Context
The COVID-19 pandemic has shocked global economies and greatly changed transportation flows, completely altering pre-pandemic forecasts and placing the world in uncharted territory. It has become critical to analyze current economic and trade drivers, project possible futures, and become proactive in planning. Transportation demand forecasts can be used to better inform short-term shipment (2-3 year) management and long-term (10 year) investment decisions. More detailed information on the forecast presented here can be found on the Transportation Data and Information Hub. The detailed version includes highlights such as a range of forecast scenarios, outlook risks, and implications for the transportation network.
Economic outlook
Canada’s economic activity is expected to recover to pre-COVID levels in 2022, lagging behind the global recovery projection of 2021. This is partially explained by the hard-hit passenger transportation sector and the economy’s interdependence with the energy sector which was also hard hit in the pandemic. Despite this, the short-term outlook could swing more positively through effective vaccination and national immunity, particularly if it is achieved before global lockdown and border restrictions are lifted (in other words, an immediate return to travel).
Globally, political shifts and COVID-control measures have stifled economies, although China is emerging strong from the pandemic and Emerging Economies have also rebounded quickly. Europe and the US, traditional international powerhouses, continue to experience high COVID case counts and uncertainty.
Permanent global economic scarring from COVID is expected to be present but modest, resulting in a slight reduction in gross domestic product levels in the long term. Structural changes resulting from COVID are assumed to be minimal. Consequential, post-COVID global growth rates are anticipated to follow a similar trajectory as pre-COVID expectations. Similarly, most major commodity markets relevant to Canadian transportation are not expected to see significant structural change resulting from COVID.
Despite minimal COVID implications, over the long term, national economic growth is expected to slow. Growth will be weighted towards that west, while eastern provinces will realize limited gains. Growth in trade will outpace gross domestic product growth. Gains in trade will be driven in part by growth in developing and emerging economies. Emerging markets will be the engine of global growth. While growth in China decelerates. Nonetheless, the US will remain Canada’s largest trade partner.
Freight outlook for Western Canada
The relatively limited adverse, and some cases beneficial, impact of COVID on key western commodity markets (grain, containers, potash, and wood products) will result in the west recovering before other regions. Rail and port traffic on the Vancouver and Prince Rupert corridors is expected to recover to pre-COVID levels by 2022, with for hire trucking recovering by 2021 (Alberta remains an outlier due to its dependence on the oil and gas industry). For hire trucking commodities will largely recover in 2021, excepting energy products. Due to the devastation of their energy sector industry, Alberta’s for hire trucking will lag, recovering in 2022.
Cross-border rail traffic is expected to realize solid gains, with particular strength in grain and potash. Container growth will retain current levels until 2021, with moderate gain thereafter. The cancellation of the Keystone XL pipeline is not expected to significantly impact border traffic. However, the lack of short term pipeline capacity is expected to result in a significant temporary increase in traffic. Increase in home repair activities during the pandemic are expected to boost wood product movements over the border.
Over the next 10 years, the region will emerge as the fastest growing region in Canada, reflecting optimistic population and income prospects, with broad-based growth across most commodities. Solid population and income growth will translate into solid growth in for-hire tucking activity. Both the Vancouver and Prince Rupert rail and marine corridors will benefit from particularly stronger growth in Asia driving both demand (grain, potash, energy) and production (containers) of key commodities. Western rail border crossings will realize moderate growth owing to strong gains in potash and grains at BC crossings to US ports and minimal gains in potash, forest products and crude oil at other crossings.
Freight outlook for Central Canada
In the short term, central networks are expected to return to pre-pandemic levels by 2022. Transportation of consumer goods, particularly food, will remain stable; as a key commodity in the region, this has bolstered the network throughout the pandemic. The Thunder Bay corridor is expected to continue growing into 2023, but the market share of grain at the port is expected to shift as normalization occurs; this is an expected outcome of a strong harvest year.
Recovery of container traffic at the Port of Montreal is expected in the short term, emphasizing goods consumption and reflecting anticipated economic growth (in other words, increasing disposable income correlates with increased demand for goods), with recovery in 2021. For hire trucking is expected to remain constant for most commodities, achieving stability in 2021, with an exception for manufacturing and wood products, which will realize a slower recovery. Overall, pre-pandemic levels are expected to be achieved by 2022.
Long-term, the region will realize moderate growth. Manufacturing and consumer good will lead demand for transportation. However, automotive sector will experience significant declines. Consequently, rail and truck movements originating from the region are expected to also realize moderate growth. Shipment through Thunder Bay will be particularly weak owing to declining energy shipments related to switch to cleaner energy and limited population growth driving grain demand in Europe.
Freight outlook for Eastern Canada
The eastern transportation networks are expected to recover in full by 2022. Trends in home repair are expected to continue driving demand for movement of construction material, further spurred by economic recovery and increased disposable income. Container movements through the Port of Halifax are anticipated to improve, due to general recovery. Mining is projected to be particularly strong as COVID health restrictions ease at larger operations, and new mines ramp up production for iron ore along the Labrador Quebec rail corridor; volumes are expected to increase in the short term in all scenarios. For hire trucking will remain consistent with most of the country, with manufacturing and wood products hardest hit, slow recovery in energy, and stable consumer goods.
The long-term growth in for hire truck growth is expected to be tepid. The region will experience more pronounce aging, which will weigh on demand for transportation. Shipments moving across the region from the Port of Halifax will realize moderate growth owing in part to growing container markets outside of China. Labrador Quebec rail corridor will see minimal growth as shipments of iron ore are constrained by lack of mine capacity.
Air passenger outlook
Over the last decade, total air passenger traffic in Canada rose 3.5% annually driven largely by travel to and from outside Canada. Over the same period, flights between Canada and the US rose 4.0% annually and flights to and from outside North America were up 6.6%. Prior to the COVID-19 pandemic, an increase of about 4.0% per year was forecasted for other international travel over the following 10 years, while trans-border flights with the US was expected to slow moderately to 3.6% per year. Domestically, moderate expansions of 2.4% per year was anticipated as population and economic expectations for Canada were slowing down.
Historically air transportation has been highly resilient to negative external shocks; however, the COVID-19 pandemic has been unprecedented in its scope, with the air sector impacted disproportionately compared to the other sectors. Air passenger annual traffic in 2020 was around 28% of 2019 and ten months into the crisis, weekly air passenger volumes remain about 9% of 2019 levels with little signs of recovery.
The air passenger traffic recovery path remains uncertain and will be shaped by 3 major drivers: the recovery of the overall economy, vaccine distribution and effectiveness, and travel behaviour such as different responses of passenger demand for domestic versus international travel, and leisure versus business travel. Canada’s air transport recovery lags behind other countries in part due to rigid travel restrictions, strict quarantines, and the uncertainty evoked by constant changes in travel requirements. International air passenger markets are only recovering where quarantine rules have been relaxed, with domestic markets in China and Russia leading the way. Volatility in air sector recovery is expected over the coming years and traffic is anticipated to eventually return to the forecasted long-term growth rate.