Freight Index Rose 0.1 Percent in June
The Freight Transportation Services Index rose 0.1 percent in June from its May level, rising for the second consecutive month, the U.S. Department of Transportation’s Bureau of Transportation Statistics reported today, Aug. 13.
For the first six months of 2008, the freight index advanced 2.9 percent, its largest increase for the first six months of the year since 2002. In 2007, the freight index dropped 0.4 percent in the first half of the year before rising about the same amount in the last six months to finish virtually unchanged for the year.
Despite a big increase in May and a sharp decline in March, the freight index was at about the same level in June as in January. At 111.5 in June, the Freight TSI was up 3.3 percent since its recent low of 108.0 in September 2007 but down 1.4 percent from its peak of 113.1 reached in November 2005.
The June 2008 Freight TSI level was 2.9 percent above the June 2007 level of 108.4, but below its June 2006 level of 112.7. Despite the decline from the June 2006 level, the freight index has increased 8.1 percent in five years and 10.3 percent in 10 years.
The seasonally adjusted Freight TSI measures the month-to-month changes in the output of services provided by the for-hire freight transportation industries, including trucking, rail, inland waterways, pipelines and air freight. It includes historic data from 1990 to the present. The baseline year is 2000.
eTrucker.com
8/16/08
Study Predicts Drayage Driver Shortage Due to Security Rules, Growing Imports
A new study by an intermodal consulting firm forecasts a looming shortage of port drayage drivers because of new federal security regulations and a return to growth of freight imports by sea.
“There is a concern that many drivers that deem themselves at risk of being rejected are simply not applying for the Transportation Worker Identification Credential,” the report from the Tioga Group said. “This could cause a shortage of drivers where illegal immigrants are believed to make up a large part of the driver force.”
Southern California could lose 22% of its port drayage driver pool because many drivers cannot pass the immigration status check that is part of the process for obtaining the TWIC card that will be required after April 15. That estimate was made by John Husing, a California economist who did a study of Los Angeles-area port drayage, last year.
There are estimated to be at least 16,000 drivers who regularly move container cargo to and from Southern California ports, warehouses and rail yards.
Drivers have to pass immigration as well as criminal and terrorism background checks before the card is issued.
Tioga recommended California port officials do a detailed assessment of the potential reduction in the driver pool. Its Containerized Intermodal Goods Movement Assessment is based on more than 100 interviews with ocean, motor and rail carriers, shippers, ports arid marketing companies.
At the same time that the driver pool might shrink, import cargo growth is expected to resume as early as next year, Tioga principal Dan Smith predicted.
International import volumes reached record levels last year, after five consecutive years when growth averaged 9% in Southern California, before declining this year on the West Coast. Import cargo has fallen a combined 10% this year as measured in 20-foot units at Los Angeles and Long Beach, the two biggest U.S. ports.
“Service providers operating in the important container activity chain are struggling with this uncertainty and with an unaccustomed need to shrink operations,” the report said.
Meanwhile, container exports have risen 20%. Exports are rising because of the weak dollar and a shift by grain exporters who use containers, which have been in short supply, instead of bulk vessels.
The report forecasts that other West Coast ports, including those in Canada, are a bigger threat to divert cargo from the West Coast than the expansion of the Panama Canal. Shipments through the Suez Canal to the U.S. East Coast are expected to grow as well.
Transport Topics
8/11/08
Analyst: Truck Capacity Down 4.5 Percent in 2008
In the wake of escalating diesel prices, an estimated 970 trucking companies failed in the second quarter of this year, Avondale Partners transportation analyst Donald Broughton reports. The number is slightly higher than the 935 failures Broughton reported for the first quarter of 2008.
Avondale Partners further estimates that 46,000 trucks -- 2.4 percent of the nation’s over-the-road heavy-duty truck capacity -- were idled during the second quarter. Added to the first-quarter totals, more than 88,000 trucks or 4.5 percent of the capacity has been idled this year, Broughton says.
Broughton believes the pain is easing, however. Not only are fuel prices falling, but the tide is turning in favor of carriers in relationship to their customers. “We see the imbalance between too many trucks and not enough freight, shifting toward too much freight and not enough trucks, as already beginning.” To support this observation, Broughton cites miles per tractor of the publicly held fleets; bill-to-book ratios reported by significant privately held carriers; the behavior of shippers in seeking guarantees of capacity and limits on pricing; and data from truck brokers.
Another factor is that the devaluation of the U.S. dollar has allowed used truck dealers and large fleets to sell many trucks into the export market, especially to Russia and Eastern Europe. “This means that unlike previous cycles where the truck was idled capacity just waiting for demand and a driver, so that it could re-enter the nation's fleet as capacity again, capacity is first being idled and then eliminated (at least from the U.S. marketplace). If these trends continue, when demand returns it will have an even more powerful impact than it did last cycle, and capacity will get very tight, very quick.”
Commercial Carrier Journal
8/19/08
Rail Freight Declines
Carloads and intermodal freight slumped during the week ending Aug. 9, according to the Association of American Railroads.
Increased coal loadings helped to offset the declines for a flat week in terms of ton-miles. AAR estimated U.S. railroads carried 34.2 billion ton-miles of freight in week 32, the same as a year earlier. Overall carloads were down one-tenth of a percent, though.
Intermodal traffic fell 1.4 percent. While trailers improved three-tenths of a percent, containers dropped 1.9 percent.
Only seven of 19 commodities gained over the comparable week last year, and three of them moved mere blips of less than 1 percent. Grain, which has consistently increased by double digits until now, increased only two-tenths of a percent, adding 53 carloads for a total of 23,363.
Coal improved by 5.1 percent, much stronger than the 3.3 percent rate for the first 32 weeks. With its heavier weight and larger base volume, coal pulled the average up.
Motor vehicles fell 29.6 percent. Lumber fell 16.9 percent. Those declines were in line with trends in the construction and automotive industries.
But a 16.5 percent drop in farm products other than grain was a deep difference from growth of 5.2 percent so far this year. Food has been growing all year at a 2.4 percent pace but fell last week 8.3 percent.
Traffic World
8/14/08
Four Percent Drop for 2008 Retail Box Traffic Seen
Cargo volume at the nation’s major retail container ports is expected to decline 4 percent in 2008 compared with 2007 because of the nation’s slow economy, according to the monthly Port Tracker report released Aug. 7 by the National Retail Federation and Global Insight.
Volume is projected to total 15.8 million TEUs for the year, compared with 16.4 million TEUs in 2007, according to the report.
Cargo volume each month this year has been below the same month last year and is expected to continue to be below last year’s levels in each remaining month except October and December.
“This has been a very challenging year, and cargo volume reflects consumer demand as retailers work to keep inventory as tight as possible in order to keep supply and demand in balance,” said Jonathan Gold, NRF vice president for supply chain and customs policy.
U.S. ports surveyed handled 1.3 million TEUs in June, the most recent month for which actual numbers are available. The number was down 0.3 percent from May and 10.3 percent from June 2007.
Cargo Business News
8/7/08
LA, Long Beach Box Numbers Fall Again
North America's two largest container ports - the freight docks of Los Angeles and the adjacent Long Beach terminals - saw traffic weaken again in July.
Both of the Southern California ports continued a yearlong pattern in which declines in loaded import boxes and empties more than offset strong gains in export loads.
That partly reflects weaker U.S. demand and a weak dollar against foreign currencies that makes imports automatically more pricey. And empty boxes that used to go right back to Asia from California now increasingly run through Atlantic ports.
The past year has also seen some ship lines bypass West Coast ports and the cross-country rail intermodal costs to steam through the Panama Canal and deliver their boxes at East Coast ports where they are a short truck ride from major consumer markets. That change in trade patterns also cuts into import and empty container numbers in California.
Total box volume in July fell 2.54 percent at the LA port to 698,159 TEUs - a standardized measure for variable-sized containers as twenty-foot-equivalent units.
Outbound loads of U.S. exports jumped 34 percent to 173,650 TEUs, but the number of empty boxes - which even a year ago outpaced export loads -- plunged 23 percent to 157,012. The dominant category of loaded import containers shrank nearly 4 percent to 367,496.
Long Beach docks handled 563,703 TEUs last month, down 12.9 percent from July 2007, as the volume of loaded inbound boxes dropped by 18 percent to 272,350 TEUs.
Like at neighboring Los Angeles, outbound loads now top the number of empties moving through Long Beach. Exports rose 13.5 percent to 153,364 TEUs and empties dropped 23 percent to 137,989.
Although July marked another decline for both ports, the falloff was milder than earlier this year. Analysts say that may be largely because the previous months in 2008 often compared with periods in 2007 when the ports still saw some volume gains; now, the declines appear softer against months last year when traffic was steadily shrinking.
For the January-July period, total box traffic at the LA terminals was down 6.13 percent to 4.473 million TEUs. Long Beach has seen volume fall 9.4 percent in the first seven months to 3.778 million TEUs.
Traffic World
8/14/08
Inflation Pace Is Fastest in 17 Years
U.S. inflation accelerated in July, as prices rose 5.6% from a year earlier, the fastest pace in 17 years.
The consumer-price index rose 0.8% from June, reflecting increased prices for food, energy, airline fares and apparel, the Labor Department said Thursday. That followed a rise of 1.1% the month before. Core inflation, which excludes food and energy, advanced 0.3% for the second consecutive month and was up 2.5% from a year before. That is well above the Fed's "comfort zone" of 1.5% to 2%.
"A truly ugly inflation report," said Harm Bandholz, economist at UniCredit Markets and Investment Banking, in a note to clients.
Slower inflation may be on the way, economists said, because of a combination of factors: the recent drop in prices for oil and other commodities; the strengthening of the dollar, which lowers the price of imports; and continued weakness in the U.S. economy.
That suggests Federal Reserve policy makers are unlikely to raise interest rates despite their policy statement last week that inflation remains a "significant" concern. The Fed is generally expected to keep official interest rates steady into next year—though rate increases could end up back on the table later this year if recent core-inflation increases persist.
Gary Stern, president of the Federal Reserve Bank of Minneapolis, said Wednesday that even though the U.S. is "probably...in for a few more sizable increases" in overall price measures, "assuming we don't get a resurgence of energy prices, we will see over time a diminution of headline inflation," which includes food and energy. Mr. Stern, who is considered one of the Fed officials most vigilant against inflation, said he also expects core inflation to slow.
Many economists agree. Lower oil and commodity prices and modest wage increases "will help to get inflation substantially lower over the coming quarters," said Dimitry Fleming of ING Bank in a research note. As a result, "we doubt the Fed will actually pull the rate trigger," he said.
Thursday's report showed that energy prices swelled 4% last month, while gasoline prices increased 4.1%, and natural-gas prices rose 7.4%. Food and beverage prices rose 0.9%. Medical-care prices, meanwhile, increased 0.1%.
Other items posted sharp gains. Clothing prices, for instance, rose 1.2% in July, while transportation prices rose 1.7% as airline fares were up sharply, reflecting higher fuel prices. New-vehicle prices advanced a modest 0.2%, reflecting falling demand.
Separately, the department said the average weekly earnings of workers, adjusted for inflation, fell 0.8% in July, suggesting incomes aren't keeping pace with prices. It also said that new jobless claims fell 10,000 last week. But at 450,000, claims remained well above levels economists usually associate with recession.
Meanwhile, continuing claims, which last for more than one week, jumped to their highest level in almost five years, suggesting it is taking the unemployed much longer to find new work than it did a few months ago. That, in turn, could further damp consumer spending, which appeared weak in July, according to a retail-sales report released Wednesday.
Wall Street Journal
8/15/08