Trends-April 2007

As shippers know all too well, finding capacity to move goods throughout the United States is not always easy.

To avoid over-the-road congestion, shippers may opt to use rail, but rail transportation comes with its own litany of challenges, including a lack of available track and a dearth of infrastructure improvements made over the years.

A new bipartisan bill, however, may make a difference. The proposal, introduced last month in the U.S. Senate by Trent Lott (R-MS) and Kent Conrad (D-ND), aims to spearhead public/private cooperation to expand the nation’s freight rail infrastructure.

If passed, The Freight Rail Infrastructure Capacity Expansion Act would provide a 25-percent tax incentive for capital expenditures for new track, intermodal facilities, rail yards, locomotives, or other rail infrastructure projects. The tax credit would apply to any organization that adds rail capacity, including shippers.

The proposed tax credit for infrastructure expansion comes at an opportune time, as the Department of Transportation predicts a 67-percent spike in rail freight traffic by 2020.

Industry organizations such as the Association of American Railroads (AAR), the U.S. Chamber of Commerce, the National Retail Federation, and the National Mining Association, among others, support the bill.

AAR calls it “a proactive approach to dealing with the central challenge of how to move additional freight without causing more gridlock on our highways.”

The bill comes on the heels of a banner year for railroad investment aimed at improving capacity and service. U.S. railroads spent a record $8.6 billion in 2006 on track and equipment improvements, and are expected to invest $9.4 billion in 2007, reports AAR.

CSX, for example, plans capital expenditures of $1.4 billion in 2007, including $800 million for infrastructure, $170 million for locomotives, $250 million for capacity expansion, and $170 million for freight cars.

Norfolk Southern predicts investments of more than $1.3 billion in 2007 for increased capacity as well as rail, cross-tie, ballast, and bridge programs; while Union Pacific cites total 2007 capital commitments of approximately $3.2 billion for projects such as double-tracking and terminal upgrades.

This renewed focus-from both government and the rail industry-on producing and improving cost-effective transport options while relieving pressure on highways is good news for rail shippers.

Aspiring transportation workers searching for a new home may want to consider Arkansas. The state recently received a $1.3-million grant, announced by U.S. Secretary of Labor Elaine L. Chao, to train workers for careers in its growing transportation and logistics industry.

The grant-awarded through President Bush’s High Growth Job Training Initiative, a strategic plan to prepare workers for jobs in vital industries-provides workers in the Arkansas Delta region with additional transportation industry career and educational opportunities.

The grant also supports the development of a registered apprenticeship program for truck drivers at Mid-South Community College, and efforts to train 150 underemployed and unemployed workers as commercial truck drivers.

A variety of industry partners including ABF Freight System Inc., Covenant Transport Inc., and Werner Enterprises, as well as the Teamsters National Education and Training Fund and the Arkansas Workforce Investment Board, assist with the programs.

The calm before the storm is how some experts currently view the nation’s ports.

February marked the year’s slowest month-as it usually does-but volume picked up in March and April. Monthly container volumes are expected to increase each month from now through the summer, with July volume possibly topping the peak for all of last year, predicts the monthly Port Tracker report from the National Retail Federation (NRF) and economic research firm Global Insight.

“This is the time of year when retailers begin closely watching what happens at the ports,” says NRF Vice President and International Trade Counsel Erik Autor. “Summer merchandise will be coming through the ports soon, and the build-up to peak season will occur rapidly. This will be a busy summer.”

Nationwide, the ports surveyed -Los Angeles/Long Beach, Oakland, Tacoma, and Seattle on the West Coast; and New York/New Jersey, Hampton Roads, Charleston, and Savannah on the East Coast—handled 1.28 million TEUs of container traffic in February, the most recent month for which actual numbers are available. The figure was down 1.1 percent from January, but up 14.9 percent from February 2006.

Port Tracker currently rates the U.S. ports it covers as “low” for congestion, but that could change as the summer ramp-up begins. NRF’s container traffic predictions for the coming months illustrate the pending growth trend:

  • March: 1.36 million TEUs (up 4.7 percent from March 2006)
  • April: 1.44 million TEUs (up 4.3 percent from April 2006)
  • May: 1.45 million TEUs (up 6.2 percent from May 2006)
  • June: 1.48 million TEUs (up 5.6 percent from June 2006)
  • July: 1.55 million TEUs (up 11.4 percent from July 2006)

If the ports do indeed handle 1.55 million TEUs in July, they will hit an all-time record, topping the previous high of 1.51 million TEUs set last October.