Weak U.S. Dollar Boosting Export Freight

By Sean McNally and Rip Watson, Senior Reporters
This story appears in the June 2 print edition of Transport Topics.
NEW YORK — U.S. freight carriers are reaping benefits from the weaker dollar as export shipments climb within North America and overseas.
Changes in traditional trade patterns are affecting shipments of grain, plastics, waste paper, steel and other products that have risen as the U.S. dollar has dropped 10% or more in value relative to Canadian, European and Japanese currencies.
“The balance has shifted dramatically,” Jerry Moyes, chief executive officer of truckload carrier Swift Transportation, said at the Wolfe Research Transportation Conference here.
He said demand to haul exports has surged ahead of import traffic from Canada.
“All of our shippers want us to go to Canada because Canadian carriers are not coming down here anymore,” Moyes said. “You’re going to have to get a lot of money to go into there because you’re going to come back empty most of the time.”

Celadon Group CEO Stephen Russell also has noted the shift.
“The Canadian market has been affected by the change in the dollar,” he said. “Northbound demand has surged, and in the last several months, we’ve seen that we have been able to achieve significant rate increases [on northbound freight].”
The trend is reflected in the Department of Transportation’s surface freight index for the first three months of 2008, which showed the value of exports shipped by truck to Canada rose 8%, while imports slipped 3% in the same period.
The change in shipping patterns also is apparent to truckers who move freight to and from intermodal terminals.
“Imports and exports have changed their positions,” said Don Cochran, CEO of Universal Truckload Services Inc. “We’re finding ourselves taking freight to the railhead [for export], and what we did before was take [import] freight from the railhead.”
At the same time, Cochran said, domestic steel production is increasing because the weaker dollar makes it less expensive to produce steel here. That shift is boosting results for Universal because about one-third of its business is related to metals markets, he said.
The trend is illustrated by an increase of 1.58 million tons in domestic steel production during the first quarter, according to the American Iron and Steel Institute. Over the same period, steel imports declined nearly 1 million tons, according to government data.
Meanwhile for ocean carriers, “the biggest mover today is export grain,” said Gregory Tuthill, senior vice president of North American operating services for Nippon Yusen Kaisha, or NYK Line. “We see the market unfolding with exports remaining robust and buoyant.”
NYK Line, the biggest Japan-based cargo line, handles both bulk and container shipments. Other fast-growing commodities in export trades are waste paper and resin-based plastic, Tuthill said.
“The shift in the dollar is a key driver, and it has been a major contributing factor to the increase in our exports,” said Robert Knight, chief financial officer of Union Pacific Corp.
The railroad boosted its percentage of revenue from exports to 14% in the first quarter from 12% in the first quarter of 2007. In 2008, imports accounted for 14% of Union Pacific’s first-quarter revenue, down from 16% in the same period of last year.
Grain exports, which are at record levels, were a key factor in the increase, as well as intermodal traffic, Knight said.
Union Pacific won’t say precisely how much its grain exports have risen. Shipments of grain exports by all U.S. railroads from Jan. 1 through May 14 increased about 25% above the same period of last year, according to the U.S. Department of Agriculture.
Grain exports in containers have risen even faster, doubling in the first two months of 2008, according to the agency.
In total, all containerized export shipments through U.S. ports rose 20% in the first quarter, while imports fell by 6%, using the standard ocean shipping measurement of TEUs, or 20-foot-equivalent units, according to Wolfe Research.
As grain is increasingly packaged and placed in containers instead of moved in rail hopper cars and dumped into ships at port terminals, the effects are being felt elsewhere in the supply chain.
“Grain is taking up every piece of available [container] capacity,” said Jeffrey Brashares, chief operating officer of Pacer International Inc.’s logistics segment.
That shift has created a new market for shipments of waste paper and other export commodities, he said.
Those products now are moving from inland destinations in domestic trailers or containers to warehouses at international gateways, where the cargo is transferred to ocean containers that are more readily available in port cities, Brashares said.
The rise in export freight also can cause complications in another way.
Ocean carriers’ traditional import cargo, such as clothing, is lightweight, “fluff freight,” while heavier exports of grain and waste paper use up all of the available weight capacity on vessels.
“You can’t load a ship more than 50% full [of heavy export cargo],” Brashares said. “Otherwise, it would sink.”