Toronto – Canada
In this age of globalization where goods are shipped internationally to various markets it makes sense that trade will be a reliable indicator of domestic and international economic performance. Certain commodities such as steel if imported in large quantities to a certain country suggest a construction boom, but what about other indicators such as logistics? In a candid video interview Howard Green of BNN discusses with Claude Mongeau the CEO of CN Rail how CN Rail’s business reflects the performance of the Canadian and global economy. Find the link to that interview here.
CN Rail does not just ship goods, it is a shipper of the economy, and Claude Mongeau reveals that to run a railway you need to know whats going on and where it’s happening. In the interview Mongeau speaks in a calculated and deliberate manner about: how today’s economic worries are different from 2008, how the movement of goods is reflecting the source of economic activity and CN Rail’s growing market share.
Thankfully, Mongeau responds to Green’s question about how today’s economic woes compare to those of 2008 with some appeasing facts. Firstly, he mentions that CN is experiencing steady shipping in heavy industrial goods, which means that there have been no major fluctuations in the market so far. Mongeau also discusses how in 2008 inventory was piling up due to a lack of demand, but presently that is not the case as companies are keeping a consistent, “tight” level of inventory. This means that companies have either streamlined inventory warehousing or that there is indeed a consistent demand.
There is a remarkable part in this interview where Mongeau discusses the proportion of shipments that are Asia bound. He mentions that about 31% of CN’s business is exports to Asia and that it is the fastest growing segment of CN’s business. Mongeau goes on to qualify why he believes this export growth will be sustained, stating that demand in China for raw materials is based on domestic needs rather than for export based manufacturing. This means that demand for Canadian raw materials will not be affected if China exports less globally since the goods are for domestic consumption. The growth of Canadian exports is an important indicator as it shows the shift of Canadian trade to emerging markets and the growing viability of Canada as a trading partner with those countries. This trend has also been corroborated by Export Development Canada (EDC) which has been promoting Canadian companies to do business abroad.
Most importantly, the rise in exports has played well into CN’s hands, however there are other factors that have helped to boost the company into an enviable position such as fuel prices and network integration. Currently, rising fuel prices and congestion have made rail a more cost effective mode of transportation. Besides saving on fuel CN has managed to add more value to their network through intermodal transportation, meaning that shipments are no longer bottle-necked in ports and freight yards, thereby reducing shipping times.
All in all, this interview was very insightful as to how logistics can be a barometer for economic performance. Mongeau shows that he has a good grip on the interconnectedness of politics and economics and how his company can add value to its customers. So next time you are stuck watching a CN train go past you might think that a longer wait is not such a bad thing after all.
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