By Alex Binkley
Despite uncertainty about the strength of the Canadian economy, the transportation industry appears in an upbeat mood about its prospects going into 2014. Strong international demand for Canadian resources and steady growth in Asia were noted by several speakers at the 2013 Workshop sponsored by the Chartered Institute of Logistics and Transport in North America.
“From a railway perspective, we are fairly optimistic,” noted Mike Gullo, Director of Policy, Economic and Environmental Affairs for the Railway Association of Canada. “We see stable traffic and strong export growth.” The prospect of new trade agreements, energy project developments, growing international demand for coal and forest products are all encouraging for the railways, he pointed out. “Demand from China and a pickup in housing starts are all important for us.”
“International growth is such an enormous opportunity for us,” added Ian Hamilton, Vice-President of Business Development for the Port of Hamilton. Strong export demand has resulted in several million tonnes of Ontario agricultural products moving through the port and, along with other new cargoes, has taken some of the sting from the loss of steel shipments. The port is also seeing a lot of railway investment to improve access to the terminals and docks in the port. “We are looking at how we can expand our facilities.”
“The outlook is generally pretty good,” observed Bob Ballantyne, President of the Canadian Industrial Transportation Association. “Retailers and manufacturers are in good shape and prices for shipments are holding up.” The biggest challenges in international shipments “lie with political stability around the world and the threat of natural disasters.” However he cautioned about a trend among shippers to switch responsibility for transportation to Chief Financial Officers to cut costs. “The companies could lose connections with the market by ignoring the qualifications of their people working in the supply chain.”
Toby Lennox, Vice-President of Strategy Development for the Great Toronto Airport Authority, said Pearson Airport is “becoming one of five mega air transport hubs in North America. It is making us look closely at how we manage such a big airport. We expect strong growth and big expansion in international business travel.” The airport is the No. 1 destination in Canada for many U.S. flights and growth at Pearson will help all Canadian airports. “International growth is such an enormous opportunity for us,” he added. “The middle class in China and India and Canada must try to capture some of that business. We are close to the growing markets in Southern Ontario as well as a big chunk of the U.S. population.” New aircraft entering service in the new few years will carry far more passengers.
Brent Fowler, Vice-President of SLH Transport, said many road carriers are operating at capacity because of the challenge of attracting new drivers. “We are partnering with our customers to deliver the service they need. We’re also listening to what our drivers have to say because we need to keep the ones we have.”
Peter Harrison, Associate Vice-President of the CPCS Transcom Ltd., said that consumer goods and forest products “will lead export growth in 2014 while the agri-food sector will likely see a decline in foreign sales.” Shipments of crude oil will remain a significant for the railways, which will continue to benefit from a strong intermodal growth along with demand for bulk transportation. The ports of Vancouver and Montreal will experience the greatest growth in traffic, he added. Diesel fuel prices should remain stable but more of the transport sector is investigating the potential of liquefied natural gas as a transport fuel.
Based on the results of a CPCS study, Ontario has gained a significant number of jobs in the transport and warehousing sector since 2007 and now has about 300,000 of the 650,000 jobs in the sector. British Columbia and Alberta haven’t seen growth rates to match Ontario’s, and Quebec has undergone a drop in its share of the industry, he said.
Wage rates in the sector are generally below average for other industrial sectors, he said. While truckers remain chronically low paid, workers in the pipeline industry “are the best paid followed by the marine and rail sectors.” The average work week in the transport sector remains close to 40 hours. Only the mining, oil and gas and construction sectors post longer work weeks, he added. The trucking industry has on average the most employees aged 55 plus, he added.
Hamilton has emerged as the busiest port on the Canadian side of the Great Lakes, Hamilton noted. “We are working on offering solutions to shippers. The port has transformed itself to live with less of the steel trade but we could still use more manufacturing jobs.” The development in the port and expanded rail facilities are geared toward handling more industrial products.
“The marine mode in the Great Lakes has been hard to access in the past,” he pointed out. With the new rail facilities and the adoption of a Southern Ontario Gateway approach, “we are finding ways to make it easier to get goods into the system.”
While the federal, Ontario and Quebec governments have talked about the development of a Seaway-based trade corridor, there still is no marine policy in Ontario, he said. “It is kind of disappointing. The Gateway concept seems easier to understand in Halifax and Vancouver than it does on the Great Lakes.”
Hamilton expects the opening of an expanded Panama Canal will bring business to his port. As well, increased shipments by rail from the United States to Canada could bring more traffic to the port. While bulk and breakbulk will remain the port’s bread and butter, there may be some opportunity for intermodal movements by water from the East Coast.
Ballantyne suggested that with a slow growth economy, shippers and truckers have a strong incentive to work together on cost reduction. However, companies switching to CFO control over transportation contracts, and putting them out as requests for proposals rather than working with traditional carrier partners, carries negative prospects. “The trend could isolate shippers from what’s happening in the supply chain and reduction in transportation costs could offset with poorer service.” While there has to be some tension between carriers and customers, “there is a place for them to work together,” Ballantyne added. Shippers are still waiting for the federal government to bring in level of service details from the Rail Service Act passed earlier this year.
Gullo said the railways are working on improving supply chain collaboration with their customers. “We still have work to do.” One of the seldom discussed issues facing the railways is the encroachment by municipal development on their corridors and how it could affect rail service in the future.
The workshop was also reminded that the Canada Transportation Act is due for mandatory review in 2015. Craig Hutton, Director General of Strategic Policy at Transport Canada, recalled the law was passed in 2001. Its replacement will be the subject of considerable discussion in the coming months. “This is just the start of the conversation. The stakes are high to get it right,” he continued. “It affects not just domestic transportation but also Canadian freight and passenger service to the rest of the world.” Preparatory work for the review has started in the department with a look at global business trends and a review of the developments of the last few years.
“Emerging economies will have a much bigger role while the impact of the U.S. will be smaller,” he said. The free trade deal with Europe and the ongoing discussions on a Trans-Pacific Pact will likely have a major influence on its shape. “There’s a lot of pressure to respond to competitive forces around the world.” The introduction of intelligent transportation technology in all modes will also have to be addressed. One overriding principle will be improving the overall efficiency of the transportation system and not just the individual modes, he added.