Japanese Narrow Gauge -762mm Lines – Part 5 – The Kiso Railway – Part D – The Atera Valley and the Nojiri Forest Railway
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The Ballachulish Railway Line – Part 3
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eBook: OpenRail for Asset Performance
The Cavan & Leitrim Railway – Arigna Valley Railway
The Penydarren Tramroad, South Wales – Part 2
The Guinness Brewery Railways, Dublin
Feature articles in the August 2018 issue of Railway Gazette International
Book Review: VIA Rail - A History of Canada's National Passenger Rail Service
As another service of FreightWaves SONAR, the Freightwaves Freight Intel Group was launched recently and is publishing in-depth research on “everything freight and logistics,” as Senior Research Analyst and team member Seth Holm described the Group’s mission. “We will be doing deep dives into topics that are most important to our industry, the inner workings of key topics and where the market is going,” Holm said. “This will include new technology and companies that are changing how the freight markets operate.”
The FreightWaves Freight Intel Group is comprised of a number of FreightWaves’ Market Experts and research staff. The Group is producing white papers and research on topics of interest to those in the freight, transportation, logistics and supply chain ecosystems. As topics dictate, they will be supplemented by academic and industry experts with specific knowledge and/or expertise.
Freight Intel research is available in SONAR under the lightbulb icon at the top of the dashboard alongside all of the Daily Watch and Deep Dive notes from FreightWaves’ Market Experts. In addition, key findings from the Freight Intel Group will be published periodically on the FreightWaves website.
“We aim to explore the unexplored, writing about topics that are highly relevant to transportation but often not yet fully explored,” explained Kevin Hill, FreightWaves’ Market Expert in Freight Intel. “We will always support our work with first-hand primary due diligence, including discussions with industry experts and our market-based proprietary survey work.”
To date, the Freight Intel Group has produced the following white papers and reports (all of which are available in SONAR):
Amazon and the Logistics Industry
Amazon’s entry into online freight matching is being met with skepticism and unease by much of the logistics industry.
The report’s survey found that eight of 10 carriers and freight brokers think Amazon’s entry into digital freight brokerage is ‘negative’ for their market segments. Carriers, by a two-to-one margin, are more apt to view this development as ‘very negative’ than freight brokers. On the other hand, seven of 10 shippers think it is a ‘positive,’ though this view is tempered as only one in five believe it is a ‘very positive’ development.
Amazon and the Logistics Industry builds on the news FreightWaves broke on Amazon’s beta version of its online freight matching platform, freight.amazon.com. The platform allows shippers to view instant quotes based on zip-to-zip searches on lanes in New Jersey, New York and Pennsylvania.
The market reaction to FreightWaves breaking this news was almost immediate. Within one business day of the article’s publication, transportation and logistics stocks experienced a sell-off that wiped out over $2.3 billion in equity value from the sector. This sell-off was led by C.H. Robinson, which lost $920 million in market capitalization.
For Amazon and the Logistics Industry, the Freight Intel Group surveyed 811 logistics professionals from carriers, freight brokers and shippers to garner their sentiment on how Amazon may impact the freight markets. Topics covered include: prospects for shipper adoption and why; types of freight brokers that are most at risk; and whether Amazon can really improve efficiencies and asset utilization in the freight markets.
The State of the Autonomous Trucking Industry: “Evolution not Revolution”
Members of the Freightwaves Freight Intel Group believes that a fully autonomous (i.e. no human operation) future for trucking is more than a decade away, at a minimum. A timeline for the development and successful roll-out is speculative, but more likely 20 to 30 years (or more) away.
However, that forecast is not because the technology doesn’t currently exist – much of it does, at least in early stages or is on the horizon. Instead, it hinges more on a prolonged regulatory and adoption curve as the industry moves from a venture capital-backed proof-of-concept stage to commercial viability.
The cab of an autonomous truck.
The heavily fragmented nature of the trucking industry will likely serve as a meaningful obstacle to adoption as well, because 91 percent of U.S. trucking fleets are comprised of eight trucks or less. In order to achieve widespread autonomous trucking (AT) adoption, both truckers and shippers will need to see a high probability, concrete path to a positive return on investment.
Nevertheless, semi-autonomous trucks will begin to make significant strides over the coming years in certain geographies and on heavily trafficked long-haul lanes, whether in the form of platooning or simply increasing driver assistance.
Fully autonomous trucks, whenever they arrive, will likely ultimately prove to be a devastating deflationary force that results in a massive wave of truck drivers losing their jobs. For carriers and shippers on the other hand, this outcome is likely to represent a step-function higher in profitability.
Until that day, the evolution from a semi-autonomous to a fully autonomous future may just mean a higher quality of life for truckers. For the foreseeable future, truckers will remain in the driver’s seat but begin to transfer many of the monotonous, dangerous and grueling tasks to computers. Truckers will be needed to carry out first- and last-mile duties, as well as to problem-solve and to potentially help operate the autonomous systems.
Carrier Outlook Survey 2019: Still seeing the positives
A key highlight of the FreightWaves Carrier Sentiment Survey and Outlook for 2019 was that leaders of small fleets are still optimistic for 2019.
Forty percent of small fleets (defined as running between four and 50 trucks in their fleets) still believe 2019 line-haul rates will surpass those seen in the second half of 2018, while another 20 percent expect rates to be comparable to those in 2018. The FreightWaves Freight Intel Group believes this outlook is highly optimistic, because the DAT national van rate is down 24.5 percent from May 2018 and 62 percent off its 2018 high (reached in late June 2018).
Small fleet leadership is also optimistic that freight volumes will increase again in 2019. The data does support this optimism a bit more than higher rates because the national index of outbound tenders (OTVI.USA) is only 20 basis points lower compared to April 2018.
Smaller fleets added capacity in 2018 to take advantage of the spike in freight rates. According to the FreightWaves survey, 48.5 percent of small fleets added at least one truck to their fleet in the past 12 months. Another 34 percent of fleets held tractor counts steady, leaving only 15 percent that shed any assets at all.
This influx of capacity has created a supply/demand imbalance in the freight markets. This will not go on forever; equipment sitting in yards is expensive. FreightWaves expects that smaller fleets will shed unproductive assets sooner rather than later.
Fuel is also on the minds of the leadership of small fleets. Fifty percent of carriers surveyed expect diesel prices to move at least slightly higher, while another 21 percent are bracing for a significant increase at the pump. However, an equal number (21 percent) think diesel will be unchanged from 2018, leaving less than 10 percent of fleets expecting to find some relief at the pump.
The FreightWaves Freight Intel Group highlighted four trends to watch for in 2019:
U.S./China Tariffs: Dancing on a ledge
The U.S. and China have billions of dollars to lose in a trade war.
The U.S. imported $540 billion of Chinese goods and exported $120 billion to this trading partner in 2018.
In this white paper, FreightWaves Freight Intel Group examined how 25 percent tariffs on virtually all $540 billion of Chinese imports will affect freight volumes and rates. Will there be a repeat of a rush of ocean imports into the West Coast like in the third and fourth quarters of 2018? Will warehousing issues force products on rail to warehouses further inland? Will truck load volumes pick up as inventory is moved to the shelf?
These questions depend largely on if and when the next round of tariffs are enacted. The timing is key for the freight markets. As for the tariff rates, whether it is the full 25 percent or only 10 percent will make a significant difference when it comes to any pull-forward demand. For timing, if tariffs are implemented as soon as the policy review and approval process is finished in late June, then the probability of front-loading diminishes greatly. However, if tariffs are used as a bargaining chip, then front-loading should continue to occur at some levels until the risks of tariffs passes one way or another.
Photo credit: Shutterstock
A macro analysis of a trade war with China is provided. FreightWaves Freight Intel Group staff provide information to answer if either country will win a trade war, or more accurately, which will lose the least. What further levers are available to the U.S. and China? Will there be more bans on Chinese companies like Huawei based on national security concerns? Could China actually use its “nuclear option” of selling Treasuries? What about restrictions on rare earth materials?
The FreightWaves Freight Intel Group also conducted a thorough financial analysis of which companies and industries have the most to lose in a trade war with China. That group includes many household names from the retail, consumer products, technology and manufacturing industries.
The proposed 25 percent tariffs cover an additional $300 billion of Chinese imports. If implemented, these tariffs would cover 94 percent of all Chinese imports.
While the first round of tariffs ($200 billion) focused on industrial and agricultural goods, the proposed next round ($300 billion) will hit consumers hard. The list includes a wide range of consumer products like electronics, apparel and household items. These tariffs will likely be passed along to consumers.
Over the past 12 to 18 months, importers have been implementing new sourcing strategies outside of China, though options are often limited. Alternative Asian countries lack the manufacturing facilities, logistics infrastructure and workforce to scale up new production quickly. This is at best a five- to 10-year strategy.
It all depends on timing of implementation along with tariff rates. The full 25 percent could be applied before the end of June, or held as a bargaining chip for further negotiations. Another option is to enact 10 percent tariffs and threaten 25 percent tariffs, much like the strategy in 2018.
If the next round of tariffs are used as bargaining chips, then expect ocean shipping to accelerate its traditional seasonal demand patterns. This should correlate to the pull-forward demand seen in the third and fourth quarters of 2018.
Inventory levels are still elevated on the West Coast from the rush to beat the original tariff deadline of January 1, 2019. Pull-forward demand in 2018 filled Southern California warehouses. These surplus inventories are being worked down, limiting capacity for any further pull-forward demand.
Air freight from China should remain normal until within 30 days of a tariff deadline, or when marine vessel space becomes sold out. When either of these scenarios occurs, expect air freight to accelerate. Volumes could accelerate the normal November/December tight capacity to as early as August/September.
Any pull-forward demand is highly unlikely to cure the current imbalances in volume and capacity. With extra truck capacity in the market with similar tender volumes to 2018, any short-term push of freight may help stabilize spot rates that have dropped 20 percent year-over-year. Unless that occurs, spot rates will continue to be weak.
What happens if the risk of 25 percent tariffs on all remaining Chinese imports comes to fruition? Trade demand will plunge as shippers either: 1) work through excess inventories; or 2) delay new orders until inventory levels hit rock-bottom in hopes that a trade agreement is reached.
IMO 2020: A new normal for diesel prices?
From June 7 to June 14, 2019, FreightWaves surveyed trucking, logistics and shipping professionals via email to gauge their awareness of an International Maritime Organization (IMO) regulation that goes into effect on January 1, 2020 (IMO 2020). The white paper on this topic is scheduled to be released to FreightWaves SONAR subscribers before the end of June.
While this regulation is aimed at ocean-going ships (to lower the legal amount of sulfur in marine fuels from 3.5 percent to 0.5 percent), the regulation could have a major impact on the ultra low sulfur diesel (ULSD) used by the trucking industry.
Unless ships use “scrubbers” to lower the amount of sulfur emissions their engines emit, they will need to begin changing over to low sulfur fuels in the next 90 days to meet the deadline. Again, this is relevant to the trucking industry because it is expected that most shipowners will turn to two fuels to meet the requirements as they move away from the high sulfur fuel oil now used. One fuel is known as marine gasoil, and it is a diesel product. The second is called very low sulfur fuel oil, a mostly new oil industry product that uses intermediate diesel products to reach the final blend.
Photo credit: Shutterstock
Consensus estimates of the amount of new diesel demand that will flow to the marine market are 1.5 to 2 million barrels per day (b/d). Current consumption is 35 million to 40 million b/d. That could be as high as a 5 percent increase in demand, which could cause volatility in the ULSD market.
Among those surveyed, motor carriers are categorized in three segments: owner-operators with one to three trucks; small fleets with four to 100 trucks; and large fleets with over 100 trucks.
Those at most risk from the impact of IMO 2020 are owner operators. It is also the segment that is ignoring IMO 2020 the most. Seven of 10 owner operators have either never even heard of IMO 2020 or have not paid it any attention. This could be disastrous to owner operators. Depressed trucking rates combined with a sharp spike in diesel prices could drive thousands to the point of bankruptcy.
The remainder of trucking fleets surveyed are only paying a bit more attention to the dangers of IMO 2020. Seventy percent of large fleets and 40 percent of small fleets are only keeping tabs here and there on the situation.
Shippers and freight forwarders are the two groups closely watching the situation; both segments are much more involved in ocean shipping.
Only 10 percent of respondents (mostly shippers) have developed or implemented strategies to deal with the possibility of a spike in diesel prices.
The lack of planning means the domestic transportation market feels a possible $0.25 to $0.50 per gallon spike in the price of ULSD due to IMO 2020 is acceptable.That is, until the question is directly asked…
At that point, shippers are by far the most concerned. One of the likely reasons is that large fleets and third-party logistics providers (3PLs) believe they can pass on price spikes in diesel to their customers via fuel surcharges. However, the smaller the fleet the more difficult this is to achieve. Most small fleets and owner operators buy diesel at or close to the retail price and use all-in rates instead of line-haul plus fuel surcharges, especially when negotiating with freight brokers in the spot market.
More in-depth analysis and further details of IMO 2020: A new normal for diesel prices? will be included in the white paper.
This article first appeared on s29755.pcdn.co
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