Will The Must Have Toy Be Under the Tree?

With the "mothballing" of much tonnage during the Recession, this article appearing front page in Today's New York Times suggests that the maritime industry, and by association, the railroad industry, may not timely deliver to Wally World whatever shape Tickle Me Elmo is to be this Xmas.

http://www.nytimes.com/2010/07/27/busin ... pping.html?

Brief passage:

• The problems stem from 2009, when stores slashed inventory. With little demand for shipping, ocean carriers took ships out of service: more than 11 percent of the global shipping fleet was idle in spring 2009, according to AXS-Alphaliner, an industry consultant.
  
  Carriers also moved to “slow steaming,” traveling at slower and more fuel-efficient speeds, while the companies producing containers, the typically 20- or 40-foot boxes in which most consumer companies ship goods, essentially stopped making them.

Rails are only tangentially mentioned, but if Elmo ain't there....look out.

• The problems in container shipping from Asia are the most pronounced, retailers say, but shipments from other continents, and via domestic trains and trucks, are difficult as well. The effects have been severe for some retailers and suppliers

Possibly some of our members within the maritime industry may choose to comment - including whether The Times reporter is anything approaching "on mark".

Mr Gilbert, I'd agree that this article is pretty much spot-on. It's not so much a question of demand as it is supply. By slow-steaming and idling vessels, the ocean carriers have "artificially" constrained supply and jacked rates (to make up for the billions in losses last year when rates were in the toilet). Same thing (though to a much lesser degree) has happened in the domestic trucking market.... a dramatic fallout in capacity in the last 12-18 months. Railroad capacity has been largely unchanged, from an equipment perspective as much of the fallout has been with older, less desirable equipment.

a industry colleague of mine brings in rv trailers from the states . He has them towed from the midwest to l.A to be sea freighted .

Lately , they have been missing the boat . the reason given , many truck drivers have had their trucks repossesed , and their is now quite a shortage , especially for smaller , one off jobs .

Yes, Mr. Benton, the Recession has taken its toll on the trucking industry - especially on Owner Operators who would likely be in the RV haulage business.

While likely I have my biases, I think general purpose over the road trucking is dead. By general purpose, I mean a shipper choosing to use trucking for, say, an LA to Chicago haul where the lading is simply part of a "pipeline" distribution rather where time sensitivity, i.e. my opening premise that Tickle Me Elmo MUST be on Wally World's shelves nationwide for some kind of "love your neighbor", i.e. trample him, sales promotion, is paramount.

Naturally, to "prime the pipeline', Wally World no doubt would be using air freight for the first shipments direct to the various airports near their distribution centers. Once that product is in place, they can now shift to air freight to an aerial port and over the road trucking beyond. By now it is cast off from the Asian port with a shipload of containers. Likely the first vessel to dock would have its containers moved by highway, but now that the pipeline has been filled, further shipment would be by rail (truck of course from Dist Ctr to the outlets).

I'm pleased to learn from Mr. Cowford (who's previous postings have lead me to believe he in in the maritime industry) that he holds the railroads will be up to the job; I can only hope same for the ocean carriers - lest we forget, there is a "bit more" to recommissioning a laid up vessel that there is for a railroad to fill out an existing train's consist or adding an additional train.

"General purpose over the road trucing is likely dead".............That statement couldn't be further from the truth. If it were, then the hundreds of trucking companies wouldn't be constantly advertising for drivers, even during the current business downturn. Many of the largest over the road companies (e.g. Schnider, JB Hunt, CR England, Swift Transportation) have even gone to the point of recruiting people and training them to get their CDL licenses. Many of the same companies are also running programs that will let drivers with very little experiece buy a truck and become owner operators, since that lets the companies experience huge cost savings with those programs by charging the drivers for workmans comp and health insurance, as well as not making matching contributions for Social Security, Medicare and income taxes. The result is drivers working for wages now, that hardly equal union wages in 1980.........one of the many downsides of Motor Carrier Act of 1980 (S.2245.)

trainwayne1 wrote:"General purpose over the road trucing is likely dead".............That statement couldn't be further from the truth.

I believe the full statement as submitted should be considered when drawing a conclusion.

• I think general purpose over the road trucking is dead. By general purpose, I mean a shipper choosing to use trucking for, say, an LA to Chicago haul where the lading is simply part of a "pipeline" distribution rather where time sensitivity, i.e. my opening premise that Tickle Me Elmo MUST be on Wally World's shelves nationwide for some kind of "love your neighbor", i.e. trample him, sales promotion, is paramount.

Naturally, for locales to which there is no rail service of where there is not sufficient volume will continue to be, and rightly so, where the motor carrier industry will earn its keep.

$4.00/ga motor fuel simply means that the economics for "pipeline' shipments are with the rail mode. Major trucking concerns are looking to the rail mode to maximize the efficiency of their operations. They are not just looking to the rails as a "foul weather friend"; they are signing up for contractual rates that require the shipment of so much (whatever unit of measure may prevail) in order to receive the favorable rate.

Fear not,the motor carrier industry is not going the way of the Interurban, and if somehow my posting implied that, please allow it to stand corrected.

disclaimer: author holds long positions KSU NSC UNP

Mr. Norman, I wasn't taking issue with your entire statement, however, with the JIT culture that has become prevelent, non-import general merchandise will still travel by over the road carriers in a lot of situations due to the transit time differences. The stack trains have replaced long distance trucking in some applications, but that is more of a situation of savings by using the inter-modal sea containers from origin to destination to avoid handling/transfering at the ports. Until the railroads can duplicate operations like the Railex concept uses, to rail fresh produce in a time period close to that of trucks to a distribution point where the freight is in and out of the transfer warehouse on a delivery truck in less than 24 hours, the rail share of time sensitive freight won't make many important gains in the market.

Mr. Trainwayne, thank you; it appears we are now "substantially on the same page."

Just as the railroads have changed, especially since "Dereg" from "boulevards of steel' to "pipelines on rails", so has the trucking industry to providing transportation where time sensitivity is more of concern, namely fresh produce and high value freight where the "just in time' distribution model is beneficial. While there will continue to be markets in which there will be head to head competition, the two modes are far more likely to see each other as a partner rather than as a competitor.

I think you're both pretty much on target, but TW1, I'd take issue with your point below:

The stack trains have replaced long distance trucking in some applications, but that is more of a situation of savings by using the inter-modal sea containers from origin to destination to avoid handling/transfering at the ports.

Domestic intermodal (net of dom. box gains and trailer losses) is actually growing at a faster rate than international, signifying market share gains in traditional over-the-road lanes. And one disclaimer: a portion of "domestic" box movements is actually imported material that's been transloaded from international boxes into the larger domestic boxes...this segment has been growing in recent years. Ocean carriers are actually encouraging shippers to do so, in order to cycle the box back to Asia as quickly as possible.

There's always a pendulum swinging between transportation cost and inventory carrying costs that governs shipper modal decisions. The latter includes more intangible costs such as risk of stock outs, etc. The rate of long-term domestic IM business growth will depend upon railroads ability offer competitive services throughout the pendulum's arc.

Related to this topic's title, is the following material appearing at The Times website and the Friday print edition:

http://www.nytimes.com/2010/08/06/world ... ussia.html

Brief passage:

• In announcing the ban, which is in force from Aug. 15 to Dec. 31, Prime Minister Vladimir V. Putin said that Russia had sufficient stockpiles of grain but that blocking exports was an appropriate response to the worst drought in decades.
  
  “We need to prevent a rise in domestic food prices, we need to preserve the number of cattle and build up reserves for the next year,” he said during a televised cabinet meeting, according to The Associated Press. “As the saying goes: reserves don’t make your pocket heavy.”
  
  Russia’s agricultural output, once the victim of chronic shortages during the Soviet era because of unwieldy bureaucracy and failed farm policies, had grown as the country privatized old collective farms and gained force as a food exporter.

Aside from that my Wheaties will soon likely cost more than the existing $5.39 a box, again I must wonder if the railroads and the maritime industries will be up to the job. Russia is wise that to feed her own people comes first, and one can only hope that there will be enough. Even in years of good harvests, Russia has imported basic agricultural products such as wheat.

While I have never been with the maritime industry in this life (again I think Mr. Cowford is and if so possibly he will choose to share such with the forum), I do follow its affairs to some extent. Again I have to note that recommissioning a vessel involves much more than for a railroad to add a train.

Mr Norman, I am in the "terrestrial" transportation arena but have a fair bit of exposure to ocean transport world. I saw the articles about Russia - horrible situation they have to deal with. Not sure how this will affect the global grain transportation market. Possibly a stat to look at is the Baltic Dry Index, which is rate market basket for dry bulk vessels... the type that carry coal, ore, scrap metal... and grain. The BDI has been weak (a reflection of global economic woes, given its drivers are raw materials), but has been inching up since mid-July. No idea if there's any correlation.

Hey, I just noticed that was my 1,000th post... do I win a prize? (More likely I'll get a "shut up already!")

This development is "most definitely news' as "the paper of record' sees fit to have such the lead front page article:

http://www.nytimes.com/indexes/2010/08/ ... index.html

Within the article is mention of the Russian railroads; Brief passage:

• But on Thursday, rail cars heaped with fresh grain came to a halt around Russia, stopped in midjourney from the country’s fields to the main exporting ports on the Black Sea. The order covered a variety of grains, including barley and corn, but will have its greatest impact on wheat exports

Obviously, with the export market from Russia abruptly cut off, the all but certain replacement market will be North America, and again will the railroad and maritime industries be up to the job?

Finally, of interest is that there have been initiatives to privatize the Russian railroad industry, but one must wonder will private investment be hindered in view of that Russia still has a government that at its own choosing will revert to the old Soviet Union way of "handling things".