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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Expect Higher Transportation Pricing in Years Ahead: Cormark's Newman

Tuesday, November 05, 2013 > 10:42:14
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(Canadian Transportation & Logistics – Lou Smyrlis)


The potential for synchronous global growth could ignite demand for transportation, leading to higher carrier pricing, a recovery of profitability, and the potential for industry consolidation, according to David Newman, a transportation market analyst with Cormark Securities and the luncheon speaker at today’s CITT conference.


Surface transportation volumes have actually been relatively sluggish with the railways realizing modest growth, although above GDP, and the TL and LTL trucking segments suffering declines. But motor carriers have done a “phenomenal job at cost and capacity management and their balance sheets are in excellent shape,” Newman said.


There have been areas of strong performance in the niche/specialized markets, such as bulk/tank, heavy haul and oilfield services.


“And everyone is expecting the fourth quarter and into next year to start looking better,” Newman added. “Truck tonnage and our tracking of various indices seem to point toward an emerging recovery in volumes.”


Newman said a variety of factors could lead to above average growth for carriers in the years to come. Europe’s economy is turning the corner at the same time as the US economy is improving and the Chinese economy is stabilizing at a lower but still robust growth level, Newman said. India is continuing to develop and Mexico is gaining momentum. He is expecting global growth around 3% next year.


Canada stands to profit from such synchronous global growth, Newman said, because it has the base metals, energy products and agricultural products required to feed the demand of an expanding world economy.


The inventory to sales ratio is also in balance so if there is an increase in demand there should be an immediate impact on freight volumes.


“It won’t be a dead cat bounce. It will be the real thing,” Newman ensured.


Canada’s West Coast ports are also doing well, and considerably outpacing their U.S. counterparts. Containerized traffic for the three largest US West Coast ports has grown just 2% YTD while Canada’s West Coast ports are experiencing 18% growth YTD.


Newman said the driver shortage, the new US hours or service, and demographics could also lead to higher pricing in the trucking sector as capacity is curtailed.


“We are actually seeing the acquisition of companies just to acquire drivers,” he said.

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