2nd Quarter OTA Biz Survey: Trending Upward

0
176
Deep uncertainty still prevails within the Ontario trucking industry, but at least carriers say they’ve experienced rebounds in most freight lanes compared to last winter.

According to the Ontario Trucking Association’s second quarter 2017 business conditions survey for the bellwether sector, the number of carriers who felt good about their overall prospects over the next three months shot back up to 62% from the 49% in the last OTA survey (4Q16), which was the first time since 2013 a minority of carriers said they were optimistic about their businesses. Like the previous two surveys, about one in five carriers (21%) remained pessimistic.

Freight Volumes

Perhaps an indication the summer home improvement ‘peak’ season is well underway, over a third (37%) of carriers report intra-Ontario freight volumes improved over the last three months, a 13-point increase from the last survey and in line with what respondents said this time last year. Over half said there was no change. Only 10% said freight volumes had shrunk, lower than 4Q16 but still relatively higher than the low single digits who experienced declines throughout all of 2014-2015.

Inter-provincially, 32% of carriers said volumes grew, a significant 13-point hike from the previous survey and the highest level in the last two years.

Another sign the U.S. economy is progressing, albeit slowly: Ontario carriers who indicate improved southbound volumes approached half once again – 45%, which was the highest since 4Q14 and nearly 20 points higher than the start of 2015. Only 13% said the opposite, which is more or less at par with responses from the last couple of years.

Northbound freight continued a predictable, peak-valley trajectory observed in recent years. This time, 27% said volumes recovered, up from 17% in the last quarter and close to matching the survey before that. As usual, half said there was no change.

Looking Ahead:

While carriers indicated the mini freight recession they were experiencing late last year could extend throughout 2017, it doesn’t seem like the doldrums will linger that long. While an overwhelmingly majority (81%) in the last survey predicted no change for intra-Ontario freight volumes over a six-month period, this time only about half expected an idle short-term market, with the shift appearing to be for the better. Nearly half of carriers (45%) predict a volume upturn the next six months, more than doubling the19% who said so in the last survey.

Similarly, 50% expect no change inter-provincially, down from 77%. Those who were non-committal last time appear to have jumped into the pro-growth tent as 35% suggest volumes will rise, compared to 27% previously.

It’s possible the new administration in Washington continues to anchor Ontario carriers’ expectations for southbound volumes, as opinion for that lane seems more polarized than other sectors. The 35% percent who tout improved volumes is a modest rebound from 4Q16’s meager 27%, but still the second lowest in four years. Consequently – and perhaps an indictment of carriers’ hopes for NAFTA escaping renegotiations unscathed – 23% anticipate decreased volumes, which is double digits higher than at any point since 2013 and the highest level recorded since the 37% at the height of the Great Recession in 2009. Forty-two expect no change, down significantly from the 70% who didn’t foresee much change last winter.

One in three carriers predict improved volumes for northbound, up from 21% last survey and – once again repeating the up-and-down routine from past seasons – nearly identical to 2Q16 and 2Q15.

Rates/Capacity

In all four freight lane sectors OTA monitors, a majority of carriers continue to see stagnant rate pricing (61% intra-Ontario, 64% inter-provincial, 61% southbound 53% northbound report no change), as has been the case for several years.

Less than a quarter of carriers feel pricing buoyancy in any of the four freight lanes. However, after souring on intra-Ontario rates for back-to-back surveys, 21% of carriers said pricing is improving, down from a near-all-time low of 6% in 4Q16. Eighteen percent reported worsening rates, a drop from 27% in the last two surveys. While only 14% suggest growth inter-provincially, that’s up from 9%. To coincide with the sullied mood on southbound volumes, only 19% feel good about corresponding rates – but at least that’s up 10 points from last survey’s five-year low. The volatile northbound lane was the one area where fewer carriers (20%) saw rate improvements from the previous survey, down from 39%.

As is typically the case, nearly half (44%) of carriers report no movement in capacity balance. Mirroring responses from the last survey, about one in three carriers said capacity had increased. This time, though, 21% suggested capacity has tightened, up from just 8% and 11% in the last two surveys. Only 18% forecast increased capacity over the next six months – identical to 4Q16 – while 30% suggest shrinkage, the highest rate in several years.