‘No profit right now’: Trucking industry facing leaner times as consumer demand drops

For Jas Singh, the street to revenue simply retains getting narrower.

“It’s sluggish proper now, not too many hundreds,” stated the proprietor of JK Transport, a Brampton-based trucking firm Singh launched 15 years in the past.

On high of fewer shipments, prices have shot up whereas freight charges have plummeted.

A brand new tractor now prices him $225,000, up from the $135,000 he paid in 2019, Singh stated. Trailers for his fleet of 15 semi-trucks have doubled in value to $80,000. And he can solely cost $1.50 per mile for deliveries that reaped $2.30 per mile final yr.

“Loads of issues this yr,” the 45-year-old stated in a telephone interview.

He’s not alone. The whole Canadian trucking trade faces a shaky market as cargo volumes and charges proceed to fall — in keeping with downward shopper demand — in contrast with the hovering highs seen throughout the pandemic.

The trade shed greater than 20,500 driver jobs — seven per cent of the workforce — within the first three months of this yr, based on a Trucking HR Canada report.

“As the economy has essentially softened a little bit, so has demand for trucking services,” stated Craig Faucette, chief applications officer on the commerce group.

While the contraction eases the labour scarcity that has plagued the sector for years, it provides recent woes to fleets already combating for survival in a aggressive panorama.

Canadians proceed to shell out on companies starting from airfare to high quality meals, however their longing for gadgets shipped in a field has fallen since 2021 and 2022.

“As things opened up, we saw a slight downturn as people returned to travel, restaurants … as opposed to the items to renovate their houses or their backyards,” stated Mike Millian, president of the Private Motor Truck Council of Canada.

Inflation and rising rates of interest have additional cooled shopper demand. “You need less trucks to move it because there aren’t as many goods moving.”

Small firms with fewer assets and contracts are notably vulnerable to a downturn.

“You’re seeing a lot of smaller fleets struggling, especially ones that rely on what we call the spot market,” Millian stated, referring to one-time shipments that fall exterior long-term contracts or recurring schedules.

An even steeper drop in shipments within the United States has additionally dented Canadian trucker revenues, as drivers wrestle to search out hundreds to haul again to Canada after making deliveries south of the border, he stated.

“We await one to a few days for it to come back again,” Singh stated of his shipments to California, referring to the pre-load wait time.

Earlier this month, 94-year-old American trucking large Yellow Corp. declared chapter after years of economic struggles, a demise that John Gradek known as “the tip of the iceberg.”

“You have a number of carriers that are in very, very tight financial scenarios,” stated Gradek, who teaches provide chain administration at McGill University.

So-called less-than-truckload (LTL) operations, which make a number of drops of cargo for various purchasers on a single run, face an particularly aggressive market.

Rather than having steady contracts and common earnings to fall again on, the “mom-and-pop shops” bid every day for shipments by way of a variety of apps corresponding to Freightera and FreightSimple, Gradek stated.

Big firms depend on less-than-truckload companies too. TFI International, the Montreal-based trucking large with greater than 25,000 staff and 11,000-plus tractors, gleans practically half of its income from the section.

“Our Canadian LTL revenue is down big-time,” CEO Alain Bédard instructed analysts on a convention name Aug. 1, including that the surprising dip just isn’t distinctive to that division. Total revenues plunged 22 per cent within the first half of 2023 in comparison with a yr earlier, prompting the nation’s largest trucking firm to decrease its monetary forecast for the second time this yr.

“We never anticipated such a major, major disruption in the market in Q2,” Bédard stated. “Everybody’s going by way of a type of very robust patch within the freight surroundings.

He pointed to customers: “They’re not spending as much on the home or buying a TV or patio furniture.”

The two-week strike by B.C. port staff final month threw an additional wrench into big-rig gears throughout the nation, he added.

Meanwhile, revenue margins in a crowded trade grew even thinner. In the United States, freight charges for spot shipments decreased 23 per cent year-over-year within the second quarter and charges for contract shipments dropped 14 per cent, based on Coyote Logistics.

With fixed cross-border hauls, Canadian trucking outfits sometimes see traits just like these within the U.S., specialists say.

The pinch comes amid ballooning working prices, as diesel gasoline costs tick again up towards 2022 highs, rates of interest on truck leases rise and provide chain kinks persist.

Back in Brampton, Singh summed up the underside line: “There’s no profit right now.”

This report by The Canadian Press was first printed Aug. 24, 2023.