Various hurdles continue to plague sectors of North American transportation, but overall, improvement is on the horizon.
Year-on-year growth slows in North American rail recovery
While traffic in the North American rail sector continued to improve year-over-year as of the week ending September 25, the gain percentages were slightly less than those reported a month ago. According to the Association of American Railroads (AAR), North American rail freight volume for the first 38 weeks of 2010 on 13 reporting US, Canadian and Mexican railroads totaled 14,109,325 carloads. The 9.9 percent improvement over the same period in 2009 still shows signs of growth in the recovery, but the rate of improvement is slightly less than the 10 percent improvement reported at the end of August. Steel-specific shipments also registered slower improvement. Metallic ore volume rose 64.4 percent year-on-year, compared to a 69.1 percent gain last month; metal product shipments improved 49.2 percent, slightly less than last month's 51.1 percent increase; and metal scrap and waste only improved by 16.4 percent, down from the 19.9 percent gain reported in August. Container and trailer shipments, on the other hand, totaled 10,221,756 in the first 38 weeks, a 15.2 percent improvement year-over-year that surpassed last month's cumulative increase of 14.8 percent.
Despite the slight slippage in volume gains, rail continues to be a bright spot in the US transportation sector. A report recently released by the US Department of Transportation outlined a vision for a high-performance freight rail network to accommodate the forecasted population growth and corresponding increase in freight shipments. The report is an update of the Preliminary National Rail Plan that was mandated by the Passenger Rail Investment and Improvement Act of 2008 and submitted to Congress in October 2009. After a study determines which geographical and economic areas are most feasible for infrastructure improvements, funds will be allocated accordingly.
As for fuel surcharges, October rates will jump slightly, to 17.5 percent based on September fuel prices of $2.946. November surcharges, however, will drop back down to 17 percent (based on August fuel prices of $2.959), matching the rate for August and September. While surcharges seem to be relatively stable, they are still higher year-on-year; October and November 2009 surcharges were 14 percent.
Drivers still in the driver's seat in US trucking sector
Despite a gradual improvement in availability, a shortage of drivers in the US trucking sector persists. Peaking in May-June 2010, the mass exodus of truck drivers--mostly owner-operators--from the market was blamed primarily on spiking insurance costs in addition to lower freight volumes overall as the economy had not yet started to recover. For a variety of reasons, trucking companies are finding it difficult to fill positions with former independent truckers, and due to necessary high standards for hiring and training new drivers, they are finding a shallow pool of suitable applicants. Owner-operators who stayed in the market have immense power in the marketplace, strengthening rates throughout the sector.
While trucking companies are experiencing healthy demand, the industry has seen a dip in overall activity without an ample supply of drivers to move freight from point A to point B. The American Trucking Associations (ATA) seasonally-adjusted Truck Tonnage Index fell 2. 7 percent in August, which was the largest monthly decrease since March 2009. According to ATA Chief Economist Bob Costello, August data highlight that the economy is still growing too slowly. "We fully anticipate sluggish economic growth for the remainder of this year and the latest tonnage numbers are reflecting that slowdown," Costello said. However, Costello is still positive overall. "While I'd much rather see better tonnage figures," he said, "motor carriers can now do better with small increases in demand since so much supply left the industry during the recession."
Barge availability tight in the midst of grain season
Due to a bountiful harvest season for grain, barge availability for any non-perishable shipments is still incredibly tight up the Mississippi and adjoining rivers. Any imports of steel, for example, are beyond secondary to barge lines, as they would rather miss a Northbound import shipment than lose out on a Southbound grain haul. Despite the tight barge supply, rates have not spiked dramatically as previously predicted. Instead, they remain at healthy levels-not too high and not too low.
As for barge movement on the Great Lakes, cargo volumes decreased slightly in August, by about 5.1 percent from July. However, compared to August 2009, volumes are still up 39.3 percent. Iron ore shipments, on the other hand, showed marked improvement. While shipments increased slightly month-on-month, they swelled incredibly from year-ago levels; the 6 million tons total moved on the lakes reflect an 85 percent improvement from August 2009. Loadings at US ports increased 74 percent year-on-year and shipments from Canadian ports nearly tripled.
As with overall cargos, coal shipments on the Great Lakes decreased slightly month-on-month but still showed improvement year-on-year. August totals of 3,915,684 of coal were 4.4 percent less than July levels, but 9.8 percent higher than the same month last year. Shipments from Lake Superior were virtually the same as last year, while loadings in Lake Erie increased 52.7 percent. In contrast, shipments out of Chicago fell by 35 percent from year-ago levels.