An aging fleet, coupled with growing freight demand, has led to overcapacity leaving the market and a run-up in truckload rates.
"There is a shortage of trucks and a growing amount of freight, and in that situation, truckers get to make a lot of money," said Kenny Vieth, a senior analyst with ACT Research, which tracks the commercial vehicle market.
BMO Capital Market's Jason Granger sees base truckload rates, which were off by 15 percent to 20 percent in 2009, snapping back and then rising 10 percent to 15 percent by 2011.
Vitran said in April it had started to see some improvement in spot pricing in its truckload business.
Dahlman Rose & Co analyst Jason Seidl expects the price rise to benefit both truckload and less-than-truckload (LTL) segments.
Ontario, the hub of cross-border trade in Canada, posted a 60 percent rise in vehicular exports to the United States via truck in April, according to the Bureau of Transportation Statistics.
Companies like TransForce, Vitran, Contrans Group and Trimac Income Fund will benefit from the upturn as they also transport related raw materials like steel and plastics, said BMO Capital's Granger.
Private players like L.Hansen's Forwarding, Mackie Moving Systems and TFX International, which specialize in auto export services, are likely to gain from the uptick.
Survival of the Fittest
At a time when top U.S. players like YRC Worldwide struggle to stay in the game, analysts believe there is potential for Canadian companies to expand into the United States.
BMO Capital's Granger named Mullen Group and TransForce, which said it would buy the U.S. oilfield transportation assets of EnQuest Energy Services Corp, as the two firms most likely to stretch into the United States.
In North America, trucking business failures were up more than 50 percent in the first quarter of 2010, analysts said.
The glut in capacity in the freight industry pressured pricing and margins, squeezing out firms like Carlen Transport and Arrow Trucking.
This gives the remaining players "bigger pieces of a pie of the economic recovery," said Stephens Inc analyst Jack Waldo, who forecast a speedy, V-shaped recovery for trucking companies compared with the overall economy.
The recovery for trucking companies "could be longer and steeper than any past recovery we have had," Waldo said.
Some analysts fear a higher Canadian dollar could hinder the recovery, as it could cause a reduction in demand for Canadian goods going south.
However, Carlos Gomes, a senior economist with Scotiabank, played down fears the rising loonie could hurt truckers, citing the enormous two-way trade in vehicle parts with the United States.
"We will continue to see sharp gains (for the trucking sector) not only this year, but even as we move into 2011," Gomes said. (Reuters)
