This article was first published in the Journal of Courier (https://www.joc.com/) here:
The prospect of increased US-Canada trade and opportunities for growth in the US arefueling transportation acquisitions and expanded services across the northern border.
Canada Cartage and Kuehne+Nagel Group announced acquisitions this week that strengthen their cross-border business. Canada Cartage purchased Montreal-based GTI Group, which owns several US trucking and logistics companies, while Kuehne+Nagel acquired Ontario-based customs brokerage and logistics provider Farrow.
And Roadrunner, a large US-based less-than-truckload (LTL) carrier, told the Journal of Commerce Wednesday it will launch cross-border service from the US into Canada on Dec. 11. The expansion of the three companies, all representing different modes across the US-Canadian border, underscores the depth of the relationship between the two economies.
“Canada is a massive importer of just about anything, and the industrial infrastructure of Canada and the US is very close-knit,” Chris Jamroz, chairman and CEO at Roadrunner, said in an interview.
Roadrunner will start with service to Ontario and Quebec and then expand to Vancouver, said Jamroz, who hails from Ontario and has been CEO of Illinois-based Roadrunner since 2019. “Eventually we’ll develop an internal business in Canada,” he said. “As a Canadian, it feels like we’re going home.”
The closure of US LTL trucking company Yellow and its Canadian subsidiary YRC Reimer in August put a major dent in cross-border LTL traffic from the US to Canada, Jamroz said.
But Justin Maze, vice president of carrier management for digital transportation platform Transfix, told the Journal of Commerce that cross-border opportunities are “becoming more prominent in the LTL sector lately.”
“The acquisitions are likely the result of the growth in nearshoring we are witnessing in our neighbors to the north and south,” Maze added, referring to Canada and Mexico.
Follow the money
The acquisitions and cross-border LTL expansion are an acknowledgment that despite low freight demand, a cooling global economy and surplus capacity that depresses truck pricing, cross-border trade between the US, Canada and Mexico is growing and will continue to grow.
Right now, the cross-border freight market is muted, as are most freight markets north of the US-Mexico border. The number of trucks entering the US from Canada was essentially flat in the first nine months of 2023, according to data from the US Bureau of Transportation Statistics (BTS).
But the value of goods hauled by trucks, in both directions, has been rising, partly because of inflation. In September, that value was up 4.6% year over year to $36.6 billion, according to BTS data. That followed a 6.7% year-over-year increase in August and a 5.4% gain in July.
And the promise of nearshoring, now and in the future, is a strong pull, Jamroz said.
“You cannot assemble a piece of automotive or earth-moving equipment in the US without crossing not just the northern border but the southern border,” he said. The flow of parts that contribute to final products is “increasingly intricate” and is becoming more concentrated in North America.
Canadian transportation and logistics firms have been entering the US market for years. Indeed, for global manufacturers and retailers, the money is in North America.
One of the prime examples is TFI International, Canada’s largest transportationholding company and since 2021 the owner of Richmond, Va.-based LTL providerTForce Freight, formerly UPS Freight.
Previously, TFI grew in the US by acquiring several transportation companies, includingseveral truckload carriers.
By acquiring GTI, Canada Cartage gets a broad footprint in the US market. GTI owns Houston-based drayage provider Jetco, Foxconn Logistics in Franklin, Tenn., and GTIUSA in Des Moines, Iowa.
“We have been looking for an opportunity to enter the US market for several years but have been waiting for the right acquisition to do so,” Canada Cartage President and CEO Jeff Lindsay said in a statement Monday. Terms of the deal were not disclosed.
Finding ‘strategic fit’
Switzerland-based Kuehne+Nagel Group on Tuesday said it will acquire Farrow, a Canadian customs brokerage and logistics firm with growing operations in the US and US-Canada cross-border trade.
The acquisition is a “strategic fit” in terms of services and markets, Hansjörg Rodi, themember of the Kuehne+Nagel’s board responsible for its Road Logistics business, saidin a statement.
“The acquisition of Farrow greatly accelerates Kuehne+Nagel’s growth ambitions in the customs market,” Rodi said. The deal, terms of which were not disclosed, expands Kuehne+Nagel’s reach not just in Canada-US trade, but in Mexico-US freight movement as well.
The K+N and Canada Cartage acquisitions are good moves for both companies, saidRoadrunner’s Jamroz, who is familiar with both the truckload and forwarding marketsin Canada and the US. For Kuehne+Nagel and freight forwarders in particular, customsbrokerage is increasingly important.
“Shippers will tell you that you should date your forwarder, but you marry your customs broker,” he said, noting that Kuehne+Nagel’s acquisition of Farrow will forge even closer links with cross-border shippers.