The Effect of Exchange Rates on Shipping
The Canadian dollar has seen some ups and downs in recent years, from an all-time high in January 2002 of 1.61, to a record low in November 2007 of 0.92. Currently sitting at about 1.45 (in relation to the US dollar), we find ourselves asking: what does this mean for the freight brokerage business?
First, let’s look at why our dollar’s dropped in value. Energy production - once a booming part of the Canadian economy - is beginning to wind down, with reported cutbacks in the oil sands industry. Lower energy prices carry several negative and positive effects. Lower manufacturing costs for Canadian goods and reduced fuel prices create an attractive option for our closest trading partner, the US. However, the cost of American goods increases dramatically for Canadian firms. So the flow of traffic may begin to shift more North to South, with manufacturers in Ontario and Quebec seeing their fair share of profit.
At the same time, American trucking companies are moving in, and acquiring Canadian carriers. Canada’s market is approximately one tenth the size of the US market, and they’re now coming for their share.
What can we expect from the future? There’s some uncertainty as to how the landscape of freight brokerage will shift in the upcoming years, not to mention our overall economy. While the energy industry may have a reason to be concerned, the consumer can expect to enjoy lower energy costs, creating additional money to put into other goods and services and bolstering the economy. It seems North America’s market, and US/Canadian freight brokerage companies with it, has a bright future.