"Better Watch Out, Better Not Cry"

Ominous news reported in Today's New York Times that Santa Claus is "making the list and checking it, uh more than, twice":

http://www.nytimes.com/2011/10/12/busin ... eason.html

While of course the article is directed to maritime shipping industry, I think we all know the stuff has got to get from the Port to Wally World - and that will directly impact the railroad industry.

Brief passage:

• Analysts have been raising their predictions for holiday spending ever since the back-to-school shopping season was stronger than most had expected.
  
  But the people who work at the companies that ship and transport retailers’ goods are not nearly as optimistic about holiday sales.
  
  When retailers expect that Americans will be crowding into their stores, their orders pile into the nation’s ports in August and September for delivery to stores by late October. But logistics companies say that is not happening this year....We’re not seeing any real, significant peak,” said Steve Branscum, group vice president for consumer products marketing at the Burlington Northern Santa Fe Railway, referring to the company’s import business. The railway typically has increased imports in August through November. But this year, he said, “the last three months, July, August, September, our numbers have been pretty flat compared year over year to the same month, and the West Coast imports have been down a little bit.”

Unfotunately, for railroad security investors, of which this author is one of such, Wall Street is taking note. Although there has been some recovery MTD October, look at the dismal performance during Sept of railroad stocks (BRK.A owns BNSF Ry):

http://moneycentral.msn.com/investor/ch ... kie=1&SZ=0

Since I do not hold any licensure as an Investment Advisor, I had best not comment regarding the decline in railroad security prices. Regarding the Times article, all I can say is "we ain't out of the woods yet".

A few years ago, one of the regular columnists in Trains put forth the point that the underlying reason for the rail industry''s post-1985 recovery was that for the first time in decades, it could offer a serice that someone actually wanted to buy, rather than holding the postion of "carrier of last resort" for bulky, low-value, and/or dangerous commodities.

But nothing is permanent except change itself, and if global economic conditions don't eventually reduce the flow of intermodal traffic, completion of an upgraded Panama Canal or improvements to deep-draft East Coast harbors might have the same effect.

Many years earlier, back in the Sixties, another Trains cover story on the possiblities for electrification concluded that "So long as the wires are up, it's cheaper to use 'em." But even that observation didn't hold true for PRR and its succesors, or the Milwaukee once another twenty years passed.

And on the brighter side, the continued growth in the rails' advantage on an energy-consumption basis seems too prominent to dismiss, and the possible loss of the long-distance COFC "plum" would seem much easier to compensate with both a rebuilt physical plant and the ratemaking freedom to use it in place. Most encouraging of all, in the view of this writer, is the passing of the "one-size-fits-all" thinking whch both enabled the industry to play a central role in the ultimate global conflict, but also ensured its being held hostage over the four decades which followed.

It's a very long and convoluted story, and we're priveleged to be among the more knowledgeable of the spectators.

Great points, Mr. Second Trick.

There is no question that there is consternation and concern along Lou Menk Drive and at 14th and Douglass, but somehow, I like to think that Warren knew that PANAMAX, save for some ULCC's - Ultra Large Crude Carriers of the 300KDWT varietal, would be a non-term within the decade. For their part, UP has now addressed the "bottlenecks' inherited from the C&NW - namely single track operations over the Des Monies and Cedar Rivers and are moving forth with double track of the Sunset Route El Paso-LA. BNSF, with the completion of the Abo Canyon project, is now in a position to give a "Z" the High Green "all the way on the Santa Fe".

There is no question that some lower value traffic handled in containers, say Asian woven textiles being shipped to the US where "Made in the USA" apparel can find its way to the shelves of Tar-g'ay and Wally World, will be routed Trans Canal to an East or Gulf Coast port - all at the expense of Warren and Uncle Pete. But the higher value traffic, such as whatever must have electronic plaything Steve has guided from upstairs to his minions down here, will still move through LA and LB with BNSF and UP line-hauls.

In short, no Adios drumheads are going up on either Transcontinental road, the reported downturn appears to be cyclical and recognition that for much of the "other 99' (ref: "Occupy---"), the Recession simply "aint over'. While Fifth Ave, Mag Mile, and Rodeo Drive may see a return to "pre-'08', the Big Box in the cornfield simply will not this year.

disclaimer: author holds long positions CSX KSU NSC UNP

While, as is the case with most anything appearing in general circulation media, this article in Tuesday's Times breaks little ground with those of us who follow affairs that could adversely affect the industry's fortunes in a post PANAMAX environment, it suggests railroads are not about to roll over and play dead when the favorable East-West line hauls are at stake. Neither for that matter is the Port of LA/LB:

http://www.nytimes.com/2012/08/21/us/us ... pands.html

Brief passage:

• Moving goods by water is generally cheaper than moving them by land because of the economies of scale of moving so many containers on those big ships, said John Martin, a ports consultant in Lancaster, Pa. So that would suggest canal routes will offer lower-cost shipping to the East Coast and Midwest through the canal.
  
  But, he said, containers loaded on the West Coast, which has built up its container yards and highway and rail infrastructure, can outrun those that travel to the East Coast by water, and that can make the difference when speed and dependability are more important than cost alone. Besides, he added, costs and fees can shift; Panama can be expected to raise rates for canal passage, and “the railroads are not going to sit idly by” and let the water route undercut their businessScudder Smith, a consultant with the engineering consulting firm Parsons Brinkerhoff, said that a water passage, “all things being equal, will cause cost reductions — but all things are not equal,” he added, and so “I’m not at all confident in any numbers.”
  
  That could be why J. Christopher Lytle, executive director of the Port of Long Beach, does not sound a bit worried. “There’s just not going to be a huge movement of cargo from the West Coast to the East Coast,” he said.
  
  His port, and its counterpart in Los Angeles, are already dealing with some of the biggest vessels on the water, capable of carrying the equivalent of 13,000 container units — vessels too big to pass through the new Panama Canal locks....

Of interest, it appears that the Port of Baltimore will still be confronted with the "bottleneck" of the B&O Howard Street tunnel. It appears CSX is not ready to commit funds so the structure can accommodate "double stacks".

Also of interest is how the article notes that the maritime industry is comtemplating vessels that will exceed "new" PANAMAX. Maybe they have "visions" of sailing Westward from Asia through Suez (better check first to see who has their cap pistols aimed at who) to call at the East Coast ports, but then, maybe it is not yet "TILT; Game Over" for LA/LB, BNSF, and UP.

There's always a chance that the East Coast is getting ready to throw a party - and nobody came. But somehow I think that shreweder minds are at work.

disclaimer: author holds long positions CSX KSU UNP

Gilbert B Norman wrote:

That could be why J. Christopher Lytle, executive director of the Port of Long Beach, does not sound a bit worried. “There’s just not going to be a huge movement of cargo from the West Coast to the East Coast,” he said.

His port, and its counterpart in Los Angeles, are already dealing with some of the biggest vessels on the water, capable of carrying the equivalent of 13,000 container units — vessels too big to pass through the new Panama Canal locks....[/i][/list]Of interest, it appears that the Port of Baltimore will still be confronted with the "bottleneck" of the B&O Howard Street tunnel. It appears CSX is not ready to commit funds so the structure can accommodate "double stacks".

Also of interest is how the article notes that the maritime industry is comtemplating vessels that will exceed "new" PANAMAX. Maybe they have "visions" of sailing Westward from Asia through Suez (better check first to see who has their cap pistols aimed at who) to call at the East Coast ports, but then, maybe it is not yet "TILT; Game Over" for LA/LB, BNSF, and UP.

There's always a chance that the East Coast is getting ready to throw a party - and nobody came. But somehow I think that shrewder minds are at work.

disclaimer: author holds long positions CSX KSU UNP

Gilbert, I think we went through this discussion once before in a different section of this forum. A big difference is between those items where the freight bill makes up more than half the cost of the item (toys and most apparel items) then all water makes sense. If what you are shipping is auto parts or most types of Electronics then a West Coast port is better, because of delivery time. Remember you paid in full for your shipment when it rolls through the Gate at the Port in China, not when it reaches your loading dock in the US. There is a big reason why companies went to "Just in Time" rather than maintaining big inventories. Time cost for inventories is big.

You mention that maybe super ships will go via the Suez, some Ships currently Post-Panamax go that way already. The larger of the joint Maersk/CGM CMA strings already operates that way and Maersk is the biggest in the business, they do have a second route currently running from China to the US East Coast via the current Panama Canal using Panamax sized ships.

Because of the way their website is set up I can't directly link the information this will take you to their homepage;
http://www.maerskline.com/appmanager/
Click on Services on the Blue menu bar
Then click Schedules on the menu at the left
Again on a left side menu chose by trade lane
Chose "Asia" and "North America"
Finally chose "Transpacific 3"

This line is the one serving the East Coast via the Suez, the other choice for direct to the East Coast "TP7" goes via the current Panama Canal. If you poke around Shipfan websites you will find that the ships used on TP3 are all about 8000 TEU while those used on TP7 are between 5000 and 5500 TEU. So about 50% more capacity on the ships using the Suez.

TP3 takes 31 days from Shanghai to Newark (makes stops in Ningbo, Hong Kong, Yantian, and Tanjung Pelepas in between)
TP7 takes 26 days from Shanghai to Miami (never goes to Newark)
TP7 takes 29 days from Shanghai to Charleston (stops in Miami and Savannah first)

So you can see that the route via the Suez could be faster than via Panama, but instead offers more of the major Ports out of Asia.