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Shippers Warehouse In News Smc3 August 2010 Ib 08 13 10

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  • 1. Crucial Clauses Improve your knowledge and strengthen your motor carrier contracts. Contract law Seminar We Can Help you: Essential Education • Work smarter by increasing your understanding of the critical points of law governing transportation contracts for Shippers, Logistics Providers and Carriers • Improve your shipping contracts by learning how to strengthen crucial transportation contract clauses September 15, 2010 • Solidify your supply chain relationships by recognizing the Marriott City Center different ways shippers and service providers approach Charlotte, North Carolina transportation contracts • Understand the “pinch points” between motor carriers, www.smc3.com /go /ClS/IB shippers and third party logistics providers.
  • 2. 2010 LOSS PREVENTION CONFERENCE Essential Education for Claims, Logistics and Loss Prevention Professionals The economy is turning. Are you prepared for rebounding volume? SAVE THE DATE! NEW October 18-20, 2010 Loews Atlanta Hotel LOCATION: Atlanta, Georgia www . smc 3. com / go / loss 10
  • 3. August 13,2010
  • 4. SMC³ CRUCIAL CLAUSES SEMINAR SEPTEMBER 15 • CHARLOTTE, NC SMC³ LOSS PREVENTION CONFERENCE OCTOBER 18-20 LOEWS ATLANTA HOTEL ATLANTA, GA SMC³ 2011 JUMP START CONFERENCE JANUARY 17-19, 2011 RENAISSANCE CONCOURSE HOTEL ATLANTA, GA For more information, call SMC³ at 800.845.8090 or visit www.smc3.com/go/education
  • 5. Current News LTL and TL FMCSA changes SMS; CSA 2010 safety standings available Aug. 16........................................................ 1 FMCSA to eliminate DOT number registrant-only classification................................................................... 1 Diesel Price Gains 0.9¢ to $2.928 a Gallon .................................................................................................. 2 LaHood Seeks Truckers’ Help to Combat Distracted Driving ....................................................................... 3 NAFTA Trade with Canada and Mexico Jumps Nearly 40 Percent.............................................................. 4 Senate Bill Would Allow Heavier Trucks....................................................................................................... 5 Opinion: Safety Doesn’t Excuse Prejudice ................................................................................................... 5 Focus federal funds on interstates................................................................................................................ 7 Fleets Say Drive-Time Cut Would Boost Freight Costs................................................................................ 8 Fuel-Efficiency Focus Should Be on Tractors, Engines, Rather Than Trailers, ATA Says .......................... 9 Logistics Putting Freight in Federal Policy ................................................................................................................. 10 Slow but Steady Growth in the Supply Chain Execution Market ................................................................ 11 RFID Market Climbs by $600 Million in 2010.............................................................................................. 12 Panama Canal Authority Signs First-Ever Partnership Agreement with the Mississippi State Port Authority at Gulfport.................................................................................................................................................... 13 Georgia Adopts Proposal to Modernize Warehouse Law........................................................................... 14 The Plight Before Christmas ....................................................................................................................... 15 Rail AAR reports weekly freight rail traffic sets 2010 record.............................................................................. 17 Freight-rail capacity expansion bill enters Senate ...................................................................................... 17 Short-line tax credit extension still stuck in Senate, ASLRRA says............................................................ 18 Rail’s Split Personality................................................................................................................................. 19 KCS Net Jumps Five-Fold to $37.4 Million ................................................................................................. 20 Air Air freight volumes on the up, but some fear a slowdown .......................................................................... 21 USPS Delivers $3.5 Billion Loss, Cash Crunch Looms .............................................................................. 22 International Freight Traffic Shows Marked Improvement .......................................................................... 22 Los Angeles Air Freight Recovery Levels Off ............................................................................................. 23 Demand continues to rise in June............................................................................................................... 24
  • 6. Maritime Port Tracker report calls for 15 percent annual volume increase and a new peak month ......................... 24 US import growth to weaken as year progresses ....................................................................................... 25 Charleston containers up 19% in first half, harbor deepening reaches milestone...................................... 26 Container volumes back to pre-recession levels this year.......................................................................... 27 US Economy New claims for jobless benefits rise to 479K .............................................................................................. 28 Spending, Income Flat in June ................................................................................................................... 29 Trucking adds 5,900 jobs in July as overall hiring slows ............................................................................ 30 Tax Breaks on the Sidelines ....................................................................................................................... 32 Fed to Keep Balance Sheet From Shrinking............................................................................................... 33 Some Firms Struggle to Hire Despite High Unemployment........................................................................ 34 Energy Information Administration Diesel Fuel Prices................................................................................ 37 Energy Information Administration Regional Fuel Prices ........................................................................... 38 Transportation Stocks by Mode .................................................................................................................. 39
  • 7. LTL and TL FMCSA changes SMS; CSA 2010 safety standings available Aug. 16 Addressing concerns raised by the American Trucking Associations and other industry groups earlier this summer about the design of Comprehensive Safety Analysis 2010 (CSA 2010), the Federal Motor Carrier Safety Administration announced updates to the Safety Management System methodology to better identify carriers deemed “high risk” or otherwise have safety compliance problems. Most notably, the measure of exposure will be changed from Power Units only to a combination of Power Units and Vehicle Miles Travelled (VMT) in the Unsafe Driving BASIC and Crash Indicator. In addition, these two BASICs will change from using Power Units as a safety event grouping (formerly referred to as peer grouping) to using the number of crashes for the Crash Indicator and the number of inspections with a violation for the Unsafe Driving BASIC. According to FMCSA’s CSA 2010 website, other updates to the SMS include: • The measure of exposure will change from Power Units to the number of relevant inspections in the Controlled Substances/Alcohol BASIC; • Severity weights for some roadside inspection violations will be updated; and • The Agency will employ a more strategic approach to addressing motor carriers with a history of size and weight violations rather than counting these violations in the Cargo-Related BASIC; the new approach will include alerts to roadside inspectors when carriers have a history of size and weight violations. FMCSA also announced that beginning August 16, the CSA 2010 Data Preview Website will soon provide carriers with an assessment of where they stand in each of the SMS’s seven Behavior Analysis and Safety Improvement Categories (BASICs) so they can understand and address their safety compliance issues right away. The seven BASICs—which replace SafeStat’s Safety Evaluation Areas (SEAs) in December 2010—are Unsafe Driving, Fatigued Driving (Hours-of-Service), Driver Fitness, Controlled Substances/Alcohol, Vehicle Maintenance, Cargo-Related and Crash Indicator. For additional details about the Data Preview and the improvements to the SMS, visit: http://csa2010.fmcsa.dot.gov/Documents/SMSImprovementsFAQs.pdf Commercial Carrier Journal, 8/6/2010 FMCSA to eliminate DOT number registrant-only classification The Federal Motor Carrier Safety Administration has announced its plans to eliminate the “registrant-only” U.S. Department of Transportation number as part of the Performance and Registration Information Systems Management (PRISM) program. FMCSA originally developed the concept of a “registrant-only” USDOT number to identify registered owners of commercial motor vehicles (CMVs) that are not motor carriers, but lease their CMVs to entities that are motor carriers. FMCSA today, Aug. 9, announced through a Federal Register notice that it has concluded that registrant- only USDOT numbers are being used differently from what the agency intended and thus the practice of 1
  • 8. issuing registrant-only numbers to entities that are not motor carriers is having an adverse affect on FMCSA’s ability to track motor carriers’ safety violations. A registrant-only USDOT number did not authorize a non-motor carrier to operate in interstate commerce, and no safety events were to be assigned to it. However, FMCSA found that in numerous cases, law enforcement personnel were presented a registrant-only number during inspections and crash investigations; as a result, data that should have been assigned to the record of the motor carrier operating the CMV were assigned erroneously to the registrant-only DOT number. An FMCSA analysis in 2009 found that more than 35,500 (18 percent) of the more than 200,000 registrant-only records in MCMIS contained crash and inspection activity that should have been recorded on the lessee’s motor carrier record. FMCSA determined that placement of this information on a registrant-only record adversely affects the accuracy of its safety monitoring system, and that motor carriers that use registrant-only numbers improperly can evade FMCSA oversight, including compliance reviews and new entrant program audits. In addition, if safety events are not attributed properly to the motor carriers operating CMVs, FMCSA found it couldn’t factor those events into the motor carriers’ safety ratings. FMCSA says it will maintain all existing numbers of non-motor carrier registrants as dormant registrant- only USDOT numbers. The effective date of the change is Sept 1. Commercial Carrier Journal, 8/9/2010 Diesel Price Gains 0.9¢ to $2.928 a Gallon 2nd Straight Weekly Rise; Oil Hits 3-Month High The U.S. diesel average price rose 0.9 cent to $2.928 a gallon last week, the second straight gain, but just the third increase in the past 12 weeks, the Department of Energy reported Aug. 2. The retail gasoline average price fell 1.4 cents to $2.735, marking its first decline in three weeks but the third in seven weeks, DOE’s Energy Information Administration reported after its Aug. 2 survey of fueling stations. On the New York Mercantile Exchange, oil prices jumped to a three-month high on Aug. 3, closing at $82.55 a barrel, after trading around $78 during the previous week. Oil closed at $82.01 on Aug. 5. Andrew Reed, an analyst for Energy Security Analysis Inc., said he does not anticipate pump prices will increase much in the near term. “With sluggish demand and plenty of inventories, there isn’t really much in the fiscal markets to push crude higher than it is,” Reed said. “After some signs of demand strength in May, we’ve had a couple of bearish signals lately,” Reed said. “I really don’t expect diesel demand in itself to be driving up prices too much. It’s really about the underlying crude price.” Prior to the two most recent gains, diesel had fallen 6.2 cents over the previous four weeks. The price is now 19.9 cents below the year’s high of $3.127 in May, but 37.8 cents higher than the same week last year, EIA said. The gas price decline left gas 17.8 cents higher than the same week a year ago. Although the diesel price has been fairly stable this summer, fleets said it is never a factor they can ignore. 2
  • 9. Richard Strobel, senior vice president of G&P Trucking, Gaston, S.C., said his company buys fuel in bulk, which it stores at five company yards, sometimes as much as 10,000 gallons of diesel a month. “Nothing to get us in trouble, but sometimes based on what the market’s doing it will give us a little bit of an advantage,” Strobel said. The truckload carrier governs its 550 tractors at 65 miles per hour and instructs drivers where to purchase fuel. It also equips some of its vehicles with fuel-efficient tires and other aerodynamic technologies, providing small increases in fuel economy. At Hager City (Wis.) Express Co., owner Bill Schroeder said he started experimenting with auxiliary power units after receiving a federally funded anti-idling grant run by Wisconsin that pays half the cost of an APU. After two years of waiting, Schroeder said, in June he received enough funding to put APUs on two of his 25 trucks. Although Schroeder said he does not yet have data on fuel savings, his trucks are forced to idle because drivers can be on the road for eight days straight and sleep in their cabs. “We were up to 40% idling time on some [trucks], so, hopefully, [adding APUs] cuts them down dramatically,” he said. John Yandell, president of truckload carrier Yandell Truckaway, Oakland, Calif., said that his company continually strives to further minimize empty miles. “We’re trying to work within a 250- to 300-mile range out of the San Francisco Bay area, filling all those lanes of traffic. I would say that probably 50% to 60% of the time we’re able to get round-trip miles.” Yandell Truckaway operates 125 tractors and hauls mostly food-related products and wine. Although the carrier is close to refineries in the Bay area, Yandell said diesel is more expensive close to home. For that reason, he encourages his drivers to refuel farther from the company’s home base. “If I get 50 or 75 miles down into the Central Valley—Sacramento, Stockton and Modesto—the price is lower,” Yandell said. “Don’t ask me why.” He also encourages his drivers whenever possible to pay for diesel in cash because prices can be 5 cents to 7 cents lower per gallon than when using credit cards. Meanwhile, EIA economist Neil Gamson said he expects diesel to rise slightly in upcoming weeks. “We see diesel prices hitting over $3 by the end of the year, and continuing a slight increase in 2011, reaching as high as $3.19 average by the fourth quarter of 2011,” Gamson said. Transport Topics, 8/9/2010 LaHood Seeks Truckers’ Help to Combat Distracted Driving COLUMBUS, Ohio—Transportation Secretary Ray LaHood encouraged the nation’s safest truck drivers to play an active role in combating distracted driving. “Distracted driving is an epidemic in America,” LaHood said in a speech Aug. 5 during the National Truck Driving Championships here. “We are trying to persuade Americans that if they put down their cell phones and their BlackBerrys while they’re driving, a lot of lives will be saved.” LaHood suggested that truck drivers who see motorists talking on cell phones should “give them a honk or two. Or three.” 3
  • 10. “You all are ahead of the curve on this; you all have set a standard. We appreciate that,” he said. During his remarks at NTDC’s “Breakfast of Champions,” LaHood also praised the truckers for their commitment to highway safety. “Thank you for making safety your No. 1 priority,” he said, addressing more than 400 drivers and their families and co-workers. “I want you to know that at DOT, we appreciate what you all do and the fact that safety is your No. 1 priority,” LaHood said. Following his speech, LaHood walked through the driving course on the convention center floor during a tour led by Mark Courter, NTDC chairman and manager of safety compliance for FedEx Freight. NTDC, also known as the “Super Bowl of Safety,” tests the nation’s safest drivers on a wide range of skills and knowledge. Competitors in all nine truck classes took written exams on Aug. 4 that tested drivers on safety rules, security, first aid and general trucking industry information. Renée Evans, a Con-way Freight driver in the step van class, said she was pretty confident about her performance on the written test. “I thought I did really well,” said Evans, who works out of Henderson, Colo. Other questions on the exam covered such topics as fire safety and specifics about the Federal Motor Carrier Safety Administration’s upcoming CSA safety ratings system. On Aug. 5, competitors in the 3-axle, 4-axle, tank-truck and flatbed classes completed their pre-trip inspections and driving skills tests. The step van, straight truck, 5-axle, twins and sleeper berth classes were set to take their tests on Aug. 6. Transport Topics, 8/9/2010 NAFTA Trade with Canada and Mexico Jumps Nearly 40 Percent Trade using surface transportation between the United States and its North American Free Trade Agreement (NAFTA) partners Canada and Mexico was 39.5% higher in May 2010 than in May 2009, reaching $66.8 billion, according to the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation. The increase was the largest percentage year over year increase in total U.S.-NAFTA trade by surface modes on record back to April 1994. May was the third month in the last four with a record percentage year-over-year increase. According to BTS, a part of the Research and Innovative Technology Administration, the value of U.S. surface transportation trade with Canada and Mexico in May 2010 remained 9.9% below the May 2008 level despite the 2009-2010 increase. North American surface freight value rose 1.5% in May 2010 from April 2010. Month-to-month changes can be affected by seasonal variations and other factors. Surface transportation consists largely of freight movements by truck, rail and pipeline. In May, 86.2% of U.S. trade by value with Canada and Mexico moved on land. The value of U.S. surface transportation trade with Canada and Mexico in May was up 15.4% compared to May 2005, and up 36.2% compared to May 2000, a period of 10 years. Imports in May were up 31.8% compared to May 2000, while exports were up 41.8%. 4
  • 11. U.S.–Canada surface transportation trade totaled $40.2 billion in May, up 37.5% compared to May 2009. The value of imports carried by truck was 32.0% higher in May 2010 compared to May 2009, while the value of exports carried by truck was 34.5% higher during this period. Michigan led all states in surface trade with Canada in May with $5.5 billion. U.S.–Mexico surface transportation trade totaled $26.6 billion in May, up 42.7% compared to May 2009. The value of imports carried by truck was 36.1% higher in May 2010 than May 2009 while the value of exports carried by truck was 43.2% higher. Texas led all states in surface trade with Mexico in May with $9.4 billion. The TransBorder Freight Data are a unique subset of official U.S. foreign trade statistics released by the U.S. Census Bureau. New data are tabulated monthly and historical data are not adjusted for inflation. May TransBorder numbers include data received by BTS as of July 12. LogisticsToday.com, 8/5/2010 Senate Bill Would Allow Heavier Trucks Measure Backed by ATA, Shippers’ Group. A trio of senators introduced a bill that would allow states to increase the maximum weight for trucks operating on their interstates beyond the federal limit of 80,000 pounds. Sens. Mike Crapo (R-Idaho), Susan Collins (R-Maine) and Herb Kohl (D-Wis.) said in introducing the Safe Efficient Transportation Act that states would be allowed to “opt in” and increase their weight limits to 97,000 pounds. The legislation is identical to a bill introduced in the House last March by Reps. Michael Michaud (D- Maine) and Jean Schmidt (R-Ohio) and would require the new, heavier trucks to have six axles in order to diffuse the added weight. “This bipartisan legislation strikes the right balance between productivity and safety,” Kohl said in a statement. The bill is backed by American Trucking Associations and the Coalition for Transportation Productivity, a shippers’ group, the two said in statements Thursday. “ATA supports a number of reforms to federal truck size and weight regulations as part of our Sustainability Initiative,” said ATA President Bill Graves. “More efficient trucks, like those allowed under this legislation, will significantly reduce the trucking industry’s carbon output,” he said in a statement. Transport Topics, 8/5/2010 Opinion: Safety Doesn’t Excuse Prejudice This Opinion piece appears in the Aug. 9 print edition of Transport Topics. Click here to subscribe today. “Alto! Habla usted español” Imagine this scenario: You and your rig cross the border into Mexico. Along the highway, the police stop you. You haven’t broken any laws, but you’re nervous. Your Spanish is enough to get by, but not all Mexican police officers speak fluent English. The officer checks your papers. 5
  • 12. His Spanish is fast, with an accent you can’t quite decipher. You do the best you can, communicating the details of your business trip. Satisfied, he lets you go. Three hours later, you’re stopped again. This time, the officer’s language is too quick, with many words you don’t understand. Once again, you tell him your business purpose, but this time the officer orders you to park, writes a violation for insufficient communication and tells you to stay put until someone bilingual shows up. Sound crazy? Not really. Similar scenarios occur frequently with interstate truck drivers on many American highways. Police stop drivers and discover they are not native English speakers. Sometimes the driver is allowed to continue; other times the driver is put out of service (OOS) for failure to communicate sufficiently. The zealotry with which this roadside enforcement is applied varies. During the 2002-2007 period, Volpe National Transportation Systems Center determined that California had completed 2.3 million driver inspections with six English-speaking violations and no OOS violations for language difficulties—this in a state where 20% of the population speaks English less than “very well.” Compare that with North Carolina, which completed only 268,821 driver inspections but racked up 511 English-speaking violations, with 175 resulting in OOS—in a state where only 4% of the population speaks English less than “very well.” So, what rule are these drivers breaking and why the arbitrary enforcement? According to Section 391.11(b)(2) of 49 Code of Federal Regulations, an interstate driver must be able to “read and speak the English language sufficiently to converse with the general public, to understand highway traffic signs and signals in the English language, to respond to official inquiries and to make entries on reports and records.” The operative word—“sufficient”—is purposely not clarified in the regulations, giving investigating officers discretion at roadside. The Federal Motor Carrier Safety Administration and the Commercial Vehicle Safety Alliance both say that if the investigator completes the vehicle/driver inspection, communication has been sufficient. During its roadside inspections, CVSA enforces the OOS language component sporadically. (State inspectors receiving Motor Carrier Safety Assistance Program grants to enforce interstate trucking regulations during roadside checks under the auspices of CVSA essentially are working as agents for FMCSA.) FMCSA itself still leaves the regulation’s wording unchanged despite issuing stricter enforcement criteria to field personnel in 2007—a policy that doesn’t comply with rulemaking or fair-notice procedures. For almost 75 years, the U.S. Department of Transportation has interpreted the English fluency rule as a motor carrier’s responsibility to evaluate a driver’s English proficiency in the context of duties, type of cargo, route and public contact. Since 1936, FMCSA and its predecessors have interpreted the rule to require only a minimal level of English fluency to drive a commercial vehicle in interstate commerce. That’s why states may administer the CDL examination in foreign languages without fear of compromising safety. No studies or statistics have shown a connection between greater language fluency and fewer accidents. That’s why it’s unfair for inspectors to enforce subjective standards in the name of safety. It’s also wrong for states to accept more than $10 billion of MCSAP money from the government when it enforces a higher standard than the federal regulation it purports to enforce—particularly when a stricter standard discriminatorily jeopardizes certain companies from prospering in interstate trucking. Some states, namely California, Florida and, most recently, North Carolina, have elected not to enforce a language fluency requirement. Internal government reports in 2007 and 2008 offered recommendations to lessen the adverse effects of inconsistent enforcement without success. 6
  • 13. Now, however, several discrimination complaints have been filed under the Civil Rights Act of 1964. DOT investigations are under way to determine if states and officers using federal enforcement dollars are violating the act’s Title VI requirements and/or individual rights. Rooting out the problem is a start, but without coordination and top leadership involvement, it will do little to create a consistent objective standard. If America is indeed a melting pot of diverse cultures, tolerance should carry the day. Until it’s shown convincingly that a certain level of English fluency reduces accidents on U.S. highways, investigators should cite drivers for “insufficient” communication only if such deficiency honestly prevents completion of the roadside inspection. Motor carriers should be left to determine fluency during the hiring process, and states should continue to govern language requirements on their commercial driver license exams. Unnecessary and inconsistent OOS orders must stop, and false OOS “jumping” charges—i.e., accusing a driver of leaving his/her OOS location before the time has expired—should cease immediately until an objective standard is promulgated. In the interim, the government should provide officers with language-assist technologies to facilitate communication during roadside inspections. Otherwise, we will continue the inexplicable use of safety as an excuse to wallow in this self-made quagmire of inconsistency, arbitrariness and discrimination. Transport Topics, 8/10/2010 Focus federal funds on interstates Without raising the federal gas tax at all, the federal government could increase spending on interstate highways by $10 billion a year, according to a study by the Reason Foundation, a Los Angeles-based public policy organization, “think tank.” That’s how much money is diverted to projects with no national benefits, such as ferryboats, trails and mass transit programs, Reason found. The funding for such programs, which are unable to generate significant user revenues and require large subsidies, should come from state and local governments, the think tank argues. “Sooner or later Congress is going to have to deal with the highway bill and the major shortfall in highway investment,” said Robert Poole, principal author of the report and the Reason Foundation’s director of transportation policy. “It is time to rethink and refocus the federal transportation role more on core federal purposes and less on peripheral concerns.” Although the trucking industry would agree with Reason’s key premise that the highway trust fund should be focused on projects of national significance, the industry might take issue with some of alternatives the alternatives the think tank offers for financing non-Interstate projects. For example, Reason favors giving states incentives to pursue public-private partnerships that shift financing and risk away from taxpayers and onto private investors. And the foundation favors tolling and congestion pricing. The summary and full report is available here. eTrucker.com, 8/9/2010 7
  • 14. Fleets Say Drive-Time Cut Would Boost Freight Costs While the trucking industry waits for the Obama administration to complete its review of a new hours-of- service proposal, executives with some of the nation’s largest fleets warned that a cut in driving time would result in higher consumer costs, reduced efficiency and increased pollution. If DOT or Congress “reduces the hours of service from 11 hours a day of driving, to say, nine . . . they are actually reducing capacity by the equivalent of 250,000 trucks,” said Stephen Russell, chairman and chief executive officer of truckload carrier Celadon Group Inc. “That’s going to cause pricing to go through the roof.” Late last month, in compliance with a federal court settlement with Public Citizen and the Teamsters union, the Federal Motor Carrier Safety Administration sent its new HOS proposal to the White House for review. The rule is expected to be made public later this year. The current rule allows for 11 hours of driving within a 14-hour period, followed by a 10-hour rest period. In June, Public Citizen put forth a suggestion that driving time be cut back to eight hours within a 12-hour period. Jack Holmes, president of UPS Freight, the less-than-truckload division of UPS Inc., said he is concerned fleets would have to hire more drivers, and put more trucks on the road, if driving time is reduced. “If you have a proposal that results in more trucks on the road, it would certainly seem to be flawed,” Holmes said. Randy Mullett, director of government relations for Con-way Inc., said “the less hours when people are out on the road equals less productivity and less use of your assets.” A reduction in hours will be costly for trucking, he said, but it was not yet entirely clear how costly. “What is difficult to figure is how much extra capacity does it require for additional equipment,” Mullett said. “Does it change the ratio of tractors to trailers? I don’t think we have a good handle on that yet.” Celadon’s Russell said higher costs ultimately would get passed through to the consumer because “nobody’s going to eat it.” “It is going to drive pricing through the roof, and whatever every Tom, Dick and Harry buys, whether they’re buying American cheese or buying products from anywhere . . . it’s going to cost more,” he said. Holmes said when a new rule is published, fleets will have to review not only routes but entire transportation networks to see if changes need to be made to minimize the effects on customers. Mullett agreed, saying that it is possible that “some things that are next-day [delivery] now may become two-day.” However, he was able to find a small upside for Con-way if there is a change. “From the Menlo point of view . . . it might be a whole bunch of work for us, so every cloud might have a silver lining,” Mullett said referring to Menlo Logistics Worldwide, the company’s logistics division. David Abney, UPS’ chief operating officer, said the company believes no change in the rule is needed. “The safety numbers since the change was made in ’04 back that up,” Abney said. “If we felt that was an issue, it wouldn’t take the government saying that they needed to reduce the hours; we would the appropriate steps ourselves.” Despite the uncertainty, Mullett said it was too early for Con-way to spend time worrying too much about what might happen. 8
  • 15. “We feel like that we’ve got the right people and systems that we can respond to a change,” he said. “We’re hoping that it is not one that’s really costly or disruptive to the industry.” Transport Topics, 8/9/2010 Fuel-Efficiency Focus Should Be on Tractors, Engines, Rather Than Trailers, ATA Says Federal transportation officials considering fuel-efficiency standards for heavy trucks should concentrate their early regulatory efforts on engines and tractors, not trailers, American Trucking Associations said. In written comments to the National Highway Traffic Safety Administration, ATA said that of five heavy- truck fuel-efficiency alternatives proposed by the agency, initial mandates should not be focused on costly and complex modifications to trailers. ATA said that requiring trailer standards is not a “viable short-term solution” to address fuel-efficiency gains, given the large number of trailers and trailer manufacturers and the high initial capital costs for fleets. “We’re not opposed to trailer regs,” Glen Kedzie, ATA vice president and environmental affairs counsel, told Transport Topics. “We recognize that trailers won’t be taken off the table entirely. But from everything that we’re hearing and based on the ratios of tractors to trailers, it probably isn’t prudent addressing trailers in the first of many rounds of these regulations.” NHTSA is considering several options in proposing fuel-efficiency standards for heavy trucks that probably would be voluntary for model year 2014 and mandatory for 2016 trucks. The U.S. Environmental Protection Agency also plans to propose fuel-efficiency standards by 2014, but President Obama has asked the two agencies to work together to “harmonize” their requirements. The five NHTSA alternatives under consideration range from taking no action to setting a performance standard that addresses engines, tractors and trailers. The alternatives were outlined in a June Federal Register posting for the agency to complete an environmental impact statement. ATA said NHTSA also should consider requirements to govern truck speeds to 65 miles per hour, make highway infrastructure improvements to mitigate congestion and allow heavier, high-productivity vehicles. The Truck Trailer Manufacturers Association agreed with ATA, calling trailer requirements “impractical.” “While on the surface it may seem that there are only a few types of trailers, the reality is that for each type of trailer (van, reefer, flatbed, low-boy, tank, etc.), there are a myriad of possible configurations,” Jeff Sims, TTMA’s president, said in written comments. The Owner-Operator Independent Drivers Association disagreed with some of ATA’s suggestions. “Speed limiters on [medium-duty/heavy-duty] vehicles may certainly increase the efficiency of that one particular vehicle but have the opposite effect on traffic operating around that one vehicle by causing them to consume more fuel as a result of needing to slow down below posted limits, the desire to pass and the creation of ‘micro-congestion,’ ” OOIDA’s president, James Johnston, wrote in comments. Johnston said that constructing a uniform fuel-efficiency standard for any particular medium- or heavy- duty vehicle poses challenges that must contemplate myriad multiple-uses, operating environments and nearly innumerable other factors that could render “any fuel-efficiency standard set by the government impossible to attain outside a perfect laboratory setting.” Johnston also opposed allowing heavier trucks as a way to increase fuel efficiency. 9
  • 16. “It is widely recognized that our nation’s highways and bridges are already in dire need of significant maintenance and rebuilding,” Johnston wrote. “Increasing vehicle weights will lead to accelerated deterioration of highways and bridges, thus reducing their life cycle and requiring significant maintenance and rebuilding.” “Increasing the size and weight of MD/HD vehicles does pose significant safety risks to the motoring public besides the hidden environmental costs,” Johnston wrote. Transport Topics, 8/2/2010 Logistics Putting Freight in Federal Policy Senate bill calls for a multimodal national freight strategy and development grants. Sen. Frank Lautenberg knows congestion, and he wants to do something about it. Hailing from one of the nation’s most congested states, the New Jersey Democrat in late July joined two other lawmakers to introduce a bill directing the federal government to establish a national freight policy. The FREIGHT Act of 2010—“Focusing Resources, Economic Investment, and Guidance to Help Transportation”—calls for an Office of Freight Planning and Development in the Department of Transportation, a strategic plan for a multimodal, national freight system and a dedicated freight grant program. The bill, sponsored by Lautenberg and fellow Democrats Maria Cantwell and Patty Murray of Washington, also ties infrastructure funding to improvements in easing congestion, carbon emissions, in energy use and public safety. It also comes as maneuvering over the next multiyear surface transportation spending bill gathers momentum. “We’ve been preaching the issue of freight and its importance for several years, and this is the most broad-based response we have received,” said Mortimer Downey, chairman of the Coalition for America’s Gateways and Trade Corridors and a former deputy transportation secretary. “There should be a national freight policy, but beyond that (there should be) a means by which the government can invest” in multi- modal projects. “We’re going to work to have this bill enacted either free-standing or as part of a broader transportation authorization bill.” Downey’s coalition is one of several industry groups supporting the FREIGHT Act, including the Intermodal Association of North America, the National Railroad Construction and Maintenance Association, the Environmental Defense Fund, the American Association of Port Authorities, ITS America and Transportation for America, a group calling for a 20 percent shift in freight from highway to rail and intermodal services. The Association of American Railroads later released a statement supporting the bill, while the International Warehouse Logistics Association backed it with a caveat: “If properly designed and implemented, such a program will not only help us preserve our competitive position in the world marketplace, but it will stimulate jobs in logistics, which is one of the few sectors of the American economy that has seen job growth and can prove a substantial jobs-multiplier effect that results from increasing supply chain efficiencies,” IWLA President Joel Anderson said. Trucking industry groups were notably absent from the roster of organizations supporting the legislation. But the FREIGHT Act isn’t anti-truck, said Leslie Blakey, executive director of the Coalition for America’s 10
  • 17. Gateways and Trade Corridors. “The intent of the bill is to make the system work better across the board,” Blakey said at a July 22 press conference. “I don’t think the bill per se is encouraging modal shift,” said Joni Casey, president and CEO of lANA, which has trucking and rail members. “You’re already seeing shifts based on fuel costs and pricing. It’s the market that’s going to do the modal shifting if there is going to be such a thing. I don’t think any piece of legislation will.” The bill hit Capitol Hill shortly after the American Association of State Highway and Transportation Officials called for greater federal investment in infrastructure—and not just highways—in a report called “Unlocking Freight.” “Congress must invest in all transportation modes, from waterways to roads and rails, to get us where we need to be as a competitive nation,” said Larry L. Brown, president of AASHTO and executive director of Mississippi’s transportation department “We need to think nationally, regionally and on a multimodal level,” said Gerald Nicely, Tennessee’s transportation commissioner. “Central to this effort should be the creation of a national multimodal freight plan to ensure that transportation investments are coordinated and made where most needed.” Brown and Nicely spoke at separate events July 8 marking the release of the report, which identified the 1,000 miles of highway most heavily traveled by truck. Although AASHTO supports a multimodal approach to freight, it puts more emphasis on expanding highway capacity than some of the FREIGHT Act’s backers. The report says traffic on interstate highways expanded 150 percent between 1980 and 2006, but interstate capacity increased only 15 percent. The legislation and report are both efforts to crack barriers to infrastructure spending and shape the next surface transportation bill, which is stuck in pre-election gridlock in Congress and debate over how to fund future spending. The DOT is preparing a list of principles to serve as guidelines for reauthorizing multiyear transportation programs. Those principles will be coming out soon along with a finalized strategic plan for all DOT programs, Secretary of Transportation Ray LaHood told the American Road and Transportation Builders Association on July 23. That plan is likely to share many elements of the FREIGHT Act, including a permanent grant program similar to the one-off TIGER grants approved by Congress that the DOT is using to fund multimodal projects. Journal of Commerce, 8/2/2010 Slow but Steady Growth in the Supply Chain Execution Market The market for supply chain execution (SCE) solutions slowed significantly thanks to the global recession, but has still enjoyed an 8% growth rate since 2006, according to a recent study from analyst firm ARC Advisory Group. In its analysis of the SCE market, ARC focuses on warehouse management systems (WMS), transportation management systems (TMS) as well as collaborative production management systems for both process and discrete industries. ARC's logistics and production management studies lowered their forecasts based on the recession, and consequently the forecast for SCE is lower than it was just two years ago, explains Steve Banker, ARC's 11
  • 18. service director for supply chain management. "However, the good news is the recession is winding down, many growth drivers remain, and ARC's forecast reflects those drivers." Each application had specific growth factors affecting that market in particular, but certain factors applied to all application areas. These common factors that cross all SCE applications include: • Global sourcing • Preferential trade agreements • Manufacturing and logistics outsourcing • Mergers and acquisitions • Regulatory pressures. These factors drove growth across all SCE applications and help explain why ARC sees a fairly robust forecast for the SCE market. LogisticsToday.com, 7/29/2010 RFID Market Climbs by $600 Million in 2010 By the end of 2010 the value of the entire RFID market will be $5.63 billion, up from $5.03 billion in 2009, according to estimates from analyst firm IDTechEx. This includes tags, readers and software/services for RFID cards, labels, fobs and all other form factors. It does not, however, include the value of any RFID tags that retail giant Wal-Mart Stores plans to insert into jeans and underwear. In total, 2.31 billion tags will be sold this year, up from 1.98 billion in 2009, predicts report author Raghu Das. Most of the growth in this period is due to an increase in use of passive UHF tags. For passive UHF tags, the biggest category of use is asset tracking in many closed loop systems. Such applications typically use tens of thousands of tags and more; and, rarely, a million tags or more. The paybacks of these applications are very strong but the numbers of tags is relatively small per case study. UK retailer Marks & Spencer will use almost 200 million UHF tags alone this year for apparel tagging, but their success in this sector has not gone unnoticed and many others, notably Wal-Mart, are on their way to large deployments. In total, IDTechEx found that in 2009 550 million passive UHF tags were sold, and that number will rise to at least 800 million in 2010. IDTechEx is aware that two passive UHF tag suppliers have increased their prices for the first time in many years this year and they are installing extra capacity. However, the biggest spenders are still governments, who are able to implement large RFID schemes such as animal tagging, transit ticketing, people identification etc where the paybacks are typically greater efficiency and improved safety. Rapid ROI is less of a concern for them. Well managed suppliers to these sectors operate profitably. For example, in 2010 178 million tags will be used for animal and pet identification, at an average tag cost of 97 cents each. The market for all RFID interrogators will grow from $0.92 billion in 2010 to $4.99 billion in 2021. According to the IDTechEx research data, the biggest sectors by numbers of tags are contactless cards (HF, for transit, secure access, purchasing, etc) using 450 million tags, followed by RFID tickets (HF, for transit ticketing) 380 million tags, and then apparel (UHF) 300 million tags. By value, just over $1 billion will be spent on RFID cards in 2010 and $240 million on tags for passports. $36 million will be spent on tags for apparel in total. In 2010 43% of RFID tags will be sold and used in North America. In the future, IDTechEx believes that RFID will be huge in China. Indicators of this include the fact that Chinas has been adding new RFID manufacturing capacity while the U.S. and Europe saw a shakeout in tag providers, the Chinese 12
  • 19. Government is a strong advocate for RFID, and has the power to mandate companies to use it. China has already executed the largest RFID order by value (over one billion national identification cards for adults, six billion dollars including systems) and has a policy of making its own requirements throughout the RFID value chain. In 2009/2010, RFID events in China are five times bigger by attendance than the biggest RFID events in the U.S. and Europe. Most products will be source tagged, and because China is one of the largest exporters the tags will be supplied there. Traditionally, active RFID has been tags with a battery to boost read range or add extra functionality to the tag such as sensors. Then came real time locating systems (RTLS). In 2010, these two sectors will be a total of $610 million in value, where $225 million will be spent on tags and the rest on infrastructure, software and services. Now there are wireless sensor networks (WSN) which may or may not be used to form mesh (self forming and self healing) networks. Those in active RFID and RTLS have added extra functionality to create WSN but we also have new standards emerging, such as ZigBee, which are part of the scene. Over 20 million ZigBee tags have been sold and are used to form mesh networks for "smart" electricity meters, preventing the need for manual reading of the meters and allowing rapid response to high use. This is increasingly becoming mandated as new houses move towards having "greener" credentials. LogisticsToday.com, 8/5/2010 Panama Canal Authority Signs First-Ever Partnership Agreement with the Mississippi State Port Authority at Gulfport (PANAMA CITY, Panama)—Panama Canal Authority (ACP) Administrator/CEO Alberto Alemán Zubieta and Mississippi State Port Authority at Gulfport (MSPA) Executive Director/CEO Donald R. Allee launched a strategic partnership in Panama by signing a Memorandum of Understanding (MOU) to increase economic growth, spur international trade and promote the "All-Water Route" (the route from Asia to the U.S. East and Gulf Coasts via the Panama Canal). During an official ceremony, both parties, joined by Mississippi Governor Haley Barbour, affirmed their commitment to mutual growth and cooperation. Renewable after five years, the first-ever ACP-MSPA agreement will allow for joint marketing ventures, information sharing and technological exchange. "Today's MOU signing represents a great opportunity for Panama and Mississippi to build upon our existing offerings and trade relationship through a mutually beneficial alliance," said Mr. Alemán Zubieta. "One of the primary tenets of the ACP is to continually look for creative approaches to boost trade flows and provide safe, reliable and efficient service to the international maritime community. This agreement is one way that we can help achieve this goal." Both the ACP and the Port are dedicated to further increasing capacity and fostering business development. In 2009, Panama was Mississippi's third largest trading partner, in terms of exports, after Canada and Mexico. "For four decades, the Mississippi State Port Authority has focused on growth prospects in the Western Hemisphere, but the expanded Panama Canal will afford the Port of Gulfport new opportunities to be more competitive in shipping between North America and both Asia and the West Coast of South America," said Mr. Allee. "This agreement between the MSPA and the ACP will provide a framework for our two entities to work together to pursue new business opportunities that will result from an expanded Panama Canal." The Panama Canal is currently undergoing its historic $5.25 billion expansion project which will double the waterway's capacity and build a new lane of traffic through the construction of a new set of locks. 13
  • 20. Scheduled for completion in 2014, the project will allow more ships and the passage of longer and wider vessels through the Canal. Receiving $570 million in federal Community Development Block grants for restoration projects, the MSPA continues to refurbish the Port from Hurricane Katrina damage. Development plans include elevating the Port's West Pier to 25 feet above sea level, returning to pre-Katrina storage capacities and preparing for increased operations once the Panama Canal expansion project is completed. "Maritime commerce is vital to Mississippi's economy, and the expansion of the Panama Canal provides the state with considerable opportunities for increased trade and worldwide shipping," said Governor Barbour. "Through the partnership with the Panama Canal Authority, the Port of Gulfport will be able to offer even more businesses quick, affordable access to nearly three-quarters of American consumers. Our nation's ports are overcapacity, and the current restoration of the Port of Gulfport will accommodate increased container traffic that will be entering the U.S. as a result of the Panama Canal expansion." Seaports Press Review, 8/2/2010 Georgia Adopts Proposal to Modernize Warehouse Law The state of Georgia has become the latest state to adopt changes to the warehousing provisions in the Uniform Commercial Code (UCC). The Georgia state legislature passed legislation adopting the changes, which was signed into law by Governor Sonny Perdue on May 27 and went onto effect on July 1. The UCC was established in 1952 and is one of a number of uniform acts that have been created to harmonize the law of sales and other commercial transactions in all 50 states. Article 7 of the code pertains to warehouse receipts, bills of lading and other documents of title. In 2003, the International Warehouse Logistics Association began an effort to get the states to adopt a revised Article 7 that allows for many of these documents to be in electronic form. The new Georgia law also deletes obsolete references to tariffs, classifications and regulations that no longer track modern commercial practices. In addition, it deals with permissible contractual limitations of liability; negotiation and transfer; lien of the carrier or warehousemen on the goods and right to enforce lien in a commercially reasonable manner; altered, lost and stolen instruments; and the effects on holders resulting from insolvency of the warehouse customer. To date, IWLA and its members have succeeded in persuading 39 states to adopt the revision. The association currently is pressing its efforts in Massachusetts, Ohio, Washington and Michigan. "Article 7 is the lifeblood of the warehouse industry, and widespread adoption of the revision allows more efficient operation in commerce across state lines," says Joel Anderson, president and CEO of IWLA. "What happened in Georgia is a perfect example of what our commercial warehouse members, working together and with the assistance of the IWLA staff, can accomplish politically for the benefit of the entire industry." "This was truly a team effort," says William Stankiewicz, vice president and general manager of Shippers Warehouse of Georgia, with facilities in Jonesboro, Ga. "Article 7 helps to solve many of the emerging issues in the new age of electronic rights and title transfer by incorporating consistent provisions for electronic documents of title. It allows a warehousemen or common carrier on one side of the country to know what his expectation will be on the other side of the country." Robert Doyle, president of Amware Logistics Services Inc., which operates warehouse facilities in the Atlanta area, says, "Getting involved in the political process is critical to our industry. There is no substitute for direct constituent involvement in these types of matters and we must be willing to get involved and represent the supply chain industry as strong and educated advocates and ambassadors." Logistics Today, 8/9/2010 14
  • 21. The Plight Before Christmas Companies have learned some useful lessons about demand planning, but will improved forecasting techniques guarantee happy holidays? For the first few months of this year, the U.S. economy was moving steadily toward recovery. The Credit Managers' Index (CMI), a key indicator of corporate economic trends, registered a rise each month from August 2009 until April 2010, and other benchmarks gave cause for optimism. Then came May, with the BP oil leak, worries about European sovereign debt, disappointing employment data, and a sudden drop in the CMI index. Talk of a double-dip recession resumed, and CFOs were torn: Should they ramp up for growth or once again batten down the hatches? The dilemma as to whether to reduce inventory if another downturn is coming or gear up for a resumption of growth is particularly acute now, as companies debate how to prepare for the holiday shopping season. "No one is confident that they should buy up into this fourth quarter in a significant way, but, by the same token, they don't want to miss opportunities," says Bryan Eshelman, a retail and consumer products specialist with business advisory firm AlixPartners. "So it's really investing in the capability to react quickly that will help those that are most successful this fourth quarter." Fortunately, the Great Recession prompted many companies to reevaluate their methods of demand forecasting and planning. Companies now test the market more frequently, assessing customer intentions via such means as dipping into markets tentatively before plunging into huge inventory orders. Merchandising methods, dubbed "hold-and-flow" and "delayed-distribution," are increasingly helping managers to look before they leap. At the same time, corporate forecasters have grown more cognizant of the role companies themselves play in sparking or dampening demand. Rather than rely solely on such venerable prediction metrics as same-store sales, they are attempting to gauge how their own pricing, advertising, and sales practices affect customer behavior and how they can refine those practices to boost sales. For these practices to succeed, some experts say, CFOs will need to begin linking sales predictions to production planning, instead of allowing the two functions to operate separately. At Coach, a maker of luxury handbags and other wardrobe accessories, CFO Mike Devine says that his role is "to make sure the organization maintains discipline in having our production forecasts line up with our sales forecasts." Rather than enforcing preexisting production, inventory, and sales plans, finance chiefs must be able to make quick adjustments as conditions change. Before the recession, CFOs typically approached forecasting and planning "on a strategic basis," says Charlie Chase, business enablement manager for software company SAS Institute. "Now they need to do it on a tactical basis," he says. Think of it as an early Christmas present the company can give itself. Going with the Flow The recession schooled finance chiefs on the inherent risks of placing large inventories in a supply chain. Previously, companies typically made or bought products and distributed them to stores in bulk because that was the cheapest way to do it. Until, that is, demand dried up and companies had to take big write- downs and unload the goods at deep discount, if at all. Some companies now postpone the manufacturing of goods until they are reasonably sure there is a market for them. More specifically, companies defer completion of a certain portion of a product line. "Previously, we would convert all raw materials purchased into finished goods," says Coach CFO Devine. "Now, we take a deeper position in continuing raw materials [but hold off on manufacturing]. This allows us to respond more nimbly to consumer buying patterns." Coach might, for example, load up on more leather or silk than it needs to manufacture products for a given season, and use the remaining materials for later seasons. If demand suddenly does spike, however, "we'll have raw materials available to quickly up production," Devine says. 15
  • 22. Similarly, some companies are stocking up at their warehouses but delaying the shipment of finished goods to stores. In a May earnings call, Saks announced that it would install such a "hold-and-flow system" in phases beginning this summer. The system "will drive allocation effectiveness by holding back a portion of certain merchandise orders at our distribution center…employing the product through the stores as demand dictates," says Ron Frasch, the luxury clothing chain's president and chief merchandising officer. Such techniques do add warehousing costs, but also have the potential to boost revenues and gross margins. That's because improved precision in meeting demand makes it more likely that goods will be sold at full price. If they're used successfully, "the benefit of full-price sell-through outweighs any additional expense to warehouse the product," says Matthew Katz, a managing director at AlixPartners. "If you warehouse product and then don't get the full-price sell-through, however, then you've got a problem." Shaping Demand Companies are also adopting a more sophisticated approach to forecasting that includes probing the effects of their own actions on customers. Previously, companies relied solely on past sales-trend data, along with such well-worn gauges as seasonal effects on sales, as a basis for their forecasts, according to SAS's Chase. "Then, whatever is left over is called 'unexplained' or attributed to randomness," he says. "But, in fact, it can be attributed to sales promotion, marketing, price, and [the accuracy of your] economic forecast." In his recent book, Demand-Driven Forecasting, Chase argues that managers imperil their predictions and their profits if they ignore such factors. "For example, a price change occurring simultaneously with a product sales promotion could erode the profitability of the product or create an unexpected out-of-stock situation on the shelf at the retailer," he writes. Yet such internal factors must be balanced against broader economic and social factors. Two years ago, OfficeMax, a retailer that does a big business in school supplies, ran a promotion in which crayons, glue, and other specified items were sold for a penny apiece in an effort to lure buyers to shop for all their back- to-school needs at the store. Unfortunately, this coincided with the start of the recession. Instead of filling their baskets with a mix of loss leaders and full-priced items, OfficeMax customers spread their spending across a variety of competing stores on the basis of price, according to Reuben Slone, executive vice president of supply chains at the company. "People had a lot more time than money," he says, "because unemployment was really beginning to mushroom, and they were literally watching their pennies." Slone says the promotion failed because of the most common kind of error in forecasting: an error in assumptions about human behavior, rather than a numerical miscalculation. Now, Slone says, OfficeMax layers a bevy of external factors into its sales forecasts, everything from "competitive entry/exit" (what happens to demand when a Staples or Best Buy enters or exits a local market) to weather patterns. The company even employs a "hurricane algorithm," which it uses to gauge how many bottles of water, flashlights, or batteries people will buy in advance of, or after, a storm. So what do such methods tell Slone about his company's prospects for Christmas, which is a key selling season for office products? "Overall, we're cautiously pessimistic," he says, noting that the company's business is highly correlated to the nation's employment numbers. "We're not planning for a huge resurgence." In that, he doesn't appear to be alone. CFO.com, 8/6/2010 16
  • 23. Rail AAR reports weekly freight rail traffic sets 2010 record WASHINGTON—The Association of American Railroads has reported that for the week ending July 31, 2010, U.S. railroads reported the highest traffic levels of 2010 for both carload and intermodal traffic. U.S. railroads originated 300,292 carloads for the week, up 9.4 percent compared with the same week in 2009, but down 10.6 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008. Note that U.S. rail traffic fell sharply in fall 2008, when the financial crisis took hold. Intermodal traffic totaled 232,895 trailers and containers, up 20.2 percent from the same week in 2009, and up 0.9 percent compared with 2008. Compared with the same week in 2009, container volume increased 21.9 percent and trailer volume rose 11.7 percent. Compared with the same week in 2008, container volume increased 9 percent and trailer volume dropped 28.9 percent. Eighteen of the 19 carload commodity groups increased from the comparable week in 2009 with only waste and scrap, down 1.9 percent, posting a decline. Metallic ores, up 73 percent, and metals and products, up 35.2 percent, were the commodities posting the most significant increases. In comparison to 2008, all nineteen commodity groups posted declines. Carload volume on Eastern railroads was up 9.9 percent from last year, but down 13.7 percent from 2008. In the West, carload volume was up 9.1 percent from last year but down 8.5 percent from two years ago. For the first 30 weeks of 2010, U.S. railroads reported cumulative volume of 8,461,271 carloads, up 7.3 percent from 2009, but down 13.1 percent from 2008, and 6,318,845 trailers or containers, up 13.5 percent from 2009, but down 6 percent from 2008. Canadian railroads reported volume of 73,858 cars for the week, up 17.3 percent from last year, and 50,967 trailers or containers, up 21.6 percent from 2009. For the first 30 weeks of 2010, Canadian railroads reported cumulative volume of 2,167,829 carloads, up 21.1 percent from last year, and 1,380,845 trailers or containers, up 14.7 percent from last year. Mexican railroads reported originated volume of 14,282 cars, up 23.4 percent from the same week last year, and 6,848 trailers or containers, up 23.1 percent. Cumulative volume on Mexican railroads for the first 30 weeks of 2010 was reported as 411,472 carloads, up 20.9 percent from last year; and 192,794 trailers or containers, up 32.8 percent. Combined North American rail volume for the first 30 weeks of 2010 on 13 reporting U.S., Canadian and Mexican railroads totaled 11,040,572 carloads, up 10.2 percent from last year, and 7,892,484 trailers and containers, up 14.1 percent from last year. TheTrucker.com, 8/6/2010 Freight-rail capacity expansion bill enters Senate Last week, Sens. Kent Conrad (D-N.D.) and John Ensign (R-Nev.) introduced the Freight Rail Infrastructure Capacity Expansion Act of 2010 (S. 3749), which aims to encourage private capital investments in freight rail and help expand rail capacity. 17
  • 24. A companion bill to H.R. 1806—a measure introduced last year by Rep. Kendrick Meek (D-Fla.) that currently has more than 100 House co-sponsors—S. 3749 would provide two tax incentives: a 25 percent tax credit for capacity expansion expenditures on new freight-rail infrastructure and a vehicle for expensing all qualifying rail infrastructure capital expenditures. The incentives would apply to railroads, shippers, ports and trucking companies. Qualifying expenditures would include track, tunnels, signals, train control devices, locomotives, bridges, yards, terminals, and intermodal transfer and transload facilities. On Friday, the Association of American Railroads (AAR) voiced support for S. 3749, which would spur future freight-rail investments that are needed to “take full advantage of freight rail’s unparalleled potential to promote economic recovery, provide much-needed jobs, take trucks off the highways, save fuel, and reduce CO2 emissions,” according to the association. “America has great expectations for our nation’s railroads—to provide not only the vital connection for U.S. business to the global marketplace, but also the underlying network for expanded intercity passenger and high-speed rail,” said AAR President and Chief Executive Officer Ed Hamberger. “This bill offers incentives for our highly capital-intensive business, and will ensure freight rail can continue to meet these expectations.” Progressiverailroading.com, 8/9/2010 Short-line tax credit extension still stuck in Senate, ASLRRA says A vehicle for extending the short-line tax credit still had not been secured in the Senate before the August recess, according to an item in the American Short Line and Regional Railroad Association’s (ASLRRA) latest newsletter. Since December 2009, Congress has tried numerous times to extend the Section 45G tax credit—which expired at 2009’s end—via a tax extenders measure. The Senate tried four times in June and July to pass the most recent House-passed bill, which would extend the short-line tax credit through 2010. But each time, the Senate failed to get the 60 votes necessary to pass a measure, according to the ASLRRA. The Senate likely won’t consider any new or pending legislation until after Labor Day. However, the last four comparable tax bills that included language on Section 45G didn’t pass both chambers in identical form before October, ASLRRA said. As of Aug. 1, measures including a short-line tax credit extension had garnered 261 House co-sponsors and 53 Senate co-sponsors. Initially enacted in January 2005, the tax credit enables regionals and short lines to claim a tax credit of 50 cents for every dollar spent on infrastructure improvements, up to a cap of $3,500 per mile of owned or leased track. Progressiverailroading.com, 8/6/2010 18
  • 25. Rail’s Split Personality Intermodal and some other cargoes are strong, but weakness still comes in carloads The freight rail business is looking more like two markets than one, a fast-paced intermodal segment marked by equipment tightness and other business segments marked by uncertainty about the economic recovery. That split personality is revealed in remarks by officials at several companies that play to differing parts of the rail industry. “We do think that we’re going to continue to see a tremendous amount of demand in the market,” said David P. Yeager, chairman and CEO of intermodal specialist Hub Group. That company experienced a surge in second quarter demand that used up all its available capacity, and it sees no sign of a letup. “The first few weeks in July we have seen just as strong as where June ended up,” Yeager said in a July 21 earnings conference call. “That’s rather extraordinary ... that’s not normal for July.” Yet at GATX, one of the premier North American suppliers of leased railcars and locomotives, demand across a much broader range of cargo markets is far less robust. “We continue to see some signs of improvement, although they are inconsistent,” Chairman, President and CEO Brian Kenney told analysts on July 22. While pricing on railcar leases have recovered somewhat from their recession lows, Kenney said lease renewal rates are still “well below expiring rates” in the second quarter. Union Pacific Railroad, like other major carriers, is enjoying a surge in profit as it keeps equipment and work force capacity tight enough to keep pushing productivity and freight rates higher. Yet UP, North America’s largest rail freight hauler, also sees a slow economic recovery continuing to split its cargo markets, with intermodal, automobiles and some other categories doing well, but other cargoes weak from a long slump in construction of housing, commercial buildings and highways. “And it doesn’t look like the slow improvement trajectory is going to change much over the last half” of this year, said John Koraleski, UP’s executive vice president for marketing and sales. James R. Young, UP chairman, president and CEO, told analysts, “We’re cautious in terms of our outlook.” He said if one adds up the pluses and minuses of the volume outlook for different cargoes, “they lean a little more on the positive side in volume than the negative.” The companies turned in strong earnings for the quarter. UP’s profit jumped 53 percent from a year earlier—which was the low point of the recession for freight haulers. Its net income of $711 million was 17 percent of its $4.2 billion in sales. Revenue carloads rose 18 percent, including a 24 percent surge for intermodal loadings. Its automotive business, flattened at that point in 2009, soared 71 percent and in turn pulled up related shipments of metals and ores. And, because pricing power and efficiency gains lifted average unit revenue by 8 percent, UP’s total revenue rose 27 percent. UP, other railroads and rail shippers still have a vast fleet of idled railcars across the continent, so they are ordering few specialty cars and are slow to activate new leases. That sluggishness in the largest business line for GATX trimmed the lessor’s rail segment revenue by about $10 million, and cut its rail profit 34 percent or nearly $15 million. Gains from its Great Lakes bulk shipping line, American Steamship, and some specialty business pushed GATX’s overall profit up 69 percent to $21.5 million, but left it wondering when it can count on a revived rail sector. “It still feels like a downturn to us,” Kenney said. Hub was in the sweet spot of a sizzling intermodal market, where demand and pricing are up so much that marketers are ordering new containers and still expecting tight capacity. 19
  • 26. Hub also has a sizable truck brokerage business, and admits it was caught off guard when demand revved up so much this past spring that truckers quickly hiked their rates to Hub or just opted not to carry loads. The result was “serious compression” in the profit margin on brokerage, Yeager said, and “it’s going to take some time to dig out of that hole.” Outside of intermodal, one area of strength in rail loadings has been metals and ores, largely to supply a revived auto manufacturing industry as well as steel supports for stimulus projects around the U.S. But recent rail data suggests metals demand could be cooling. GATX is also cautious about ore loadings for its Great Lakes ships, amid concerns some steelmaking furnaces may curtail production in coming months. “We could see some softening in demand for ore in the second half;” Kenney said. Journal of Commerce, 8/2/2010 KCS Net Jumps Five-Fold to $37.4 Million Railroad firm’s second quarter freight volume matches 2008 pace Kansas City Southern, the smallest of North America’s Class I railroads, powered back from tough recession financials to post a $37.4 million profit for the second quarter that was up 527 percent from the 2009 period. The company operates two railroads of about equal size in its network—KCS Railway in the central- southern U.S. and KCS de Mexico that sprawls across that country. It was also the hardest hit of the Class Is by the 2008-2009 recession, as its normally strong KCSM automotive traffic plunged after the credit crisis shut down much U.S. auto production. Another factor was that in the 2009 second-quarter, KCS was spending to finish a costly construction project to open its own rail segment between the towns of Rosenberg and Victoria, Texas. That project eliminated a need to pay Union Pacific Railroad to use its track in the area, gave KCS a more direct route between Houston and Laredo at the border and allowed KCS to build an intermodal ramp near Houston. With that segment running and the auto business up sharply with the recovery, KCS reported a 24 percent gain in freight traffic from last year and said volume now slightly exceeds the period in 2008 before the credit crisis triggered a sharp recession. Revenue surged 35 percent to $462 million as KCS added price increases to the stronger volume, like other railroads. Its per-shipment average revenue rose 11 percent to $952. “Automotive and intermodal traffic trends have been encouraging, and we continued to deliver strong increases in our cross border revenues,” Chairman and CEO Michael R. Haverty said. The latest quarterly profit was 8.1 percent of receipts, and while up sharply from a 2 percent margin a year earlier it compares with double-digit profits that the top railroads are delivering. KCS’ net income available to common shareholders was $34.6 million. Haverty steps down from the CEO post on Aug. 1, to make way for David L. Starling to move up from his current role of president and chief operating officer. Haverty will remain with KCS with a new title of executive chairman. Journal of Commerce Online, 7/27/2010 20
  • 27. Air Air freight volumes on the up, but some fear a slowdown IATA chief questions how long the industry can maintain momentum. Air freight volumes in June continued to show growth on last year, but there are doubts whether volumes can continue to grow at this level. Scheduled freight traffic grew 26.5% year-on-year in June, according to the International Air Transport Association (IATA), but lagged behind the 34% year-on-year growth reported in May. However, May traffic was exceptionally high as it included some delayed traffic from April’s volcano ash crisis, and volumes remain 6% above the pre-recession peak of early 2008. IATA said cargo load factor remained “historically” high at 53.8% in June, but it was down from the 55.7% reported in May, when capacity increased “slightly” ahead of volumes. IATA Director General and CEO Giovanni Bisignani said: “The question is: how long can the industry maintain the double-digit momentum? “Business confidence remains high and there is no indication that the recovery will stall any time soon. “But, with government stimulus packages tailing off and restocking largely completed, we expect some slowing over the months ahead.” Bisignani added: “A clear indication of the growing confidence was more than 400 aircraft orders announced at the UK Farnborough Air Show. “This is good news that will bring environmental benefits through improved fuel efficiency. But it will also make the challenge of matching capacity to demand much more difficult.” Freight demand continues to follow economic recovery and trade patterns, with airlines in Asia-Pacific up 29.8% year-on-year in June, 39.6% up in the Middle East, 44.9% up in Latin America and 54% up in Africa. Carriers in North America saw volumes grow by 24.2%, while Europe was at half the rate of the fastest- growing economies, at 15.3%. Europe remains the only region still 5-6% below the pre-recession peak. “The low value of the euro will be a help to the region’s exporters and eventually drive-up freight volumes,” IATA added. African, Asian and Latin American carriers boosted capacity rapidly over the last quarter, according to IATA. Asia-Pacific airlines, including Korean Air, Singapore Airlines and Cathay Pacific, three of the world’s largest air freight providers by size, boosted capacity measured in available freight ton kilometers (AFTK) by 20.5%, year-on-year. African and Latin American airlines increased AFTK by 23.3% and 25.3%, respectively, but their European and North American counterparts were far more cautious, expanding AFTK by just 2.1% and 5.9% compared to a year earlier. International Freighting Weekly, 7/29/2010 21
  • 28. USPS Delivers $3.5 Billion Loss, Cash Crunch Looms Agency seeks congressional relief, changes to contracts. The U.S. Postal Service said its net loss for the April-June quarter rose 46 percent to $3.5 billion and the agency warned it may run out of money next year unless Congress reduces its pension costs. “Given current trends, we will not be able to pay all 2011 obligations,” said Joseph R. Corbett, USPS chief financial officer. Despite more than $10 billion in cost cuts in the last three years, “it is clear that a liquidity problem is looming and must be addressed through fundamental changes requiring legislation and changes to contracts,” Corbett said. The postal service said its net loss for its fiscal third quarter rose to $3.5 billion from $2.4 billion a year earlier as mail volume continued to decline and benefit costs increased. Mail volume, which has fallen 20 percent since 2007 amid growing competition from e-mail and other electronic communications, fell 1.7 percent in the quarter to 40.9 billion pieces. Operating revenue declined $294 million to $16 billion while operating expenses rose $789 million, or 4.2 percent, to $19.5 billion. The postal service blamed the increased operating costs mostly on an $870 million increase in workers’ compensation liability expense resulting from a non-cash fair value adjustment and higher retiree health benefits expenses. The agency is required to set aside $5.4 billion to $5.8 billion annually to pre-fund retiree health benefits under the Postal Accountability and Enhancement Act of 2006. Although cash flow appears to be sufficient for 2010 operations, it is uncertain whether cash flow, together with maximum available borrowing of $3 billion, will be enough to fund the congressionally mandated $5.5 billion payment to the Retiree Health Benefit Fund on Sept. 30 and retain sufficient liquidity into 2011, Corbett said. The Postal Service has incurred net losses in 14 of the last 16 fiscal quarters. The fiscal 2010 year-to- date net loss is $5.4 billion, compared to a loss in the same period last year of $4.7 billion. Journal of Commerce Online, 8/5/2010 International Freight Traffic Shows Marked Improvement International scheduled air traffic statistics for June showed continued strong demand growth as the industry recovers from the impact of the global financial crisis, reports the International Air Transport Association (IATA). Compared to June 2009, international passenger demand was up 11.9% while international scheduled freight traffic showed a 26.5% improvement. Capacity increased only slightly above demand improvements during the month, keeping load factors in line with historical highs at 79.8% for passenger traffic and 53.8% for freight. "The industry continues to recover faster than expected, but with sharp regional differences. Europe is recovering at half the speed of Asia with passenger growth of 7.8% compared to the 15.5% growth in Asia-Pacific," says Giovanni Bisignani, IATA's director general and CEO. 22
  • 29. Outside of Europe, all regions reported double-digit growth in passenger traffic. "The question is how long can the industry maintain the double-digit momentum? Business confidence remains high and there is no indication that the recovery will stall any time soon. But, with government stimulus packages tailing off and restocking largely completed, we do expect some slowing over the months ahead," Bisignani says. International freight demand grew 26.5% in June 2010, down from the 34.0% recorded in May 2010. May was exceptionally high as some interrupted traffic from April's volcanic ash crisis shifted to May. Volumes remain 6% above the pre-recession peak in early 2008. Freight demand continues to follow economic recovery and trade patterns with airlines in Asia-Pacific (+29.8%), Middle East (+39.6%), Latin America (+44.9%) and Africa (+54.0%) growing the fastest. Carriers in North America (+24.2%) occupy the middle ground. Europe (15.3%) is growing at half the rate of the fastest growing regions based on slower economic growth. This trend is particularly evident in Europe which is the only region still 5-6% below the pre- recession peak. The low value of the Euro will be a help to the region’s exporters and eventually drive up freight volumes. "We remain cautiously optimistic," says Bisignani. "A clear indication of the growing confidence is the over 400 aircraft orders announced at the Farnborough Air Show. This is good news that will bring environmental benefits through improved fuel efficiency. But it will also make the challenge of matching capacity to demand much more difficult." Logistics Today, 7/29/2010 Los Angeles Air Freight Recovery Levels Off Tonnage grows 25 percent in first half of 2010, slips from May to June. Freight traffic at Los Angeles International Airport grew 25.1 percent in the first half of the year, but the tonnage growth slipped back in June in a sign that the air cargo recovery is leveling off. The airport, the largest U.S. gateway for trans-Pacific air trade, said freight tonnage grew 18.5 percent in June compared to the same month a year ago. That was slower than the 26.5 percent expansion LAX reported in May, and freight tonnage also slipped 2.4 percent from May to June. The recovery at Los Angeles, where freight traffic fell 7.1 percent in 2009, comes as airports in Asia are reporting a sharp upturn in exports. LAX’s tonnage for the first half of 2010 exceeded the airport’s total during the same January-June period in 2008, before shipping demand hit the deepest part of the downturn. But the 2010 half-year total still is more than 6 percent behind the tonnage Los Angeles handled in the first half of 2007. Journal of Commerce Online, 8/3/2010 23
  • 30. Demand continues to rise in June International airfreight showed continued strong demand growth in June as the industry recovers from the impact of the global financial crisis. Global demand for air cargo grew 26.5 percent, down from the 34 percent recorded in May 2010. However, May was exceptionally high due to the shifting of some interrupted traffic from April’s ash crisis. Volumes remain six per cent above the pre-recession peak in early 2008. Capacity increased only slightly above demand improvements during the month, keeping load factors in line with historical highs at 53.8 percent. Freight demand continues to follow economic recovery and trade patterns with airlines in Asia-Pacific (29.8 per cent), the Middle East (39.6 percent), Latin America (44.9 percent) and Africa (54 percent) growing the fastest. Carriers in North America (24.2 percent) occupy the middle ground. Europe (15.3 percent) is growing at half the rate of the fastest growing regions based on slower economic growth. It is the only region still five to six per cent below the pre-recession peak. The low value of the Euro will be a help to the region’s exporters and eventually drive up freight volumes. Air Cargo News, 7/30/2010 Maritime Port Tracker report calls for 15 percent annual volume increase and a new peak month Following last month’s report which noted import cargo volumes at U.S.-based retail container ports would begin to decline in the coming months, the most recent Port Tracker report by the National Retail Federation and Hackett Associates notes that 2010 volume is pegged to hit 14.5 million containers for a 15 percent annual increase. July volumes are expected to rise 1.38 million TEU, or 25 percent, and August volumes are expected to rise 14 percent year-over-year at 1.32 million TEU, according to the report. Port Tracker indicated that U.S. ports handled 1.32 million TEU (Twenty-foot Equivalent Units) in June, which is the latest month for which data is available, for a 4 percent gain from May and a 30 percent year- over-year gain. This marks the eighth straight month to show a year-over-year improvement after December 2009 snapped a 28-month streak of declining volumes through November 2009. This year began with sequential gains in December and January, followed by a decline in February. March volumes—came in at 1.07 million TEU (Twenty-foot Equivalent Units), which was up 7 percent from February’s 1.01 million TEU and 12 percent year-over-year. April volumes at 1.15 million TEU—were up 7 percent from March and 16 percent year-over-year. And May hit 1.25 million TEU followed by June’s 1.32 million TEU. The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, New York/New Jersey, Hampton Roads, Charleston, and Savannah. 24
  • 31. The report’s authors said that the large double-digit increases in June and July can be attributed to backlogs that accumulated due to a lack of shipping capacity brought on by ship owners removing capacity during the recession, followed by them taking their time bringing them back online when economic activity picked up. They added that many retailers may actually be transporting more merchandise earlier in the year to avoid further bottlenecks, explaining that this could lead to July becoming the peak shipping month in 2010 as opposed to October, which is more common. “Shippers and importers have sort of moved ahead of the market by buying early partly out of fear that there was not going to be enough capacity later on, and it seems that they have gotten a head start,” said Ben Hackett, president of Hackett Associates, in an interview. “This is what really drove the May-July figures.” Hackett added that he believes the container shortage is close to an end, with carriers putting vessels back into service that are charged with bringing back empty containers from Europe and North America. And the amount of empty containers moving out of U.S. ports is higher through the first six months of 2010 than it was for all of 2009, according to Port Tracker. And with various economic indicators taking steps backwards in recent weeks, Hackett pointed out that consumer confidence appears to be moving in lockstep with that trend, as current levels—since June— are in line with August 2009. Even though the Port Tracker report maintains that July may turn out to be the peak shipping month of the year, Hackett noted that does not mean there will not be growth in the coming months. In fact, year-over-year projected growth rates are still in double-digits, with July and August projected to hit 1.38 million TEU (25 percent increase) and 1.32 million TEU (14 percent increase), respectively. September is expected to hit 1.32 million TEU (16 percent increase), and October is slated for 1.31 million TEU (10 percent increase). November and December are projected to hit 1.19 million TEU (9 percent increase) and 1.12 million TEU (2 percent increase), respectively. “We aren’t back to where we were two years ago and consumers aren’t convinced that the recession is over quite yet, but 2010 is clearly going to finish better than last year,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “In the meantime, retailers are monitoring demand very closely and hoping to see increases in employment and other areas that will boost consumer confidence. Cargo numbers this summer are showing unusually high percentage increases, but that appears to be an indication of shortages in shipping capacity earlier in the year rather than sales expectations.” Logistics Management, 8/6/2010 US import growth to weaken as year progresses Double-digit growth in container imports into the US in June and July caused by vessel shortage earlier in the year US container imports are expected to surge by 15% this year, although growth is expected to weaken in the second half as retailers imported goods earlier this year to avoid capacity shortages. The latest Global Port Tracker report, which is carried out by Hackett Associates on behalf of the National Retail Federation (NRF), estimated that import volumes would reach 14.5 million containers in 2010. While this would put 2010 imports 15% ahead of 2009, they would still lag behind pre-recession levels. Volume growth would also weaken as the year progressed, the NRF said. 25
  • 32. The volume increase experienced over the last couple of months was an indication that the peak season, which normally comes in the third quarter, had come earlier than normal, the report said. It was also an indication that backlogs had built up due to the lack of shipping capacity earlier in the year after ship owners took vessels out of service during the recession and were slow to return them as the economy began to pick up. NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said: “We aren’t back to where we were two years ago and consumers are not convinced that the recession is over quite yet, but 2010 is clearly going to finish better than last year.” “In the meantime, retailers are monitoring demand very closely and hoping to see increases in employment and other areas that will boost consumer confidence.” “Cargo numbers this summer are showing unusually high percentage increases, but that appears to be an indication of shortages in shipping capacity earlier in the year rather than sales expectations.” Ben Hackett, founder of Hackett Associates, said: “There are indications that the shipping season may have peaked earlier than normal as the rush to re-stock inventories earlier in the year intersects with a combination of increased shipping capacity, consumer confidence levels not seen since August 2009 and the slowing growth of consumer spending. The traditional peak season may be melting away.” The report showed that US container imports in June were 4% up on May and 30% above June 2009. It was the seventh month in a row to show a year-over-year improvement after December broke a 28- month streak of year-over-year declines. July was estimated at 1.38 million teu, which is a 25% increase over last year, while August is forecast at 1.32 million teu, up 14% percent on last year. International Freighting Weekly, 8/10/2010 Charleston containers up 19% in first half, harbor deepening reaches milestone Deepening of Charleston Harbor, already the deepest in the Southeast, reached another milestone as container volumes in the Port of Charleston increased 19 percent in the first half of 2010. The U.S. Army Corps of Engineers’ Charleston District has favorably concluded the Reconnaissance Study for the post-45-foot deepening project in Charleston Harbor. The study determined a federal interest in proceeding to the next step in the process—the feasibility phase—to further define time and costs associated with deepening Charleston’s channels. At the same time, container volumes in the Port of Charleston have continued to climb. Buoyed by new shipping services and major new investments in the area, container volume increased 19 percent during the first six months of 2010. In June, pier containers at the Port of Charleston increased almost 34 percent over the previous year— the fourth straight month of year-over-year, double-digit increases. Despite widespread declines in global trade in 2009, the SCSPA volumes rebounded during the past six months and closed its most recent fiscal year exceeding its budgeted container volume. In the accounting period that ended June 30, Charleston handled 741,208 pier containers, off 5.2 percent from FY2009. “Despite a very challenging economic environment, the SCSPA posted an operating profit and enjoyed strong volume increases over the past six months,” said Bill Stern, chairman of the SCSPA board. “While 26
  • 33. we expect volume to moderate in the latter half of the year, we’re encouraged that business has returned at such a fast pace and we’re headed in the right direction.” Contributing to the recent volume gains, Charleston added three new shipping services in FY2010, including Mediterranean Shipping Company’s Golden Gate Service (GGS). The GGS, which had its first local call in February, is bringing ships of more than 8,000 20-foot equivalent units to the port on a regular basis. This highlights Charleston’s deep-water capabilities in the Southeast region. “The port is handling the biggest ships on the East Coast today while working toward even deeper channels that will secure our state’s future in global trade,” said Jim Newsome, SCSPA president and CEO. On the cargo development side, major global corporations are locating or expanding in the port’s service area while the SCSPA has launched new targeted sales efforts: • TBC Corporation, parent company of Tire Kingdom, is the largest distribution center to announce in the past year. TBC is locating a new 1.1 million square foot distribution facility in Berkeley County and will import tires through the Port of Charleston. • Several other importers and logistics firms located or expanded in the area, while private developers are proceeding with plans to build more than 20 million square feet in new industrial space near Charleston’s deepwater port facilities. • Targeted marketing efforts, including a new rail-served warehouse initiative and an expanded overweight permit for refrigerated containers are also boosting container volume. During the current fiscal year, which began on July 1, the SCSPA is projecting a seven percent increase in container volume and a more than 50 percent increase in breakbulk and non-container cargo. At the same time, the SCSPA plans to invest nearly $77 million this fiscal year on terminal improvements, including work on the SCSPA’s new container terminal on the former Navy Base as well as a new cruise terminal in downtown Charleston. American Journal of Transportation, 8/6/2010 Container volumes back to pre-recession levels this year Container volumes handled at the world’s ports are expected to exceed the pre-crisis levels of 2008 this year, but growth is expected to slow towards the end of the year. Analyst AXS Alphaliner said it expected container port handling volumes to grow by 11.6% in 2010 to 545 million teu, just exceeding the 535 million teu recorded in 2008. In 2009, port volumes fell by 8.6% to 489 million teu—the first decline recorded since containers were first introduced to the market. Year-on-year growth in the first half is estimated at 18%, but Alphaliner expects growth to slow during the second half. Alphaliner said: “The robust 2010 growth projections come on the back of a strong first half. Global handling volumes in the first six months to June are estimated to have grown by 18%.” “The full-year growth forecast takes into account a slowdown in the second half of the year, due to the uncertainty over the sustainability of global demand.” “Handling volumes are expected to grow by 6% in the second half, reflecting partly the higher base seen in the second half of last year, as well as the anticipated slowdown in trade volume growth.” 27
  • 34. The volume growth is led by Chinese ports (including Hong Kong), which are expected to handle 165 million teu this year. In the first six months of the year, Chinese ports handled 80 million teu, compared with 66 million teu in the same period of 2009 and 74 million teu in 2008. The Middle East is the region expected to post the slowest volume growth rate, at 4.5%. International Freighting Weekly, 8/9/2010 US Economy New claims for jobless benefits rise to 479K WASHINGTON—Initial requests for jobless benefits rose last week to their highest level since April, a sign that hiring remains weak and some companies are still cutting workers. The Labor Department said Thursday that new claims for unemployment insurance rose by 19,000 to a seasonally adjusted 479,000. Analysts had expected a small drop. Claims have risen twice in the past three weeks. Some of the increase in claims stemmed from difficulties the government has in adjusting for seasonal factors. But the jump in claims is a cautionary sign that higher corporate profits and a slowly recovering economy aren't spurring companies to generate many jobs. "The very unyielding flow of layoffs now clearly evident discourages any thought that employers are more comfortable with the size of their staffs," Pierre Ellis, an economist at Decision Economics, wrote in a note to clients. Also on Thursday, retailers reported modest sales gains in July, raising concerns about the health of the back-to-school shopping season. Many stores, including teen specialists Abercrombie & Fitch Co. and American Eagle Outfitters Inc., had to discount more than they had planned in June and July to pull in recession-scarred shoppers. Recent economic data has heightened concerns that the recovery is slowing. Americans are spending cautiously as they save more and pay down debt. Home sales and construction have slumped after a popular homebuyers' tax credit expired on April 30. The impact of the federal government's stimulus efforts is fading. The financial markets dipped in morning trading. The Dow Jones industrial average fell about 21 points and broader indexes also declined. Some analysts said seasonal factors that began in early July are still skewing the jobless claims numbers and must be considered before reading too much in to the report. The Labor Department anticipated a large decline in claims last week as many auto companies usually shut their plants temporarily in early July. Claims were expected to rise during the shutdown and then fall. But this year General Motors and other manufacturers skipped the shutdowns, so claims didn't fall last week as much as expected. 28
  • 35. "Claims have averaged 463,000 since the beginning of the year, and at this point we still consider the underlying trend to be around this level," said Ryan Wang, an economist at HSBC Securities. The seasonally adjusted four-week average of claims, which smooths out volatility, rose by 5,250 to 458,500. Economists closely watch initial claims because they are considered a gauge of the pace of layoffs and an indication of employers' willingness to hire. Applications for unemployment insurance have fluctuated between 450,000 and 480,000 all year, after declining steadily last year from a peak of 651,000 in March 2009. In a healthy economy with rapid hiring, claims usually fall below 400,000. The tally of laid-off workers continuing to claim unemployment benefits fell by 34,000 to 4.54 million. That doesn't include an additional 3.9 million people receiving extended unemployment benefits paid for by the federal government. During the recession, Congress added up to 73 weeks of extra benefits on top of the 26 weeks typically provided by states. Those extended benefits were interrupted in June when Republicans blocked an extension. But Congress has since reinstated the program through November. The economy began growing last year and that growth accelerated in the winter and spring. It spurred some modest hiring, but not enough to rapidly reduce the unemployment rate, which is 9.5 percent. More jobs are needed to give consumers more spending power to help support a sustainable recovery. But it's not clear if the new jobs will come fast enough. On Friday, the Labor Department will issue the July jobs report and economists expect it will show the nation lost a net total of 65,000 jobs. That includes the end of about 150,000 temporary census jobs. Excluding government employment, private companies are expected to add a net total of 90,000 jobs. Thursday's report follows some positive news on the job front. A trade group said Wednesday that the service sector expanded in July for the seventh straight month. The Institute for Supply Management, an association of purchasing executives, also said its survey's measure of hiring expectations rose in July for only the second time since December 2007. Some companies are adding staff. Cognizant Technology Solutions Corp., a New Jersey company that provides consulting and information technology outsourcing, posted big gains in profit and revenue in the second quarter as corporate customers restarted projects that had been on hold during the recession. The company said it added 3,200 jobs to its payrolls during the quarter, an increase in its work force of nearly 4 percent. Other firms are still struggling. Cypress Bioscience LLC said Wednesday it is discontinuing its personalized medicine services business and will slash 86 percent of its work force to cut costs. The layoffs will affect 123 workers. Atlanta Journal Constitution, 8/5/2010 Spending, Income Flat in June U.S. consumer spending was flat in June as incomes stopped growing and prices remained subdued, pointing to a weaker economy. 29
  • 36. Consumer spending, a key driver of economic growth, was unchanged last month after growing a revised 0.1% in May, the Commerce Department said in its monthly report Tuesday. The May figure was originally reported as a 0.2% rise. Personal incomes were also flat in June as private wages and salaries fell. Incomes in May rose by 0.3%, slightly less than what the government had previously reported. Economists polled by Dow Jones Newswires had expected to see a 0.1% increase in spending and a 0.2% rise in income for June. Some analysts said they expected a weak personal income figure in part because of the expiration of federal unemployment benefits in early June. Congress extended the benefits program last month, but the impact won't be seen until future reports. U.S Federal Reserve Chairman Ben Bernanke Monday said consumer spending will likely continue to grow in the coming quarters as wages rise and credit becomes less stringent. But he cautioned that a weak jobs market is expected to weigh on consumer confidence. Although the U.S. economy began emerging from the recession in the second half of 2009, the high unemployment rate has taken a toll on consumer purchases and continues to weigh heavily on the recovery. Despite previous signs of improvement in economic conditions, some indicators now point to a possible slow-down in the second half of this year as consumers spend less and unemployment remains at 9.5%. Gross domestic product—a broad measure of the U.S. economy—grew at an annualized 2.4% in April to June, compared with a more robust 3.7% in the first quarter of 2010. Mr. Bernanke told politicians Monday he believes the U.S. still has a "considerable way to go to achieve a full recovery in our economy" as Americans continue to grapple with "unemployment, foreclosure and lost savings." With the economic outlook more uncertain, Americans have been saving more recently. The report showed that U.S. consumers boosted savings in June and May. Americans last month saved $725.9 billion as the national saving rate rose to 6.4% from 6.3% in May. In April, the savings rate stood at 6.0%. Tuesday's report also suggested there is no risk of inflation in the near-term as a price gauge closely watched by the Fed remained tame. With the economy expected to remain weak for some time, the Fed chairman said prices should remain subdued over the next couple of years. But he didn't signal any concern that deflation could set in, a risk that other Fed officials have raised recently. The core price index for personal consumption expenditures, which excludes food and energy prices because of their volatility, was unchanged in June from a monthly 0.1% rise in May. On a year-over-year basis, the index slowed to 1.4% in June from 1.5% the previous month. The overall PCE price index was down 0.1% on the month in June, the same decline as in May. The index rose 1.4% on a year-over-year basis, slowing down from a 2.1% increase. Wall Street Journal, 8/3/2010 Trucking adds 5,900 jobs in July as overall hiring slows WASHINGTON—Companies showed a lack of confidence about hiring for a third straight month in July, making it likely the economy will grow more slowly the rest of the year. The unemployment rate was unchanged at 9.5 percent. Private employers added a net total of only 71,000 jobs in July, far below the roughly 200,000 needed each month to reduce the unemployment rate. 30
  • 37. The trucking industry added 5,900 jobs in July, after slipping slightly in June when the for-hire industry lost 200 jobs, according to the Bureau of Labor Statistics. That number includes all employees who work at a truck-related company, including local delivery companies. The BLS reports segment break outs on a one-month delay. In June, employment in truckload trucking increased 3,300 compared with an increase of 600 jobs in May. In June, less-than-truckload employment fell by 100 compared with an increase of 1,900 in May. Overall, the economy lost a net total of 131,000 jobs last month, the Labor Department said Friday, mostly because 143,000 temporary census jobs ended. Investors reacted by selling stock futures and shifted into safer investments such as Treasury bonds. The yield on the 10-year Treasury note, which helps set interest rates on mortgages and other consumer loans, fell to 2.87 percent from 2.91 percent late Thursday. The department also revised down its jobs figures for June, saying businesses hired fewer workers than previously estimated. June's private-sector job gains were lowered to 31,000 from 83,000. May's were raised slightly to show 51,000 net new jobs, up from 33,000. "There is still a labor market recovery, but it's a very, very weak one," said Nigel Gault, chief U.S. economist at IHS Global Insight. The slow pace of hiring will weigh on the recovery, he said, with economic growth in the current quarter likely to come in even lower than the April-to-June quarter's already weak 2.4 percent. The "underemployment" rate was the same as in June, at 16.5 percent. That includes those working part time who would prefer full-time work and unemployed workers who've given up on their job hunts. All told, there were 14.6 million people looking for work in July. That's roughly double the figure in December 2007, when the recession began. Even if hiring picks up, it will take years to regain all the jobs lost during the recession. The economy lost 8.4 million jobs in 2008 and 2009. This year, private employers have added only 559,000 new hires. Friday's report is being closely watched by the Federal Reserve as it considers ways to energize the recovery. The report could persuade the Fed to take new steps to boost the economy and keep interest rates at record lows when it meets next week. Without more jobs, consumers won't see the gains in income needed to encourage them to spend more and support economic activity. Even those with jobs may not feel confident enough to ramp up their spending. That's important because many of the trends driving economic growth earlier in the recovery are fading. Companies boosted production in the winter and spring to rebuild inventories that were depleted in the recession. But that boost won't last much longer. And the impact of the federal government's stimulus package is also declining. The economy grew at 5 percent in the fourth quarter last year and 3.7 percent in the first three months of 2010. But that slowed to 2.4 percent in the April-June period. That's not fast enough to generate many jobs and reduce the unemployment rate. Many companies appear to be getting more out of their current employees rather than adding new staff. The average work week increased by one-tenth of an hour to 34.2 hours, the department said. That's up from about 33 hours in the depths of the recession. Average hourly pay also rose 4 cents to $22.59, up 1.8 percent from a year earlier. That, along with the increase in hours worked, could provide some boost to spending. The number of temporary jobs fell by 5,600, the first drop after nine months of gains. Employers usually hire temp workers if they need more output but don't want to hire permanent employees. But "firms aren't even adding temporary workers right now," Gault said. 31
  • 38. Manufacturers added 36,000 jobs in July, slightly above its monthly average this year. Those gains were aided by General Motor's decision to keep its plants running last month. Usually it closes them and temporarily lays off employees to retool for the new model year. Construction firms cut jobs for the third straight month, losing 11,000, while financial firms shed 17,000 workers. But retailers added 6,700 jobs. And the leisure and hospitality industry hired 6,000 additional staffers. Corporate net income rose sharply in the second quarter, but businesses aren't yet using the proceeds to ramp up hiring. Companies in the S&P 500 index reported a 46 percent increase in net income for the April-to-June period, compared to a year earlier. But many employers are uncertain about the direction of the economy. Some are concerned sales will slow once government stimulus and other temporary factors fade. Others fear what will happen if federal income taxes are allowed to rise next year as tax cuts enacted by President George W. Bush expire. "People have a long worry list they're looking at," said Ethan Harris, chief economist at Bank of America Merrill Lynch. Some companies are adding permanent workers. The hospital chain HCA Inc. has 8,300 open positions, company spokesman Ed Fishbough said. That includes nurses, physicians and information technology professionals needed to build HCA's ability to handle electronic medical records. HCA employs about 190,000 people. But layoffs are also continuing. FBR Capital Markets, an investment bank based in Arlington, Va., cut its work force by about 15 percent in early July to about 500 employees, saying it needed to reduce costs. TheTrucker.com, 8/6/2010 Tax Breaks on the Sidelines Repairs by small railroads, biodiesel among ‘extenders’ awaiting Senate OK It’s getting to be a taxing wait for U.S. short line railroads, whose owners hoped Congress would have renewed a popular tax credit for track repairs by now. The same goes for the biodiesel industry, and truck stops that have put in the pumps to handle such fuel only to see a key tax break expire last December. State and local government users of “Build America Bonds” for infrastructure projects may also be getting edgy: That well-tapped program expires this year unless lawmakers step in to give it a two-year extension. All of those measures are lumped into a long “tax extenders” package that many members of Congress say they support. But the favored tax breaks have repeatedly fallen off the legislative calendar as the Senate wrestles with mainly Republican objections to passing any new bills without specifying how to pay for them. Last week, the Senate was poised to finally pass an extension of benefit payments to people who had lost their jobs and then watched their support payments run out before they could find new employment. During the past spring, that measure included the tax extenders package, but by the time the Senate was ready to act, the legislation was stripped to its barest essentials. Adam Nordstrom, a lobbyist for the short line rail industry at Chambers, Conlon & Hartwell, said the tax break for track work has plenty of backers in both chambers of Congress, so long as lawmakers agree on 32
  • 39. how to account for its cost. And he expects Congress to keep the various tax breaks together in the same package. “While the specific path to victory for extension of the short line railroad track maintenance credit remains uncertain, the tax extenders bill still has a pulse, and hope is far from lost,” he said. He is telling railroad operators not to lose hope, since “four times in the last six years Congress has passed legislation that enacted, amended, or extended the credit” but always tied it to some “must pass” legislation. Journal of Commerce, 7/26/2010 Fed to Keep Balance Sheet From Shrinking Federal Reserve officials moved to prevent the Fed's huge balance sheet from shrinking, an attempt to spur the U.S. economy's recovery and avoid deflation. At the end of a policy-meeting Tuesday, Fed officials said they would reinvest the proceeds from expiring mortgage-backed securities into longer-term U.S. Treasurys. In the closely-watched statement that followed the meeting, U.S. central bank officials acknowledged that the pace of the recovery had slowed in recent months. While the Federal Open Market Committee expects the gradual improvement in the economy to continue, officials said the "pace of the economic recovery is likely to be more modest in the near term than had been anticipated." Since Fed officials last met June 22-23, signs have been growing that the one-year-old recovery from the worst recession in decades is losing momentum. The economy shed jobs for the second month in a row in July amid a small rise in private-sector employment. The unemployment rate remains painfully high, providing little hope that Americans will boost shopping again any time soon. With unemployment still so high, some officials had started to worry the economy runs the risk of falling into a Japan-like deflationary environment if no action was taken. The latest move by the U.S. central bank represents just a tweak in its strategy for managing its huge portfolio. But it's a significant one since it could be a step towards new large purchases of both government bonds and mortgage-backed securities. Currently, the proceeds of expiring mortgage bonds are not being reinvested, with the result that the Fed's balance sheet would have slowly shrunk over time. This amounted to a slight tightening bias in the policy stance. Michael Feroli, economist at J.P. Morgan Chase, said the Fed's latest move indicates the central bank is "very concerned about the sustainability of the recovery." The Fed said it will release more details about the reinvestment operation later Tuesday. The Fed's decision to purchase longer-maturity Treasuries as opposed to shorter maturity debt indicates the central bank is comfortable with a larger balance sheet for longer, said Dan Greenhaus, economist at Miller Tabak & Co. Some Fed officials have reservations about restarting full-blown asset purchases because they're not sure they can drive down long-term rates further from already low levels. Average rates for a 30-year mortgage fell last week to 4.49%, according to Freddie Mac, the lowest rate since the 1950s. Holding many more securities could also cause problems further down the road. 33
  • 40. In response to the economic crisis, the Fed bought roughly $1.7 trillion in mortgage and Treasury debt in 2009 and earlier this year. The program is estimated to have cut long-term rates by around half a percentage point, although Fed officials are divided on its effect. The Fed had an incentive to move early because deflation is harder to fight than inflation, especially now that short-term interest rates are already close to zero. When there's inflation, a central bank can at least raise rates as high as needed to counter rising prices. A new Wall Street Journal survey out Tuesday found that by a two-to-one margin Wall Street economists see deflation as a bigger threat to the U.S. economy over the next three years than inflation. The previous April survey found economists were split 50/50 over whether inflation or disinflation posed the bigger risk over the next year. The Fed also reiterated that it expects the benchmark short-term interest rate it uses to steer the economy to remain close to zero for an extended period due to low inflation and high unemployment. Kansas City Fed President Thomas H. Hoenig was once again the only dissenter out of the 10 voters at the Federal Open Market Committee meeting. He voted against the central bank's decision for the fifth time this year, arguing that the economy is recovering modestly and that the pledge to keep rates near zero for an extended period limits policy flexibility. Fed Vice Chairman Donald L. Kohn participated in what is likely to be his last FOMC meeting. He's been the second-highest-ranking Fed official since June 2006 and has been working at U.S. central bank for some 40 years. Mr. Kohn is due to be replaced by San Francisco Fed President Janet Yellen, who was nominated by the White House but is awaiting confirmation from the Senate, along with two other Fed board members. Wall Street Journal, 8/10/2010 Some Firms Struggle to Hire Despite High Unemployment In Bloomington, Ill., machine shop Mechanical Devices can't find the workers it needs to handle a sharp jump in business. Job fairs run by airline Emirates attract fewer applicants in the U.S. than in other countries. Truck-stop operator Pilot Flying J says job postings don't elicit many more applicants than they did when the unemployment rate was below 5%. With a 9.5% jobless rate and some 15 million Americans looking for work, many employers are inundated with applicants. But a surprising number say they are getting an underwhelming response, and many are having trouble filling open positions. "This is as bad now as at the height of business back in the 1990s," says Dan Cunningham, chief executive of the Long-Stanton Manufacturing Co., a maker of stamped-metal parts in West Chester, Ohio, that has been struggling to hire a few toolmakers. "It's bizarre. We are just not getting applicants." Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth. The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can't qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops. The difficulty finding workers limits the economy's ability to grow. It is particularly troubling at a time when 4.3% of the labor force has been out of work for more than six months—a level much higher than after any other recession since 1948. 34
  • 41. Some economists fear the U.S. could end up with a permanent caste of long-term unemployed, like those that weigh on government budgets in some European countries. "It is a very worrisome development," says Steven Davis, an economist at the University of Chicago's Booth School of Business. "It leads over a long period of time to social alienation as well as economic hardship." Matching people with available jobs is always difficult after a recession as the economy remakes itself. But Labor Department data suggest the disconnect is particularly acute this time around. Since the economy bottomed out in mid-2009, the number of job openings has risen more than twice as fast as actual hires, a gap that didn't appear until much later in the last recovery. The disparity is most notable in manufacturing, which has had among the biggest increases in openings. But it is also appearing in other areas, such as business services, education and health care. If the job market were working normally—that is, if openings were getting filled as they usually do—the U.S. should have about five million more gainfully employed people than it does, estimates David Altig, research director at the Federal Reserve Bank of Atlanta. That would correspond to an unemployment rate of 6.8%, instead of 9.5%. Of course, many jobs remain easy to fill. Companies offering middle-skilled jobs can be flooded with applicants. Laquita Stribling, a senior area vice president in Nashville for staffing firm Randstad, says she received several hundred applications for a branch manager job that might have attracted a few dozen candidates before the recession. "The talent pool has swollen to the point where it's almost overwhelming," says Ms. Stribling. But other employers with lots of applicants say the pool of qualified workers is small for specialized jobs. Carolyn Henn, head of hiring at environmental consultancy Apex Companies, says she recently received about 150 applications for an industrial hygienist job paying as much as $47,000 a year, which requires special certifications and expertise to oversee projects such as asbestos cleanups. That is about three times the amount she received for similar jobs before the recession. But she says the number of qualified applicants—about five—is less than she got before. "We've always been looking for a needle in a haystack," she says. "There's still only one needle, but the haystack has gotten a lot bigger than it was before." Longer-term trends are at play. For one, the U.S. education system hasn't been producing enough people with the highly specialized skills that many companies, particularly in manufacturing, require to keep driving productivity gains. "There are a lot of people who are unemployed, but those aren't necessarily the people employers are looking for," says David Autor, an economist at the Massachusetts Institute of Technology. Manufacturers of high-precision products such as automobile and aircraft parts are in a particularly tough spot. Global competition keeps them from raising wages much. But they need workers with the combination of math skills, intuition and stamina required to operate the computer-controlled metalworking machines that now dominate the factory floor. At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is "the key limitation to the growth of our business and to meeting our customers' expectations," says Mr. Sperry. He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs. Trips to several job fairs yielded almost nothing, so the company set up a 10-week training program to create its own machinists. Out of the first group of 24 trainees, 16 made it to graduation. Mr. Sperry sees extended jobless benefits as one of the main culprits behind his company's hiring difficulties. Many of the applicants he saw at job fairs, he says, were just going through the motions so they could collect their unemployment checks. Some workers agree that unemployment benefits make them less likely to take whatever job comes along, particularly when those jobs don't pay much. Michael Hatchell, a 52-year-old mechanic in Lumberton, N.C., says he turned down more than a dozen offers during the 59 weeks he was unemployed, because they didn't pay more than the $450 a week he was collecting in benefits. One auto- 35
  • 42. parts store, he says, offered him $7.75 an hour, which amounts to only $310 a week for 40 hours. Unemployment benefits, though, can't explain the whole problem. Researchers at the Federal Reserve have estimated that the benefits could account for between 0.4 and 1.7 percentage points of the unemployment rate. That doesn't cover the 2.7-percentage-point gap between the current jobless rate and what Mr. Altig's analysis of job openings suggests the rate should be. Some of the people who dropped out of the Mechanical Devices training program aren't collecting unemployment benefits and offer other reasons why they couldn't or wouldn't do the work. Former truck driver Troy Arnett says the prospect of standing in front of a machine all day was just too restricting after a career spent making about $60,000 a year on the open road. "I figured in these economic times you've just got to bite the bullet, and I couldn't do it," says the 42-year- old Mr. Arnett. He considers himself among the lucky ones: He has since found a job installing railroad crossings that he expects will pay about $50,000 a year. Employers say getting people to move for work has been especially difficult this time. Often, that is a function of the mortgage and credit problems many potential employees face. In a recent study, Fernando Ferreira and Joseph Gyourko of the University of Pennsylvania, together with Joseph Tracy of the Federal Reserve Bank of New York, found that people who owe more on their mortgages than their homes are worth are about a third less mobile. At Emirates, four cabin-crew job fairs the airline held in Miami, Houston, San Francisco and Seattle attracted an average of about 50 people each, compared to a global average of about 150 and as many as 1,000 at some events in Europe and Asia. "I would have liked to have seen more and would have expected to see more," says Rick Helliwell, vice president of recruitment. The jobs require little more than a high-school diploma and fluency in English. They include free accommodation and medical care, and starting pay of about $30,000 a year. Mr. Helliwell speculates that Americans might be hesitant to move to Dubai, where the jobs are based. "Maybe they have less of an adventurous spirit" given the uncertainties they face at home, he said. The obstacles to moving are aggravated because many employers no longer provide the same job security they have in the past. Temporary jobs, for example, have increased 21% since September 2009 as more employers—including Mechanical Devices—hire through staffing agencies to help control health- care costs and maintain flexibility. David Denton, a 63-year-old quality-control expert, recently quit a temporary job at Mechanical Devices. He says the terms of employment simply weren't attractive enough to make him pick up stakes and move. The one-hour commute from his hometown of Mt. Zion, Ill., proved to be too burdensome, he says, as the cost of gasoline cut into his $15-an-hour wage. Like a number of older workers, Mr. Denton has decided to leave the work force rather than accept a lower-paying job. Mr. Denton says he plans to live on savings until he can collect full Social Security benefits at age 66. "I'm trying to hang on the best I can," he says. The disconnect between workers and jobs could constrain the economy for some time. It makes it hard for even small firms, which as a group typically account for an outsize share of job growth in a rebound. Paul McNarney, owner of The Mower Shop in Fishers, Ind., says he has been looking for a good lawnmower mechanic so he can guarantee a one-week turnaround on repairs. He received only two responses to an Internet ad he placed a couple of months ago, even though the job can generate income of more than $40,000 a year, depending how many mowers the mechanic repairs. Similar ads he placed before the recession attracted more than a dozen candidates, he says. "My thought was that in a cr— economy I could probably find somebody good because a lot of people were looking," says Mr. McNarney, who has been in business for 13 years selling everything from simple lawnmowers to big riding models for large properties. "I didn't find anybody." Wall Street Journal, 8/9/2010 36
  • 43. ENERGY INFORMATION ADMINISTRATION DIESEL FUEL PRICES AUGUST 09, 2010 $3.90 $3.80 $3.70 $3.60 $3.50 $3.40 $3.30 $3.20 $3.10 Dollars & Cents Per Gallon $3.00 EIA Diesel Fuel Price $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 2009 | 2010 WEEKLY OBSERVATIONS 2009/2010 EIA Fuel Price Average 2009 EIA Fuel Price (246.7 ¢) EIA Fuel Price for This Week Last Year (262.5 ¢) EIA National On-Highway Diesel Fuel Prices - 2009 & Year to Date 2010 Week All ¢ ULS ¢ Week All ¢ ULS ¢ Week All ¢ ULS ¢ Week All ¢ ULS ¢ Jan 5 229.1 229.9 Jul 13 254.2 254.6 Jan 4 279.7 280.1 Jul 12 290.3 290.4 Jan 12 231.4 232.4 Jul 20 249.6 250.1 Jan 11 287.9 288.2 Jul 19 289.9 289.9 Jan 19 229.6 230.7 Jul 27 252.8 253.2 Jan 18 287.0 287.4 Jul 26 291.9 (1) Jan 26 226.8 227.8 Aug 3 255.0 255.4 Jan 25 283.3 283.8 Aug 2 292.8 - Feb 2 224.6 225.6 Aug 10 262.5 262.8 Feb 1 278.1 278.7 Aug 9 299.1 - Feb 9 221.9 223.0 Aug 17 265.2 265.6 Feb 8 276.9 277.5 Feb 16 218.6 219.7 Aug 24 266.8 267.2 Feb 15 275.6 276.1 Feb 23 213.0 213.8 Aug 31 267.4 267.9 Feb 22 283.2 283.4 Mar 2 208.7 209.5 Sep 7 264.7 265.0 Mar 1 286.1 286.5 Mar 9 204.5 205.1 Sep 14 263.4 263.8 Mar 8 290.4 290.6 Mar 16 201.7 202.3 Sep 21 262.2 262.6 Mar 15 292.4 292.6 Mar 23 209.0 209.3 Sep 28 260.1 260.6 Mar 22 294.6 294.9 Mar 30 222.1 222.5 Oct 5 258.2 258.8 Mar 29 293.9 294.2 Apr 6 222.8 223.3 Oct 12 260.0 260.4 Apr 5 301.5 301.7 Apr 13 222.9 223.4 Oct 19 270.5 270.8 Apr 12 306.9 307.3 Apr 20 222.1 222.6 Oct 26 280.1 280.5 Apr 19 307.4 307.8 Apr 27 220.1 220.7 Nov 2 280.8 281.1 Apr 26 307.8 308.2 May 4 218.5 219.2 Nov 9 280.1 280.5 May 3 312.2 312.6 May 11 221.6 222.3 Nov 16 279.0 279.5 May 10 312.7 313.1 May 18 223.1 223.7 Nov 23 278.7 279.2 May 17 309.4 309.8 May 25 227.4 227.8 Nov 30 277.5 278.0 May 24 302.1 302.5 Jun 1 235.2 235.4 Dec 7 277.2 277.7 May 31 298.0 298.3 Jun 8 249.8 250.1 Dec 14 274.8 275.3 Jun 7 294.6 294.9 Jun 15 257.2 257.5 Dec 21 272.6 273.1 Jun 14 292.8 293.0 Jun 22 261.3 261.9 Dec 28 273.2 273.6 Jun 21 296.1 296.2 Jun 29 260.8 261.2 - - - - Jun 28 295.6 295.7 Jul 6 259.4 259.8 - - - - Jul 5 292.4 292.5 All ¢ = Energy Information Administration All Types Weekly Diesel Price ULS ¢ = Energy Information Administration Ultra Low Sulfur (15 ppm and Under) Diesel Price. (1) As of July 26, 2010, there were no outlets reporting Low Sulfur On-Highway Diesel (LSD) fuel prices on EIA’s price survey. As a result, the two price series have converged and the Ultra Low Sulfur price is now represented by the Average All Types price. 37
  • 44. Energy Information Administration (EIA) Petroleum Administration for Defense Districts (PADD) REGIONAL FUEL PRICES - AUGUST 09, 2010 REGION 7/19/2010 7/26/2010 8/2/2010 8/9/2010 U.S. Average Diesel Fuel Price (ALL) 289.9 291.9 292.8 299.1 This Week Last Year 249.6 252.8 255.0 262.5 Percentage Difference 16.1 15.5 14.8 13.9 East Coast (Regions 1A throught 1C) (PADD 1) 291.3 292.8 293.4 300.0 This Week Last Year 251.4 255.0 257.9 266.5 Percentage Difference 15.9 14.8 13.8 12.6 New England - CT, ME, MA, NH, RI, VT (PADD 1A) 301.5 301.4 300.9 302.7 This Week Last Year 260.0 261.3 263.7 270.1 Percentage Difference 16.0 15.3 14.1 12.1 Central Atlantic - DE, DC, MD, NJ, NY, PA (PADD 1B) 301.2 302.0 302.0 308.6 This Week Last Year 263.0 264.3 267.1 275.5 Percentage Difference 14.5 14.3 13.1 12.0 Lower Atlantic - FL, GA, NC, SC, VA, WV (PADD 1C) 286.1 288.0 289.0 296.2 This Week Last Year 245.6 250.5 253.5 262.4 Percentage Difference 16.5 15.0 14.0 12.9 Midwest - IL, IN, IA, KS, KY, MI, MN, MO, NE, (PADD 2) 286.6 289.1 290.0 296.6 ND, OH, OK, SD, TN, WI This Week Last Year 247.0 250.0 252.0 260.1 Percentage Difference 16.0 15.6 15.1 14.0 Gulf Coast - AL, AR, LA, MS, NM, TX (PADD 3) 285.9 287.5 288.7 294.7 This Week Last Year 244.3 249.3 251.3 258.1 Percentage Difference 17.0 15.3 14.9 14.2 Rocky Mountain - CO, ID, MT, UT, WY (PADD 4) 290.2 292.0 293.7 299.1 This Week Last Year 255.9 254.0 253.7 257.3 Percentage Difference 13.4 15.0 15.8 16.2 West Coast - AK, AZ, HI, NV, OR, WA, CA (PADD 5) 304.2 306.0 307.1 312.4 This Week Last Year 259.5 261.7 264.3 270.0 Percentage Difference 17.2 16.9 16.2 15.7 38
  • 45. Transportation Stocks by Mode - Week Ending Wednesday - August 11, 2010 Company Symbol Closing Price Change in Week Earn/ P/E Annual Dividend 52 Weeks Aug 11 Aug 04 Net Percent Share Ratio Rate Yield High Low LESS THAN TRUCKLOAD Arkansas Best Corporation * ABFS 20.09 22.94 -2.85 -12.42 -4.92 na 0.03 0.60 34.56 18.84 Con-Way, Inc. CNW 28.18 33.37 -5.19 -15.55 0.42 67.53 0.10 1.42 47.52 28.00 Forward Air Corporation FWRD 27.02 29.07 -2.05 -7.05 0.74 36.71 0.07 1.04 30.30 20.32 Old Dominion Freight Line , Inc. ODFL 35.76 38.75 -2.99 -7.72 1.32 27.00 na na 40.94 24.10 Roadrunner Transportation Services RRTS 13.25 14.79 -1.54 -10.41 na na na na 15.05 13.08 Saia, Inc. SAIA 11.86 13.81 -1.95 -14.12 -0.15 na na na 20.00 11.25 Vitran, Inc. VTNC 9.06 10.27 -1.21 -11.78 -0.07 na 0.04 0.77 15.39 7.82 YRC Worldwide, Inc. YRCW 0.29 0.32 -0.03 -9.38 -1.01 na 0.24 na 6.18 0.10 TRUCKLOAD (f - flatbed; r - refrigerated; t - tank truck; v - vehicle) Celadon Group, Inc. CGI 12.84 14.85 -2.01 -13.54 0.21 61.83 na na 16.80 9.01 Covenant Transport, Inc. CVTI 7.64 9.54 -1.90 -19.92 -1.11 na na na 9.90 3.02 Frozen Food Express Ind. (r) FFEX 3.15 3.37 -0.22 -6.53 -0.77 na 0.03 3.81 4.99 2.71 Heartland Express, Inc. HTLD 15.12 16.17 -1.05 -6.49 0.59 25.52 0.02 0.53 17.18 13.21 J.B. Hunt Transport Svcs. * JBHT 33.62 36.41 -2.79 -7.66 1.32 25.47 0.12 1.43 39.65 27.43 Knight Transportation, Inc. KNX 19.38 21.23 -1.85 -8.71 0.65 29.91 0.06 1.24 22.38 15.78 Landstar System Inc. * LSTR 38.24 40.45 -2.21 -5.46 1.59 24.10 0.05 0.52 46.23 34.16 Marten Transport Ltd. (r) MRTN 20.75 22.79 -2.04 -8.95 0.76 27.20 na na 23.55 16.32 P.A.M. Transportation Svcs. PTSI 12.49 14.75 -2.26 -15.32 -0.45 na na na 18.60 7.20 Patriot Trans. Hldgs., Inc. (t) PATR 72.20 76.81 -4.61 -6.00 2.30 31.35 na na 98.95 68.78 Quality Distr., Inc. Fla. (t) QLTY 5.38 6.68 -1.30 -19.46 0.42 12.85 na na 8.18 3.04 Universal Truckload Svcs., Inc.* UACL 13.28 15.38 -2.10 -13.65 0.66 20.26 1.00 na 19.21 13.04 US 1 Industries, Inc. USOO 1.04 1.00 0.04 4.00 -0.08 na na na 1.49 0.52 USA Truck, Inc. USAK 14.03 16.48 -2.45 -14.87 -0.61 na na na 18.79 10.78 Werner Enterprises, Inc. * WERN 21.22 23.14 -1.92 -8.30 0.95 22.35 0.05 0.94 24.59 17.21 PACKAGE Dynamex, Inc. DDMX 12.90 13.75 -0.85 -6.18 0.99 13.06 na na 19.75 12.05 FedEx Corporation FDX 83.13 85.96 -2.83 -3.29 3.76 22.13 0.12 0.58 97.75 63.54 United Parcel Service UPS 65.21 67.38 -2.17 -3.22 2.67 24.39 0.47 2.88 70.89 51.90 Velocity Express Corp. VEXPQ 0.02 0.02 0.00 0.00 na na na na 0.18 0.01 TRUCK LEASING/CONTRACT CARRIAGE Ryder System, Inc. R 40.93 44.17 -3.24 -7.34 1.74 23.56 0.27 2.64 48.49 31.86 INTERMODAL/RAIL/TRUCK Pacer Int'l., Inc. Tenn. PACR 5.46 8.70 -3.24 -37.24 0.33 16.50 0.15 10.99 9.45 2.50 Trailer Bridge TRBR 3.36 3.35 0.01 0.30 0.25 13.50 na na 6.17 2.93 39
  • 46. Transportation Stocks by Mode - Week Ending Wednesday - August 11, 2010 Company SYMBOL Closing Price Change in Week Earn/ P/E Annual Dividend 52 Weeks Aug 11 Aug 04 Net Percent Share Ratio Rate Yield High Low LOGISTICS Autoinfo, Inc. AUTO 0.55 0.46 0.09 19.57 0.06 9.66 na na 0.55 0.25 C H Robinson Worldwide CHRW 64.98 67.22 -2.24 -3.33 2.18 29.81 0.25 1.54 68.00 51.16 Clark Holdings, Inc. GLA 0.32 0.30 0.02 0.28 -0.25 na na na 0.82 0.24 Echo Global Logistics ECHO 12.82 12.86 -0.04 12.90 0.38 34.15 na na 15.32 10.18 Expeditors International EXPD 41.03 44.26 -3.23 -7.30 1.29 31.90 0.20 0.97 44.33 24.50 Express-1 Expedited Solutions XPO 1.42 1.37 0.05 3.65 0.08 17.69 na na 1.70 0.78 HUB Group HUBG 29.21 33.14 -3.93 -11.86 1.01 28.82 na na 33.88 21.49 UTI Worldwide UTIW 14.06 15.07 -1.01 -6.70 0.41 34.44 0.06 0.43 17.59 12.04 * Dow Jones US Trucking Index 334.08 356.11 -22.03 -6.19 na na na na 357.79 283.21 CANADIAN COMPANIES (in Canadian Dollars) Clarke Inc. CKI 3.83 3.73 0.10 2.68 0.43 8.81 0.04 2.09 4.20 3.00 Contrans Income Fund CSS_UN 8.80 9.14 -0.34 -3.72 0.80 10.95 0.08 3.64 10.59 5.71 Mullen Transportation MTL 14.02 14.25 -0.23 -1.61 0.74 19.01 0.13 3.57 17.09 12.97 TransForce Income Fund TFI 9.97 10.16 -0.19 -1.87 0.36 27.79 0.10 4.01 11.12 6.75 Trimac Income Fund TMA-UN 4.75 4.70 0.05 1.06 0.23 20.80 0.04 10.11 5.10 3.76 Currency Exchange Rates Per U. S. Dollar Change in Week Price of Money Aug 11 Aug 04 Net Percent Aug 11 Aug 04 Change in Week Last Canadian Dollar 1.0454 1.0176 0.0278 2.73 Prime Rate Net Percent Change Mexican Peso 12.7486 12.5266 0.2220 1.77 3.25 3.25 0.00 0.00 12/16/2008 Euro 0.7762 0.7596 0.0166 2.19 Discount Rate Japanese Yen 85.4000 86.3300 -0.9300 -1.08 0.75 0.75 0.00 0.00 1/19/2010 British Pound 0.6378 0.6291 0.0087 1.38 Swiss Franc 1.0585 1.0527 0.0058 0.55 Chinese Yuan 6.7749 6.7725 0.0024 0.04 Stock Indices Average Change in Week 52 Weeks YTD 3 yr. Ann. Aug 11 Aug 04 Net Percent High Low Chg.% Chg.% Chg.% Dow Jones Transportation Average 4,262.24 4,507.20 -244.96 -5.43 4,806.01 3,576.02 13.7 4.0 -4.9 Dow Jones Industrial Average 10,378.83 10,680.43 -301.6 -2.82 11,205.03 9,135.34 10.9 -0.5 -7.8 Nasdaq Composite 2,208.63 2,303.57 -94.94 -4.12 2,530.15 1,930.84 10.5 -2.7 -4.6 Standard & Poor's Stock 500 Index 1,089.47 1,127.24 -37.77 -3.35 1,217.28 979.73 8.3 -2.3 -9.2 N.Y.S.E. Composite 6,902.71 7,182.14 -279.43 -3.89 7,728.96 6,352.11 5.6 -3.9 -9.9 Commodities Closing Price Change in Week Year Change in Year Aug 11 Aug 04 Net Percent Ago Net Percent Gold (Comex spot), per Troy oz. 1197.50 1193.70 3.80 0.32 950.70 246.80 25.96 Crude Oil, per Barrel NYMEX (crude future) 78.02 82.47 -4.45 -5.40 70.16 7.86 11.20 Offshore Forties 77.64 85.20 -7.56 -8.87 72.80 4.84 6.65 Brent 78.69 85.20 -6.51 -7.64 72.78 5.91 8.12 Bonny Iight 79.39 85.90 -6.51 -7.58 74.18 5.21 7.02 Urals Mediterranean 75.24 82.27 -7.03 -8.55 71.93 3.31 4.60 Domestic West Texas intermediate/Cushing, OK 80.25 82.47 -2.22 -2.69 70.16 10.09 14.38 West Texas sour/Midland, TX 78.15 80.47 -2.32 -2.88 69.01 9.14 13.24 Louisiana sweet/St. James, LA 83.30 85.82 -2.52 -2.94 73.96 9.34 12.63 Alaska North Slope Pacific Delivery 77.02 81.62 -4.60 -5.64 69.81 7.21 10.33 40

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