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The record high value of the Canadian currency against the U.S. dollar is causing a marked shift in trade flows between these two major trading partners and driving substantial growth at Schneider National's Canadian operations.
"Over the last three years Canada's currency has appreciated more than 30 percent against the U.S. dollar and has very quickly shot up in the last couple of months another 6 percent to 8 percent, to around 94 cents," says John Ferguson, Schneider's general manager for Canada. "Consequently, the demand for our services Northbound is almost out of control and it has become more challenging to balance flows outbound, particularly from Ontario and Quebec."
To put the level of cross-border trade in perspective, he notes that approximately 14m trucks cross the Canada-U.S. border every year. "That's around 40,000 trucks a day, which means that one truck is clearing Customs every two seconds," he says. The value of that cross-border truck traffic is an estimated $400bn annually, he adds.
The run-up in the Canadian currency is due to several factors, Ferguson says. One is the oil boom taking place in western Canada, which has produced something of a gold-rush environment in parts of Alberta. Second is the continuing overall strength of the Canadian economy and third is a surge in merger and acquisitions among Canadian companies. "All of this has changed the flows of freight," Ferguson says. "In addition to more Northbound flows, we also are seeing more intra-Canada flows, primarily to Western Canada from Ontario and Quebec. And we are seeing a lot more trans-loading activity as more freight from Asia flows through the port of Vancouver."
Schneider National is well positioned to take advantage of these trends, Ferguson says.
"Schneider is one of the few, if not the only, large U.S.-based carrier with a significant presence in Canada," he says. "Consequently, we have the ability to take advantage of those northbound flows to Canada that are so hot right now." Schneider can leverage its U.S. network to get northbound loads to the Canadian border, where they can be relayed to a Schneider Canada truck with a Canadian driver, he says. Because of its presence in the country, Schneider also can handle the cross-Canada movements as well. "We are seeing a lot more demand for our team expedited product," Ferguson says. This traffic is being driven both by the oil boom in Alberta and increasing imports from Asia to Canada's West Coast ports.
Schneider also is seeing well-balanced growth in the Canada to Mexico trade lane, Ferguson says. "Most people think of Canada-U.S. trade, but there is a lot of through traffic between Canada and Mexico. Because Schneider has a unique ability to clear both borders with our own assets, we feel that we are the leader in being able to offer this service."
Schneider's Access Canada service is another "extremely hot product right now," Ferguson says. This is a solution targeted to U.S.-based shippers who want to enter Canada without investing in bricks and mortar. "Instead of retailers having to come in and open distribution centers and put a lot of infrastructure in place, Access Canada allows them to serve Canada from their U.S. DCs," he explains. By consolidating orders into truckload shipments, "we are able to provide them an efficient move, including Customs clearance." Freight is delivered to a Canadian cross-dock, from which Schneider manages the distribution across Canada with its LTL, small package and store delivery network. "We can give companies a really quick and easy entry, on a door-to-door basis, into the Canadian market from their existing facilities in the U.S. That's a very attractive package," he says.
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