The webinar wrapped up with David and Noah fielding questions from participants — read on to see the questions and responses.

How might elevated interest rates impact the freight market in the next 3-5 years? What if there are cuts?

• The Bank of Canada’s monetary policy plays a crucial role in managing economic health, influencing consumer behavior and sector-specific investments, particularly housing.
• Housing activity and truckload demand are strongly correlated; lower interest rates could stimulate housing activity, boosting freight demand for construction materials and household goods. Lowering interest rates alone won’t solve complex issues like housing affordability and consumer spending power, which are critical to long-term freight demand trends.
• Still, our short-term outlook for the freight market is cautiously optimistic, with no significant demand downturns expected despite economic uncertainties.
• As for the next few years, nothing is certain, but the freight market’s foundational role in the economy provides resilience against fluctuations, ensuring some demand stability.

Why are truck markets suffering so much after the pandemic?

• High rates during the pandemic attracted many new entrants, leading to a capacity surge as companies invested in equipment and expanded fleets.
• As a result, the market is now oversupplied, with truck availability reaching an all-time high earlier this year.
• Demand must outweigh supply to create the vulnerability necessary for an inflationary rate environment.
• That process is underway: Inflationary conditions during the pandemic raised the costs of entering the market, including higher prices for trucks, trailers and driver wages.
• New entrants that operated with a higher cost structure back then are at a disadvantage today as rates normalize.
• Many of these carriers relied heavily on the spot market; they now face challenges without consistent spot demand and are adopting aggressive pricing strategies to secure freight.

How might Canada’s new carbon tax affect the freight market?

• Preliminary estimates indicate that the carbon tax could cause freight rates to rise by 10–30%, primarily due to its direct effect on fuel prices, a major component of carrier operating costs.
• For carriers operating on thin margins, the additional financial burden could exacerbate the post-pandemic inflated cost structure they are already facing.
• Ocean carriers’ adoption of carbon pricing mechanisms aims to promote sustainable practices but adds financial complexity, requiring a balance between greener operations and cost management.
• The carbon tax may also have broader economic impacts, potentially increasing import costs by 1–4%, which could dampen consumer spending and impact freight demand — this would leave carriers with the dual challenge of managing increased operational costs while facing demand contraction.

How can shippers mitigate risk in today’s market?

• Stay in compliance with environmental regulations when operating across borders to avoid fines and delays.
• Beyond focusing on electric vehicles (EVs) and carbon tax rebates, businesses should optimize operations to reduce deadhead miles — this will reduce fuel consumption and emissions while increasing efficiency and cost savings.
• Consider contracting freight to achieve greater cost stability, especially on higher volume lanes, to secure savings and buffer against market volatility.
• Incorporate dynamic pricing models in contracts to protect against inflationary pressures.
• Choose carriers who align with your operational goals and risk tolerance to mitigate the risk of disruption from market exits.
• Diversify your transportation strategy by balancing spot market opportunities with longer-term contracts, focusing on rates and terms that allow for adaptability to market conditions to maintain stability.