The North American economy will most likely not recover until late 2009, but when it does the demand for trucking services will likely outweigh the supply and truck rates will be under upward pressure, according to David Bradley, CEO of the Canadian Trucking Alliance (CTA).
Bradley said that the biggest problem for truckers over the past year has been over-capacity, as there have been too many trucks chasing the level of freight being generated by the economy. However, the trucking industry across the continent has been shedding capacity, he said.
“It’s been a tough year for everyone, motor carriers and shippers, and this has resulted in downward pressure on freight rates in 2008,” Bradley said. “But shippers would be advised to partner with carriers now to lock-in capacity for when things do inevitably start to come back, which we hope will be sometime in 2009. Some shippers get it and are now entering into multiyear agreements with carriers.
“Carriers have been reducing their fleet sizes, getting rid of trucks and not buying new ones,” Bradley added. “Many trucking companies have left the market; either because they decided they’d had enough, or they couldn’t get sufficient credit and/or they went bankrupt. Tighter credit has also made it more difficult for people to enter the marketplace. While there will continue to be tough sledding in 2009 – reflecting current global economic concerns and, as always, punctuated by a chronic long-term labour shortage – capacity of trucking services will be that much lower when things do turn the corner.”
Bradley said that he hopes to see a slowdown in the volatility that has hit currency and financial markets throughout Canada. However, while the price of diesel fuel has dropped in the past few months, he said it is because the worldwide economy is on the brink of a recession and is subject to wide fluctuation day by day.
Despite a difficult year for the trucking industry, Bradley pointed to a number of regulatory and policy decisions CTA played a role in bringing about--a promise by the “Harper Conservatives” to cut the federal excise tax on diesel fuel by 50%; excise tax refunds for heating and cooling systems; the defeat of anti-replacement worker bills from becoming law in the last Parliament; the addition of $75 million over two years for increased CBSA border resources and $6 million over two years to support provinces introducing enhanced drivers licenses, and $3 million to carriers for utilizing technologies endorsed in CTA’s enviroTruck initiative.
“We have our work cut out for us in 2009, there are plenty of issues to keep CTA and our partners in the provincial associations busy,” Bradley said. “We will still have a minority government in Canada, with a new cabinet supposedly designed to deal more effectively with the economic challenges that confront the nation. It will be interesting to see how they manage the need for action on so many fronts in the face of a very tight fiscal situation. There will be a new Administration in the U.S. and it will be interesting to see how it tackles trade and security issues, infrastructure financing, EOBRs, etc.”
CTA also has lobbied against the introduction of a biodiesel mandate for all on-road fuel. The Harper Governments has proposed a federal regulation requiring 2% renewable diesel fuel content no earlier than 2010 and no later than 2012, pending confirmation that the fuel will not have a detrimental impact on truck engines.
CTA contended that questions related to operational capability with post-2007 trucking equipment and a cost/benefit analysis must be conducted first. The trucking lobby contracted fuel experts Ervin & Associates to produce a report, entitled Discussion of the Potential Impact of a National Renewable Fuel Mandate on the Canadian Distillate Market, which analyzed the potential issues relating to implementing biodiesel.
According to the report, biodiesel will result in additional storage and blending concerns while forcing a greater reliance on insulated heated tanker trucks, rail cars or marine tankers to move product normally moved by pipeline, as biodiesel cannot be pipelined because of cross-contamination concerns, CTA said. Bradley said these concerns will ultimately be felt by the trucking industry.