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Economic & Freight Outlook November 2012 ACACSO Meeting

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Presentation on theme: "Economic & Freight Outlook November 2012 ACACSO Meeting"— Presentation transcript:


2 Economic & Freight Outlook November 2012 ACACSO Meeting

3 Welcome Today’s Agenda
TTX Overview Economic Conditions & Outlook Intermodal Automotive Boxcar

4 TTX Overview TTX functions as the industry’s railcar cooperative, operating under pooling authority granted by the Surface Transportation Board $1.1 billion company, serves/owned by North America’s leading railroads The Company owns/maintains a national pool of over 200,000 railcars: Owners enjoy financial/operational benefits matched to business needs: Rail customers benefit from a consistent fleet of free-running cars Intermodal Automotive General Merchandise Empty mile reduction Capital outlay elimination Risk mitigation

5 TTX Capital Expenditures (New Railcars)
Spending Flexes, Based on Customer Needs, with nearly $5 Billion Spent Since 2000 TTX Capital Expenditures (New Railcars)

6 Economic Conditions

7 Context for the 2013 Plan Discussion
Weak and uncertain economy Strong, domestic-driven intermodal growth Strong automotive gains / stressed fleet Outstanding rail service performance and velocity improvements across fleets: Why? Is it durable? Growing replacement demand for other car types

8 Very strong industry-wide velocity improvements
Weighted Average Industry Measures YTD vs. 2011 Train Speed +7.2% Intermodal Train Speed +3.0% Terminal Dwell Time -8.1% Loads per Car +5.8% Industry Velocity Index +7.5% Source: AAR

9 Late 2012 Economic Climate: High Uncertainty
Europe in recession China growth slowing U.S. election / fiscal cliff Still-slow job growth Softening manufacturing Rising food and energy prices

10 Risk of recession still elevated
Source: Moody’s Analytics

11 Features of the fiscal cliff
Taxes Expiration of the Bush tax cuts End of the 2% payroll tax cut New taxes from the Affordable Care Act End of AMT indexing Spending cuts Sequestration of spending - part of latest debt-ceiling extension Reduction in Medicare reimbursements End to emergency unemployment benefits Impact Estimates of 3%-4% reduction of GDP from its expected level CBO projects 1.3% first half GDP decline if nothing changed

12 Job growth has disappointed
Sources: U.S. Bureau of Labor Statistics

13 The ISM manufacturing index suggests that growth may slow in coming months
Source: Institute for Supply Management

14 Some Recent Positives Housing showing signs of life
Low natural gas prices provide a boost Some recent reports have been positive: Best net job growth since February Rebound in retail sales Strong auto sales and production

15 U.S. auto sales well ahead of 2011
Annual Forecasts 2012 – 14.2 Million 2013 – 15.0 Million 2014 – 16.0 Million Source: AutoData, The Monthly Autocast

16 Economic Outlook

17 Given current uncertainty, TTX chose a modest growth scenario for 2013
Sources: Moody’s Analytics, The Wall Street Journal

18 GDP growth improves in 2014 Sources: Bureau of Economic Analysis, Moody’s

19 Consumer spending growth will be muted until 2014
Sources: Bureau of Economic Analysis, Moody’s

20 Housing will slowly recover with multi-family taking a larger share of starts
Other 2013 Total Housing Starts Forecasts Global Insight: 930,000 WSJ Consensus: 890,000 RISI: 920,000 Sources: Bureau of Census; Moody's

21 Canada GDP growth will moderate
Sources: Statistics Canada, Moody’s

22 Mexico GDP growth will rebound
Sources: INEGI, Moody’s

23 Summary of economic assumptions
Indicator 2012 2013 2014 2015 2016 GDP (annualized % change) 2.1% 1.8% 3.1% 2.5% Consumption (annualized % Change) 2.2% 2.9% 2.7% Non-residential Fixed Investment (annualized % Change) 4.5% 3.3% 4.2% 4.0% Industrial Production (yr/yr % change) 5.0% 2.3% 1.5% 1.4% Total Housing Starts (Thousands of starts) 720 800 1,120 1,370 1,580 Auto Sales (Millions) 14.2 15.0 15.9 16.2 16.4

24 Intermodal Outlook

25 International intermodal drivers
Imports (GDP and consumer spending) Fuel prices and competition from trucking Transloads Port choices / Panama Canal expansion Railroad initiatives / Service offerings Origin region and “near-shoring” developments

26 U.S. container imports will hit a new peak in 2014
Sources: PIERS, TTX

27 Transpacific traffic will continue to dominate imports
Sources: PIERS, TTX

28 All water share will gain a few more points and then flatten out around 33%
Sources: PIERS, TTX

29 Estimated percentage of containerized imports moving inland by rail
Canada West Coast ~ 77% 1.5 mm Import TEU’s; 1.1 mm Intermodal TEU’s Vancouver ~ 55% IPI & 18% transload Prince Rupert ~ 99% IPI Canada East Coast ~ 48% 712k Import TEU’s; 340k Intermodal TEU’s Montreal ~ 40% Halifax ~ 80% U.S. West Coast ~ 67% 9.1 mm Import TEU’s; 6.1 mm Intermodal TEU’s LA/LB% ~ 37% IPI & 30% transload Oakland ~ 30% IPI & 20% transload PNW ~ 50% IPI & 24% transload U.S. East Coast ~ 17% 5.1 mm Import TEU’s; 885k Intermodal TEU’s NYC ~ 13% Norfolk ~ 30% Charleston / Savannah ~ 18% Gulf ports – minimal Mexico West Coast ~ 33% 1.2 mm Import TEU’s; 395k Intermodal TEU’s Manzanillo ~ 20% IPI Lazaro Cardenas ~ 57% IPI Percentage moving inland by rail is TTX’s current estimate TEU volume numbers use 2011 full year data

30 International rail volume forecast U.S. and Canada
Sources: IANA, AAR, TTX

31 TTX will cut 48-ft wells to improve railroad efficiency for returning international traffic

32 Domestic intermodal drivers
GDP and consumer spending Fuel prices Import-related transloading Truck equipment capacity and driver supply Short-haul growth Domestic container fleet capacity Rail service levels

33 Sources: FTR Associates
Tight trucking supply reflects investment in replacement capacity rather than growth Sources: FTR Associates

34 Driver supply is a concern, and will worsen with new HOS rules and economic recovery
Source: FTR Associates

35 U.S. trucker costs, fuel and productivity held constant
Trucking inputs are outpacing inflation… U.S. trucker costs, fuel and productivity held constant 5.8% 4.6% 3.4% Sources: FTR Associates, Freight Rate Index,, various annual reports

36 Intermodal market share has room to grow
Sources: IHS Global Insight/TTX

37 Rail market share domestic intermodal
1% share change = approximately 250,000 moves quarterly Sources: FTR, IANA, TTX

38 Domestic fleet growth continues; a singular 53-ft footprint and emerging segments
Sources: TTX

39 Domestic container volume forecast U.S. and Canada
Sources: IANA, AAR, TTX

40 Trailer volume forecast U.S. and Canada
Sources: IANA, AAR, TTX

41 Intermodal volume forecast U.S. and Canada
Sources: IANA, AAR, TTX

42 Automotive Outlook

43 Key Factors Driving Network Changes
NA light vehicle production expected to increase 20% in 2012 Increased production in Mexico Decreased production in Canada More intra-Mexico traffic: plants to ports Increased auto production in North America vs. Imports Fewer production locations mean longer empty hauls to next available load Source: TTX

44 Auto production will outpace auto sales
Sources: Monthly Autocast

45 Boxcar Outlook

46 Boxcar loads will grow as housing comes back, and will remain steady
Sources: AAR, TTX, FTR

47 Industry-wide boxcar fleet continues to decline
Source: AAR

48 Standardizing has improved consistency for shippers and velocity for railroads
Sources: TTX

49 © Copyright 2012 TTX Company : : CONFIDENTIAL

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