down 16 percentage points from last quarter.

Carriers reported a softening in the 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 that volumes were improving (compared to 39 per cent last quarter) and half of respondents said volumes were about the same.

In the northbound US market, just over half (51 per cent) of respondents said freight volumes were still improving, but this was down 10 percentage points from last quarter. Thirty-seven per cent said northbound volumes were about the same.

All Costs Increasing for Carriers

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

The costs of maintenance and tires are both on the rise with 98 per cent and 89 per cent of respondents reporting increases, respectively. Sixty-four per cent of respondents reported maintenance cost increases of 5 per cent to 10 per cent, while 61 per cent reported tire cost increases of similar magnitude. Labour costs -- the largest component of operating cost -- are also on the upswing, with 91 per cent of carriers reporting increases in driver wages -- 67 per cent of which reported increases of between 5-10 per cent in the quarter. Employee benefits are also driving labour costs, as 62 per cent of respondents reported increases in employee benefit costs over the year, 35 per cent of which reported increases of between 5 and 10 per cent.

Loaded Miles/Length of Haul

Forty-five per cent of respondents indicated that loaded miles are increasing, the largest proportion of respondents to report this since OTA began surveying that data in 4Q08. Seventy-two per cent reported that the average length of haul is staying the same, while 18 per cent reported it is increasing -- up 3 percentage points since last quarter's survey.

Rate Environment

Twenty-six per cent of respondents said that intra-Ontario freight rates were improving, up 4 percentage points from 2Q11, but 61 per cent reported that rates were about the same.

Forty-six per cent of respondents reported improving rates in the interprovincial market -- up 7 percentage points and the highest value reported since OTA began the survey in 3Q08.

Continued weakness was reported in the southbound US market, with only 14 per cent reporting rates were improving -- down 11 percentage points since last quarter. Fifty-eight per cent reported rates were about the same.

Northbound US rates remain relatively stronger. Over half (55 per cent) of respondents reported that rates were improving, down 4 percentage points from last quarter. Forty-one per cent indicated that rates were about the same, up 6 percentage points from last quarter and only 2 per cent reported northbound US rates were decreasing.

Capacity

Thirty-nine per cent of respondents reported that capacity had stayed the same over the last quarter, up 11 percentage points from 2Q11. In addition, 29 per cent of respondents reported capacity had decreased from last quarter. Carriers are split as to where capacity will go; 37 per cent reported that capacity will increase, 29 per cent believe it will decrease and 33 per cent believe it will remain the same.

Drivers/Owner-Operators

Carriers also remain split as to whether they should begin hiring or not. Fifty-one per cent of respondents said they plan to add more company drivers while 47 per cent said they have no planned changes to the net number of drivers. Forty-nine per cent said they plan to add more owner-operators, while 51 per cent 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 per cent) who said they plan no new additions to their fleet of tractors. Similarly, 53 per cent 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 per cent of respondents reported that customers are paying a reasonable fuel surcharge, up 7 percentage points from last quarter. The majority of respondents (70 per cent) report that contract timeframes are not changing, although 21 per cent reported that customers are lengthening contract timeframes, locking in capacity.

A third of carriers reported that shippers are taking longer to pay their bills -- up 14 percentage points from last quarter and again reflecting a softening in economic activity.

Over 50 carriers participated in the survey which was conducted electronically between July 4^th -- 25^th, 2011.