While 2010 was an overall year of improvement in the North American transportation sector, 2011 is already showing signs of stronger growth.
Trucking sector busy, but still plagued by driver shortage
There has been no significant change in the North American trucking sector's driver shortage situation, and the status quo has led to unstable monthly tonnage activity--available trucks are busy, but availability in general has fluctuated. The American Trucking Association's Truck Tonnage Index dropped 0.1 percent in November after increasing 0.9 percent in October. Nevertheless, the outlook for trucking is positive. "I don't expect volumes to rise every month," said ATA Chief Economist Bob Costello, noting that "the decrease in November is much smaller than the gains during the previous two months." While the sector's recovery is still "growing modestly," Costello said he expects truck freight tonnage to accelerate in the second half of this year.
However, the driver shortage, which should ease this year if optimistic economic forecasts pan out, is not the only problem the trucking sector is facing at the moment. A new proposal released Thursday by the Obama administration will lift the current ban on Mexican trucking companies that prevent them from operating north of the border. Mexico has protested the two-year-old ban as a violation of the North American Free Trade Agreement (NAFTA), and in response, the country has implemented punitive tariffs on approximately $2 billion in US goods, according to several news reports. While agricultural, manufacturing and other industries have lobbied the administration to lift the ban, US-based truckers firmly support it, stating that Mexican trucks aren't subject to the same safety and environmental standards as US trucks, which would give Mexican companies an economic advantage. Nothing has been officially decided yet, but with a proposal that pits US export opportunities against internal infrastructure, the US will lose in some way no matter who wins the battle.
North American rail traffic still following a clear upward trend
After a year full of overall improvement in the rail sector, the only thing hampering the rate of growth is tight capacity. Fuel surcharges are up, but the increase has not affected the demand for rail transportation. For most major railroads, surcharges will be 20 percent in February, based on December 2010 average fuel prices of $3.243 per gallon. While only slightly up from January's surcharge of 19 percent, February's rate reflected the highest percentage since December 2008, when the rate was 23.5 percent (it fell further to 16.5 percent in January 2009 then 12 percent in February 2009). Last year at this time, February rates were only 15 percent.
According to John T. Gray, the Senior Vice President of the Association of American Railroads, "Rail traffic growth in 2010 was clearly a positive development, and reflects a growing economy as well as solid, dependable service on the part of the railroads." Unfortunately, the rate of growth is slower than many would like, Gray said.
Regardless, year-end cumulative totals of rail traffic volume on 13 reporting US, Canadian and Mexican railroads indicated a strong improvement from the previous year. According to the AAR, carloads totaled 19,322,414 in 2010, a 9.4 percent increase from 2009. Containers and trailers registered a higher rate of growth, at 14.7 percent year-on-year. As for specific products, metallic ore shipment increased an impressive 52.8 percent from 2009, metal products increased by 41.3 percent, and scrap shipments were 14.1 percent higher in 2010 compared to 2009.
Barge activity steady despite availability restrictions
Although the grain season is winding down, there is still a short supply of Northbound barge vessels available for steel-related shipments. Consequently, river barge rates are currently up, but not too high to be prohibitive. Steel import activity is quiet for the moment, but that situation could change in the next couple months, as rapidly rising domestic steel prices have translated into a spike in import inquiries. Fortunately, orders being placed now will come in after the grain season has come to a close, freeing up vessels to take imports upriver from the Gulf.
As for traffic on the Great Lakes, iron ore shipments for the month of December and 2010 as a whole were both up from year-ago levels. December 2010 shipments totaled 5,013,621 net tons, reflecting an improvement of 11 percent from December 2009. For the year as a whole, 2010 saw 54.4 million nt in iron ore loadings, an increase of 67 percent from 2009 levels. Loadings at US ports increased 67.8 percent in 2010 compared to 2009, and Canadian port loadings improved 62 percent year-over-year.