Dec 2, 2008 1:09 PM
It may take the better part of 2009, at least, for the North American economy to stabilize and begin to recover, when it does, the demand for trucking services will likely outweigh the supply, said David Bradley, Canadian Trucking Alliance (CTA) chief executive officer.
“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 in a news release. "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.”
The major problem facing truckers over the past year, or more, has been one of over-capacity--too many trucks for the level of freight being generated by the economy. “It doesn’t matter where you operate, all carriers faced a major challenge this year with sky-rocketing diesel fuel prices and a slowing economy," he said. "Obviously, the appreciation in the value of the Canadian dollar and slump in the US economy continued to have a profound negative impact on the Central Canadian economies and therefore on the volume of freight, especially in southbound freight to the US which had been the underpinning of industry growth for the past 20 years.”
In many traffic lanes, both international and domestic, there were simply too many trucks chasing the freight. However, the trucking industry across North America has been shedding capacity. “Carriers have been reducing their fleet sizes, getting rid of trucks and not buying new ones," Bradley said. "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 labor shortage--capacity of trucking services will be that much lower when things do turn the corner."
One thing that Bradley hopes to see early in 2009 is a moderation in the volatility that has been a feature of currency and financial markets in the fourth quarter of 2008. “The modest depreciation of the Canadian dollar that we have seen this autumn is not unwelcome, but when a currency loses almost 20 per cent of its value over a period of weeks, then jumps back by 4 per cent in one day, it’s hard to run a business.”
Also welcome, is the softening the in the price of diesel fuel over the past couple of months. “However, the price of diesel fuel is lower because the worldwide economy is on the brink of recession," he said. "The price of diesel fuel is still extremely high compared to where it was just a couple of years ago and is subject to wide fluctuation day-by-day. The industry still needs fuel surcharges.”
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