Carriers, Shippers Eye Federal Spending to Boost Economy and Fix Infrastructure
By Jonathan S. Reiskin, Associate News Editor
This story appears in the Nov. 24 print edition of Transport Topics.
FORT LAUDERDALE, Fla. — Shippers, carriers and analysts meeting here agreed that the nation’s contracting economy is hurting freight transportation badly, but said they were hopeful the government would agree to critical transportation infrastructure improvements, financed by higher taxes.
Shippers at the TransComp meetings and the Intermodal Expo held here Nov. 14-19 said they had less freight to move and did not know when that might change. The freight drop-off affects various transportation modes differently, but no transportation carrier said there would be a normal peak shipping season this year.
Current economic woes notwithstanding, shippers and carriers renewed their call for an improved, federally funded surface transportation network.
The TransComp and Intermodal Expo are jointly organized by the Intermodal Association of North America and the National Industrial Transportation League; the Transportation Intermediaries Association also helps prepare the program.
“Transportation volumes offered are based on our sales to customers, and retail volumes are not good,” said Mark Maleski, newly installed NITL chairman and director of supply chain logistics for J.C. Penney Co. “It’s not a pretty picture now.”
Larry St. Clair, director of intermodal marketing for the Port of Tacoma, Wash., said the port’s container volume was “down 2.3% through September . . . but not as much as other West Coast ports.”
NITL’s president, Bruce Carlton, said, “Job No. 1 — and maybe Nos. 2, 3, 4, 5 and 6 — for the new administration and new Congress is to fix the economy and empower consumers and investors to spend money. Beyond that, the rest falls neatly in line.”
Carlton’s agenda extended beyond the stumbling economy; he called for a long-term, nationwide plan for a new surface transportation plan to modernize what President Eisenhower started in 1956.
“This won’t be done in one four-year administration or one two-year Congress,” Carlton said. Funding for a new surface transportation system should come from traditional appropriations, new taxes, tolling and public-private partnerships to “repair and grow the transportation infrastructure,” he said.
Congress and the Obama administration need to develop a master plan that departs from funding local pet projects, or “earmarks,” Carlton said. Until a master plan is agreed upon, though, he recommended that transportation projects should play a major role in economic stimulus legislation.
For most conference participants, it was difficult to avoid the topic of economic matters.
“There’s definitely slower de-mand,” said Tony Labriola, carrier manager of Transplace Inc., adding that the third-party logistics provider’s management is not really anticipating recovery before the third quarter of next year.
At the conference’s opening session, a panel of stock analysts put the problems in perspective.
“We’re still on the slippery part of the down slope,” said Thom Albrecht of Stephens Inc. “I don’t think it will be until March, at the earliest, when we can say things will be stable.”
Albrecht predicted that U.S. industrial production will fall farther in this recession than it did in the 2001 recession and that unemployment will rise higher.
John Larkin of Stifel, Nicolaus & Co. said there has been a steady “deceleration of freight hauling activity” for the past four months and that July was busier than August, which runs counter to the usual seasonal shipping patterns.
“Since October, companies have been in a cash-conservation mode. When General Electric had to go to Warren Buffett for an infusion of working capital, that was a very significant wake-up call,” Larkin said.
Ocean shipping, especially for bulk cargo, has been hurt badly by the financial meltdown, said Urs Dur of Lazard Capital Management. Dur said ocean shippers and carriers are highly dependent on short-term letters of credit that have not been forthcoming.
Larkin said the transportation sector has been in recession since the second half of 2006. He said railroads and parcel carriers are surviving better than truckload or less-than-truckload carriers, though, because rail and parcel are dominated by a small number of large firms.
Albrecht said LTL carriers are now taking more of a pasting than is the truckload sector.
Looking at crude, Larkin said hedge funds and financial speculators helped send prices in July to an unsustainable high of $147 a barrel. Panelists said oil would probably range between $50 and $100 in 2009 — barring an extraordinary event.
