Alberta truck fleets face double hit of Covid-19, low oil – Truck News

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EDMONTON, Alta. – Canada’s trucking industry was sent reeling by
Covid-19, but the economic fallout of a pandemic has added insult to injury in
Alberta.

This year was supposed to represent a turning point for the provincial
economy, which had sputtered its way through 2019 and marked a deep recession
in 2015-16. The federal government’s re-approval of the Trans-Mountain Pipeline
project offered hope. The Federal Court of Appeal backed that decision earlier
this year.

And there’s no denying the link between oil prices and Alberta’s
fortunes. Each of the province’s five recessions in the past 35 years have
coincided with a shock in energy prices, TD economists noted in one report.

There was a sense of “cautious optimism” a few weeks ago, agrees Chris
Nash, president of the Alberta Motor Transport Association (AMTA).

Then Covid-19 hit. The value of oil futures plunged into negative
territory for the first time in history on April 20, as storage tanks were
filled to capacity.

Even Fort McMurray, which has been rebuilding in the wake of devastating
wildfires in 2016, is now dealing with floods.

Reversal of fortunes

The Covid-related economic downturn didn’t hit everyone right away. Calgary-based Orlicks Inc. actually had to hire on an extra 30 trucks to meet surging demand for grocery shipments in mid-March. Revenues for the month doubled.

It was an experience shared by many of those who haul food and other
essential supplies. At first.

While the grocery-related business is still active, the backhauls of supplies
like lumber are now hard to come by. When Orlick recently shipped loads of Coke
out to Saskatoon, Edmonton and Manitoba, there was nothing for the return
journeys to Calgary. The 18 daily Edmonton-bound loads of groceries that Sobeys
needed in March have dropped to four loads per day. Orders for shipments of
bottled water that are placed one week appear to be canceled the next.

“There’s a lot of payable clerks that are not really in a hurry to pay Gene.”

– Gene Orlick, Orlicks Inc.

The fleet hasn’t laid anyone off, and it remains busy, but the downward
swing will hurt.

“We’re going to be financing losses through April and May, and likely
June,” says fleet president Gene Orlick. The operation doesn’t qualify for the Canada
Emergency Response Benefit (CERB), either. But he did reach out to his bank for
a rare visit on March 12 to secure a 25% increase in the company’s line of
credit. At the time it was to deal with the bigger bills associated with
surging loads and extra lease operators.

“There’s a lot of payable clerks that are not really in a hurry to pay
Gene,” he says. Forty-five-day payable terms are now being pushed to 60 days.
Competing carriers are slashing rates, too.

“We’re doing a risk assessment on each customer to try to predict who’s
strong enough to last through this,” Orlick adds.

“Now the economic challenge is going to creep up on us,” Nash says,
noting how fleets across the province will face challenges such as dropping
revenues and a rising number of clients that are unable to pay their bills.

Layoffs and cutbacks

Mullen Group enjoyed its own strong start to March, when the province’s
largest fleet was on target to meet expectations. Since then it has temporarily
laid off 1,000 employees.

“Once the full extent of the virus started to become evident, demand
deteriorated in many sectors of the economy directly impacting several of our
business units. For example, we witnessed a sharp decline in the demand for
discretionary consumer goods as well as in commodity-based industries,” said
CEO Murray Mullen.

Other business remained steady in the first quarter of the year, such as
the demands to move LTL shipments and large-diameter pipe needed to construct
pipelines. As for oil, Mullen quipped that he might use parked tanker trailers
to store oil rather than to haul it.

“Flatdeck carriers are soft, and there’s a bunch of those guys who
parked their trucks,” Orlick says, referring to some of his peers in the
province. “The oil, minus $37, I never heard such a thing.

“Our Oil Patch friends are going to suffer,” he says. “It’s been five
years. It’s not a quick fix for sure.”

“The low oil value hasn’t helped.”

– Greg Sokil, Sokil Group

“The low oil value hasn’t helped,” agrees
Greg Sokil of the Edmonton-headquartered Sokil Group. “It just put more
pressure on the market because people won’t buy goods … We haven’t had enough
time to adjust our economy.”

In the midst of it all, orders for
things like furniture and appliances are placed on the back burner. And if such
goods aren’t ordered, they aren’t shipped.

Nash has heard similar stories from other
members who haul consumer goods.

“They parked a good chunk of their trucks,” he says. Others have faced
bigger struggles. “It was a real challenge when you get into the heavy
equipment stuff.”

The road to recovery

The question now is how long the
downturn will last, and how quickly the economy can recover after that.

“People that think this is going to
open up in two or three weeks, that’s not realistic,” Sokil says. “It’ll take
some time to kickstart the economy.”

Mullen doesn’t expect much good news in the coming quarter, either, but
he remains hopeful for the business that will emerge on the back end.

 “I believe we will weather this
crisis and come out of it stronger,” he said, citing factors like a strong cash
position and diversified business. “Once the economy starts to recover we will
be well-positioned to take advantage of the inevitable opportunities that arise
during challenging times.”

“I am not exaggerating by stating that the job losses in the private
sector are staggering,” he stressed. “The bottom line is that this health
crisis is hurting a lot of people. Obviously, all of us hope that the steps
taken by the governments will be successful, but realistically I doubt if we
will know for quite some time.”

A new way of doing business

No matter what, Covid-related business practices are also expected to be
in place for awhile.

Needs such as the widespread use of PPE, and additional steps to secure
supplies for drivers, will continue, Nash says.

“This isn’t a small little hiccup … Policies and procedures, health and
safety, we’re going to see a change.”

At Sokil Group, that already means things like business transactions
completed from afar, and social distancing measures in the office. When PPE
supplies like masks can be sourced, they’re
distributed to staff. Drivers are given sanitation kits and encouraged to wipe
down equipment before and after each shift.

But drivers are now more widely recognized for the work they’re doing
across the province, too.

“We’ve been seeing great acknowledgement of what value there is for
transportation,” Nash says, referring to how Alberta residents appear more
aware of the role trucks drivers play. “To get products to the end of the line,
to where it needs to be, it can’t be done without a truck. It’s great to see
the notoriety [for truck drivers] … They’re the unsung heroes.”

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