The price of freight in Canada is poised to surge higher as demand continues to outstrip the capacity to move goods and government wage subsidies end, the CEO of one of the country’s largest trucking and logistics firms, Mullen Group, said Thursday.
“This has already occurred in the United States,” Murray Mullen told financial analysts. “In Canada, we are lagged on this market change but … I am of the view that we are in the early days of improved pricing. I can tell you this, our business units have heard me loud and clear: Prices must rise.”
Mullen made the comments a day after Alberta-based Mullen Group (TSX: MTL) reported record third-quarter revenue on the strength of LTL and logistics acquisitions. The company brought in adjusted net income of CA$17.8 million ($14.4 million), or 19 cents per share, on CA$432.5 million in revenue.
The company’s revenue increased by 48.7% compared to the third quarter of 2020. It came largely from acquisitions, including Ontario intermodal and LTL carrier APPS Transport and Chicago-area 3PL QuadExpress, which has rebranded as Haulistic.
Mullen said he didn’t anticipate significant growth in coming quarters but expected better margins as the company increases prices at its operating units, which stretch from Ontario to British Columbia.
“We’re raising prices, that’s all there is to it,” Mullen said. “And if you don’t want to pay the price, then give your business to somebody else. I’m OK with that.”
Stagnant prices, tightening capacity
Base freight costs for Canadian shippers — excluding fuel and accessorial charges — were up less than 1% in August compared to a year earlier, according to the most recent Canadian General Freight Index report released Wednesday. However, total freight costs were up by 6.7%, according to the report.
Meanwhile, capacity in the Canadian freight market has continued to tighten. A key measure of truckload capacity, the Outbound Tender Reject Index for Canada on FreightWaves’ SONAR platform, is up by 50% compared to a year ago as carriers reject a higher percentage of loads.
According to Mullen, pricing is the only visible solution to meeting the demand. It’s simply too difficult to hire truck drivers, dockworkers and other workers.
Other transportation and logistics companies are also going to be forced to increase their pricing because of the recent end to the Canada Emergency Wage Subsidy program, Mullen said. The subsidy, implemented in response to the pandemic, has flowed billions of dollars to company payrolls across Canada, including to Mullen’s own operating companies.
The subsidy had allowed firms to keep a lid on pricing, he said.
“If companies don’t adjust their pricing, they will be in a lot of trouble,” Mullen said.