It’s in good shape for the shape it’s in.
http://fleetowner.com/management/news/domestic-intermodal-volumes-rebound-1113/
Thanks for sharing. [tup]
A couple of quibbles/ comments:
“One reason for the growing popularity of intermodal is the depressed state of the trucking industry, plagued by excess capacity and aggressive pricing, Longbow Research analyst Lee Klaskow told Reuters.” Huh ? Wouldn’t those factors tend to keep traffic on trucks and not intermodal ? [%-)]
“He noted that intermodal is also more attractive to shippers because it’s greener—as it takes about a third less fuel than shipping by truck alone.” Do the shippers really even care about either of those ? As long as the service meets their needs, and the price and time are competitive ?
- Paul North.
Paul
I am a couple of decades beyond working the business, but I have to agree that about the only way “greener” might have an impact is where a shipper thinks he ought to take a “look” at intermodal service. If the price and service is right there might be a shift, but in the light of the current economic environment, I sure can’t see a traffic manager buying a service that costs his company more money just because there is a social issue.
One has to assume that “aggressive pricing” was stated to mean that excess capacity is pushing rates downward. That is not necessarily good news for a shipper. Trucking companies or truck brokers who rely on independent truck owner operators may find that some owners won’t take loads with low revenues and will park their trucks rather than go out and lose money. As a consequence, the traffic manager may find he is not getting trucks to his dock when he needs them. The thing that trumps low rates is poor service. Company managers love low transportation costs, but if they aren’t getting the business out the door…
Note on pricing: Many of the TL and LTL carriers are zombie companies that are being kept alive by their lenders despite the operating loss only because the alternative of shutting the company down is worse from the lenders’ perspective. If the company is shut down then the assets must be liquidated and in this economy the assets are worth virtually nothing as there is no demand. Also the lenders must then write down their books to the true value of the assets (zero) while if they keep the zombies staggering around then everyone can be hopeful that the value of the asset is something greater than zero someday.
Even though TL pricing has been cut, it is still on average not into the territory of domestic intermodal pricing, which is running at a discount of about 15 percent below the lowest consistent TL rates. Meanwhile domestic IMX service is improving noticeably in on-time performance and reliability, and its schedules have not been cut whereas the TL carriers are less enthusiastic about markets where backhauls are thin. Also, shippers are increasing significantly the amount of goods they restuff from international to domestic containers, which again favors rail volume and not TL volume because these are typically large-volume consistent moves.
I doubt there’s a traffic manager out there who cares about green other than to impress other departments on powerpoints. It’s a parsley sprig on the steak of lower shipping costs. However, boards of directors and senior management can read tea leaves and the ones I see the policy from are expecting that green/sustainability demand by the public is going to increase long-term, and expect pressure on them to show improvement, and in turn are strongly pressuring their managers to show real results.
RWM
That’s an interesting thought. I’m not sure I agree with it. From my perspective, we see a lot of manufacturers and distributors seeing the value of using all kinds of* green* and sustainable buzzwords, but not too many of them actually changing much. It seems like the easiest way for most companies to be thought of as green is to print a bunch of pretty picture pamphlets, telling the world how green they are. Dilbert would be proud.
Until companies are forced to become better corporate citizens by the marketplace, I don’t see much changing. It seems the public can demand green/sustainability, but this is the same public who wants someone else to make that sacrifice. John Q. wants the world to be a better place-don’t we all? He just wants someone else to pay the price for making it a better place. for him.
Maybe that great philosopher Red Green has it figured out: “We’re men…but we can change…if we have to…I guess.”
Paul:
I was also puzzled by the “depressed state” comment. It didnt make sense unless the depressed state of pricing is forcing the carriers to move their shipments to the lower cost alternative, which is from OTR to intermodal.
Recently the NS intermodal trains on the ex Conrail Chicago line have been loaded with JBH containers, more than previously seen.
One only has to take a look at YRC to see the effects of lender’s relationships with carriers. This last week YRC proposed a debt for equity swap in which all debt would be transformed into stock with the lenders then owning 95% (yes 95%) of the company. Obviously, managment is looking at a court bankruptcy or giving the company away (bankruptcy less court time). It wasnt long ago that the R component of YRC (Roadway) was a cash only company with absolutely no debt on their books.
The long haul LTL market has changed drastically over the past 25 years with manufacturing shifting from Cleveland, Pittsburgh, Chicago, Milwaukee and other rust belt areas to Pacific rim. Freight now moves via container to a port and then inland with distribution being a much smaller segment of the transportation, when compared to cross country (Chicago - LA) of a couple decades ago.
No one at this time is buying transportation equipment, except for the 2009 tractors (to beat the emissions standards increase of 2010 models). Trailer sales are depressed. A major rail shipper indicated that builds for railcars is projected at 8000-10000 next year, a fractions (tiny fraction) of the capacity. Yet, the recession is “history”.
Perhaps so, but not for me.
ed
Cynical on such a fine morning are we, Norris?
I just report what I see. Unlike many who frequent this forum I’m not an advocate or a member of an advocacy group for any position. I’m just in business to try and make money hauling freight and passengers by rail. I’m kinda dull – I am one of those dinosaurs who really doesn’t care what the politics are and what the rules are so long as they’re equally enforced so that my competitors don’t get to break the rules while I have to mind them. You want to see me get excited, it’s when my competitors get a break and I don’t.
Maybe you get to tell your customers that green is stupid and they mind you, but I don’t seem to have those powers. My customers tell me what they want and I can either get with the program or quit, and what they want is green. And my ultimate customers – since railways are just a service business – are either the public with its capital investment dollar, or shippers, mostly large shippers who need to build plants, or mine coal on public lands, or emit CO2, or sell bridge steel to state highway departments, or something the public cares about, and they all have the public breathing down their neck to get green or get lost. So I pay attention!
I don’t get to tell the public what to do, what to think, or what to want. I’m a nobody and I don’t have my own TV show and I have to work for a living so I don’t have time to be a preacher for any vision I might have for what America ought to be. I leave those ambitions to others who have spare time on their hands and rightousness in their minds. I just see what it is the public is telling me to do, and I decide whether I shall comply or go find something easier to do. The public tells me what to do all the time. It has regulations for all sorts of things. If I want to use its money, or get its permit to build something, or survive its public hearings with my project intact, I find that it’s necessa
Don’t forget the “Experts” portion of the show, where they feature a panel of Possum Lodge members who deal with viewer mail and those three little words that men find impossible to say**…**“I Don’t Know.”
Red’s philosophy**:** “If women don’t find you handsome, they should at least find you handy.”
A fair enough assesment, I suppose.
Let me expand a bit, so that I’m not misunderstood. green & sustainability are both good things. I like good things. The industry I work in should rank up there pretty high in the green & sustainability rhelm of things. Lumber-the stuff grows on trees!
What I’m saying is, at least from my perspective, is that it’s a lot like Mark Twain said about the weather. Everybody talks about it, but no one does anything about it.
Perhaps you’re a little further up the food chain, in that you’re closer to businesses that are building new or expanding on large scale. The businesses I deal with might be more in the old and set in their ways type of people. I also live relatively off the beaten path.
I can see green & sustainability as being a market force now, and down the road as well. But, I see it as something a lot of companies and individuals will deal with when they have to, not when they want to, or because it’s the right thing to do. So, yes, I’m cynical on that train of thought.
Back to the example of B.o.D.s thinking about Green & sustainability for the long term. How much of that spills over into the transportation planning side of a business plan when designing a new mine or factory?
I’ve swallowed waaayy to much water in this thread, so I went looking and found this handy-dandy reference for those who may be reading, and who, as I am, are unfamiliar with some of the trucking industry initialisms and terminology.
http://www.greatcdltraining.com/understanding-trucking/trucking-terms
Pardon while I belch…
Yah, trucker types have all that stuff, plus secret hand shakes, hand sign and special hats. Unlike railroaders…
“Zoombie” truck lines? YRC being handed over to its creditors? Learning is good.
I’ve never heard of “Zoombie” companies before, but the concept makes perfect sense. It’s like what happened to the LTL cariers in the early 80’s when they faced deregulation. Truck lines with no hope kept running on hope by cutting rates to attract any cash flow they could. It works for a while, but eventually reality sets in (as when you have to buy new equipment).
I think Jay nailed it right off the bat with regards to rates. Lower rates please the shippers right up until the time the truck doesn’t show up. Or breaks down en route with your load. Then the shipper looks for alternatives, and on specific lanes intermodal will do just fine.
As to the “Green” thing. I think it’s pretty obvious to most of us that fuel prices are going to go back up in a significant way. 1) The dollar is being devalued so it will take more of them to buy oil, 2) this world wide recession will end someday causing the demand for, and price of, oil to increase, and 3) “Cap & Tax” may pass further driving the cost of fuel up.
A reasonable VP of Distribution would plan for this by minimizing his company’s exposure to the future price increases. Shifting as much freight as is reasonably possible now to a lower fuel intensive mode, such as rail, would make sense. If you change your distribution now you won’t be left scambling with everyone else when the price of fuel goes back up.
As Murphy Siding said, “It’s market driven ‘Green’”.
There is/are a lot of ‘brownfield’ properties that have sat empty that are right besides various working ROWs right now that could be taken for a song. One could see a lot of redevelopment around those districts and hence may also bring more business back to the older industrial parts of cities etc. That may be another approach as well.
The term for that is ‘green-wash’ - like ‘white-wash’, or a former boss used to say, ''just eye wash".
Some companies and products are legitimately ‘green’, but they just didn’t realize it until it became all the rage recently. In your board business, Murphy, it’s the OSB, I-joists, LVLs, paralams, glu-lams, finger-jointed stock, etc., which are largely man-made out of small pieces of trees, instead of big chunks from ever scarcer big logs. That trend started a long time before the green thing deed, largely as a reaction to scarcer and more expensive trees. So what made sense economically from a cost and availablility perspective turned out to be ‘green’ as well.
Others can legitmately tout the green thing, and use it to justify or command higher prices and profits because it’s got some extra appeal to the buyer as compared to the commodity stuff. Sometimes it’s more expensive to make - other times, that extra money goes all to the bottom line, a tribute to the marketing people.
And then there are products and services that are not very ‘green’, but the advertising crowd has figured out a way to make a claim or make it seem that way. Who could be against motherhood and apple pie, or green, too ? I suspect that’s some of what your seeing.
greyhounds - “zombie truck lines” are kind of like “zombie banks”, I suppose. You could look up the latter if you haven’t heard i
“Green” is being fed to the public through education, news, and entertainment, and they are lapping it up. Why wouldn’t they? Right now green is just a symbol, and one that just happens to be perfect enough to appeal to everybody. Businesses are reflexively marketing to that symbol because the public is in love with it. So, most of that corporate response is merely symbolic as well. But that sweet symbol is like a Trojan Horse, and the public is soon going to be surprised by what’s inside.
I think this fits classic economic theory to a “T”.
On certain, select, lanes a more efficient, lower cost, supplier (intermodal) is replacing a less efficient, higher cost, supplier (OTR trucking). That’s just what is supposed to happen in a free market.
Take a look at what RWM said. Intermodal service is 15% below over the road cost, and its service is getting better. As the IM improved service level narrows the gap between it and OTR service, IM becomes more and more of a “Product” that the customers can use. These customers increasingly choose to use the lower cost option when it meets their service needs.
It’s just as Mr. Smith projected.
I’m enthusiastic about the new NS/JB Hunt agreement. BNSF is good, and it’s hard to fault success. But I see their IM marketing efforts as being somewhat “Uninspired”. They can just sit back and let their long length of hauls take the freight off the Interstates.
NS, on the other hand, has shorter hauls and has to do some work to make IM truck competitive at the shorter distances. This can be done. Their JB Hunt agreement indicates they are serious about doing it.
I take it you are not in the industrial development business or the real-estate business. Those properties are usually deemed untouchable because the seller usually wants the buyer to assume all the future environmental liability. Also, the tax rates are usually exorbitant because the property is still being valued by the municipality at its prior use value, and if they derate your property they’ll be hammered by all the other industrial property owners in the municipality who didn’t get the same break. If you get past all that, the rail access costs are usually enough to scare off any potential buyer because the railroads have typically repurposed the spare capacity that was once devoted to the former plant and now the buyer might spend $20-$50 million on a deceleration track, signal improvements, and grade-crossing separations to fit all this into the available footprint.
The environmental liability is particularly problematic because it’s impossible to quantify – a site could have a multi-billion dollar problem that no one will know about for years into the future. That makes it impossible for the buyer to obtain financing because the lender can’t quantify his risk of your default. Often the land price on these properties is ridiculously high, too, because the seller is carrying the property on his books at an exalted rate and if he writes it down to a price that will “mark to market” he’ll violate his debt covenants.
RWM
Murphy – read that paragraph above. Many people are under the impression that a shipper than can use either an intermodal product or a TL product can just flip back and forth every last trailer in every last lane on the turn of a dime in price. Not so. Some can, but many can’t. First, a shipper’s needs are dynamic, not static, but his committments, such as where to build his distribution centers, are static, not dynamic. There are no simple answers to these questions, and if you get it wrong while everyone else gets it right, you may find that you’ve got a higher-cost distribution network than your competitors. So right now, some shippers are looking long term that fuel costs and truck costs are probably inevitably going to rise as a result of “green” and other influences and are starting to think about how to reconfigure their models to reduce TL and increase IMX. But these are not changes that you can pencil out, sit on, and flip a switch one day; they’re like turning supertankers – you have to plan in advance and start making committments now.
RWM
Well, I did not say I had any in that field![:D] But I can see there would be issues
After reading this all through there would be a huge problem but then what would, or could, you do? The issue in many places right now is that the only areas left for that type of development is way out of town and no where near any RR ROW. So those costs to develop any ROW into that industrial park I’d say would also be extremely problematic even to a new development. As it is we have one company building an industrial park outside of London’s city limits precisely because the valuation is so high on a normal industrial
Thank you for stating so eloquently what