‘Cautious Optimism’ Is Theme at Intermodal Freight Show

This story appears in the Nov. 23 print edition of Transport Topics.

ANAHEIM, Calif. — A solid consensus of trucking, rail and ocean freight carriers speaking at an industry conference here predicted stronger business volumes next year.

That message — delivered by a dozen carriers, including the largest railroad and truckload operator, and echoed by shippers and analysts — was fueled by cautious optimism for an accelerating economic recovery in 2010.

However, most speakers at the Intermodal Expo/TransComp shied away from making specific predictions about the anticipated upswing.

“The worst is behind us,” said Dave Howland, vice president of rail for Schneider National Inc., which is the largest truckload carrier in the United States and Canada. “There is still a long road ahead. It will be another six to eight months before we get out of this thing.”

“There is a pretty wide range of views about what 2010 will look like” based on customer feedback, said Steve Branscum, group vice president of consumer products for BNSF Railway. “The answers we are getting now are a little more optimistic.”

“We like where we are, and we are cautiously optimistic,” said Mark Young, executive vice president of Swift Transportation, No. 10 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, one spot below Schneider.

“We see 2010 as being better than 2009, but I am not sure about August,” Young said, referring to Howland’s timetable for growth.

Other truckers had a similar outlook to Swift and Schneider.

“We are starting to see some light at the end of the tunnel,” said Val Noel, president of the cartage unit at Pacer International. “Things do look encouraging.”

“We are real optimistic,” said Mike Bruns, president of Comtrak Logistics, a drayage carrier owned by logistics company Hub Group Inc. “It’s not so much the economy, but because there are a lot of competitors who are on the verge of being eliminated.”

Three shippers were generally upbeat, as well.

“We are looking for small growth from 2009,” said Martin Bernstein, JCPenney Co.’s transportation director.

“The bad news is decreasing,” he added. “That makes people think we are recovering. We still have a long way to go.” He said the retailer’s sales this year are expected to trail 2008.

“We have some optimism about 2010,” said Jeff Hoy, senior manager of Western Division transportation for Home Depot, citing expected volume growth in the spring.

“We are expecting things to be very slow until February or March of next year, and then we will get a 2-to-3% increase,” said Wayne Johnson, director of logistics for American Gypsum. For freight levels, “it will be an up year, but it will be 2012 or 2013 until it is back to where we need it to be,” he added.

 From the ocean side, Ron Widows, group president of NOL Group, said that globally, “we are seeing economic improvement of some consequence. There is more domestic business in China.”

He sounded a different tune about North America.

“As far as the notion of a recovery being under way in the U.S. — well, maybe, a little bit,” said Widows, whose company is the world’s fifth-largest ocean carrier.

Though he saw some improvement ahead, Widows emphasized that ocean carriers could lose $20 billion this year and need steep rate increases in 2010 to stave off multiple bankruptcies.

Besides BNSF, other rail carriers said they saw improvement when asked about 2010.

“We see heartbeats,” said Brian McDonald, Union Pacific Railroad’s vice president of intermodal. “We have a few good days. We are cautiously optimistic.”

“We see some bright spots,” said James Bolander, an intermodal vice president at Norfolk Southern. “‘Better’ is a pretty broad term. It’s very difficult to be worse” than 2009.

“We think the domestic intermodal market will do well,” said CSX Intermodal President James Hertwig, who said he expected business will be “less worse” in 2010 than 2009.

Customers use the phrase “guardedly optimistic,” said James Cairns, an assistant vice president at Canadian National Railway. “It will be a steady, gradual acceleration. There won’t be any hockey-stick curves.”

Wall Street analysts who spoke at the meeting also said they expect increased business levels next year, but those expectations were muted

“There is a sense of hope,” said John Barnes of RBC Capital Markets. “You don’t just run businesses on a sense of hope. We need to see volumes.”

The Intermodal Association of North America reported the first quarter-to-quarter volume increase since the first quarter of last year. Intermodal volume rose 1.1% on a seasonally adjusted basis from the second to the third quarter, with increases in both domestic and international freight.

“The beginnings of industry and economic recovery are evident,” IANA’s report said. IANA cosponsors the annual Intermodal Expo/TransComp event, along with the National Industrial Transportation League.

IANA’s report included a prediction from consultant FTR Associates that truck freight growth should resume in the spring as economic growth climbs above 3% and capacity utilization improves. The FTR data showed a  0.4% rise in truck traffic from the second to third quarter.

The Transportation Intermediaries Association’s third-party logistics report told a similar story, with volume up 0.2%.