Digital Edition

Aug.22, 2016

Issue link: https://jocdigital.uberflip.com/i/714141

Contents of this Issue

Navigation

Page 59 of 87

SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 60 THE JOURNAL OF COMMERCE www.joc.com AUGUST 22.2016 By Reynolds Hutchins THE SO-CALLED FREIGHT recession in North America that has allowed domestic inter- modal shippers to enjoy relatively lower rates soon may end. Industrywide declines in freight volume and overcapacity across all modes have led to lower prices to move a 50-foot container or trailer. In the second quarter, freight vol- umes fell across-the-board, shipping rates dropped and railroads' profits were meager at best. But just as the industry is coming to terms with the doom and gloom, the clouds are beginning to lift. "It's a freight reces- sion," Tony Hatch, transportation analyst with ABH Consulting, told The Journal of Commerce. "But by the time we realize we're in one, we're beginning to leave it." North American railroads and analysts such as Hatch say they anticipate intermo- dal traffic — and intermodal pricing — to rebound in the second half of 2016, or the first half of 2017 at the latest. They've pointed to a number of positive signs: Consumer spending is up, imports are rising, and West Coast ports — with far more connections to the U.S. intermodal network than their eastern counterparts — are win- ning over market share. Moreover, railroad executives and transportation analysts agree that capacity across all modes should tighten as new U.S. regulations hit a trucking indus- try struggling with a chronic driver shortage. "Intermodal continues to be impacted by excess capacity in the truck market, a condition we expect to change next year," Alan H. Shaw, Norfolk Southern Railway's chief marketing officer and executive vice president, told analysts and investors on a second-quarter earnings call. "Uncertainty" was still a popular word on those earnings calls this year, and even more popular among the analysts attempt- ing to gauge when and how much the market will rebound. Larry Gross, a senior trans- portation analyst at FTR Associates and president of Gross Transportation Consult- ing, likened himself and other analysts to Chicken Little — pundits often asked to play prophet. "Some shippers have gotten tired of hearing from folks like ourselves who keep saying things are going to be tighter. This forecasting business is difficult," he told The Journal of Commerce. "But I think we're going to start seeing some tightening, and that will work to intermodal's benefit." A rebound in the intermodal market would be welcome news to U.S. and Cana- dian railroads that have seen cargo volumes fall across a wide range of business segments in recent months. Coal, the dominant rail commodity for decades, has lost its throne. Energy sector volumes have been down by double-digits at railroads since last year. A successor has yet to fill the void that coal and other carload commodities have left in both volume and revenue. But intermodal has been a leading con- tender. Networks are primed for its revival, service already has improved to levels that preceded the devastating 2013-14 winter roiled networks nationwide, and multiple railways have introduced new marketing campaigns to win new intermodal business. Many rail executives on second-quarter conference calls with investors and analysts characterized the shift as an exchange between coal's declining promise for Class I railroads and the potential for new intermo- dal business. "We will continue to preserve INTERMODAL'S FIRMER FOOTING Analysts see North American volume and pricing edging up as consumer spending and imports grow

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - Aug.22, 2016