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2011 Current Issues & Trends Affecting Intermodal Ron Sucik RSE Consulting CCIB Intermodal Seminar October 5, 2011.

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Presentation on theme: "2011 Current Issues & Trends Affecting Intermodal Ron Sucik RSE Consulting CCIB Intermodal Seminar October 5, 2011."— Presentation transcript:

1 2011 Current Issues & Trends Affecting Intermodal Ron Sucik RSE Consulting CCIB Intermodal Seminar October 5, 2011

2 Current Situation and Key Facts to Keep in Mind Intmdl Lds Up +5.8% over Down 3.7% to Intmdl Lds Up +5.8% over Down 3.7% to Int’l traffic still more than half of Intermodal loads. Int’l traffic still more than half of Intermodal loads. 40% of Asian imports come through LA/LB. 40% of Asian imports come through LA/LB. 31% of Asian imports related to housing industry. 31% of Asian imports related to housing industry. Container trade imports increased 2% in first seven months of Exports increased 9%. Container trade imports increased 2% in first seven months of Exports increased 9%. Containerized imports to rise about 3.6% during Containerized imports to rise about 3.6% during Ron Sucik RSE Consulting

3 Ron Sucik Selected States Population Change Compared to United States Population Change 1990 to 2000 RSE Consulting

4 Geography & Demographics

5 1997 Import TEUs West Coast 83.25% LA/LB, Oakland, Seattle, Tacoma, Vancouver East Coast 16.75% Gulf Coast.25% NY/NJ/N. East 7.97% South East 8.53% RSE Consulting 2008 Import TEUs West Coast 75% LA/LB, Oakland, Seattle, Tacoma, Vancouver East Coast 25% Gulf Coast NY, NJ, N. East South East Ron Sucik

6 Which Route to the Midwest Ron SucikRSE Consulting

7 What Makes A Location More Favorable Large population or consumption centers Large population or consumption centers (LALB, NYC, Florida and the Southeast)(LALB, NYC, Florida and the Southeast) Deep water for ports Deep water for ports (Prince Rupert, LALB, Norfolk and Lazaro Cardenas)(Prince Rupert, LALB, Norfolk and Lazaro Cardenas) Port infrastructure Port infrastructure (LALB, Norfolk and PANYNJ)(LALB, Norfolk and PANYNJ) Nearby Rail or Highway infrastructure Nearby Rail or Highway infrastructure (LALB, PANYNJ, Norfolk and the PNW-Vancouver, Seattle & Tacoma)(LALB, PANYNJ, Norfolk and the PNW-Vancouver, Seattle & Tacoma) Space and/or Central Location for Dist. Complexes Space and/or Central Location for Dist. Complexes (Chicago, St. Louis, Columbus, SEUS including Charleston, Savannah & Jacksonville)(Chicago, St. Louis, Columbus, SEUS including Charleston, Savannah & Jacksonville) RSE Consulting Ron Sucik

8 Total Intermodal Loadings Millions Source: IANA Intermodal Market Trends & Statistics Ron Sucik RSE Consulting

9 Ron SucikRSE Consulting

10 US Rail: Containers on Flat Car (COFC) 4-week moving average August '06 - September '11 (9/24/2011) Source: AAR ACT Research Co., LLC: Copyright Loads/week (000) Y/Y % Chg TOFC VS COFC Ron Sucik RSE Consulting

11 Domestic Intermodal demand continues to show growth versus prior year comparisons. Domestic Intermodal Volume 11 SOURCE: INTERMODAL ASSOCIATION OF NORTH AMERICA

12 International Intermodal showed slower inbound US freight volumes in July. Signs of seasonal pickup are emerging. International Intermodal Volume 12 SOURCE: INTERMODAL ASSOCIATION OF NORTH AMERICA

13 US Import Container Volume Growth 2011 vs (January – June) Source: Port Websites WC: LAX, LGB, OAK, PDX, SEA, TAC EC: NYC, BAL, ORF, CHS, SAV YTD Growth: West Coast = 4.5%, East Coast = 5.3%

14 Import/Export TEU Projections are Strong Source: TTX, 06/01/2011 Imports 2014 vs. 2011: +3.2 M TEUs (+18.4%)

15 Hub Group’s rail partners have invested nearly $30 billion over the past five years improving their overall product and service offerings. Railroads Continue to Invest 15 NUMBERS REPRESENTED ARE IN MILLIONS $2,242 $3,100 $2,500 $2,488 $3,300 $2,014 $2,248 $2,167 $1,991 $2,600 $3,500 $1,178 $1,341 $1,558 $1,299 $1,743 $2,200 $1,639 $1,773 $1,740 $1,447 $1,800 $2,000 $- $4,000 $6,000 $8,000 $10,000 $12, EST RAILROAD CAPITAL EXPENDITURES UPBNSFNSCSX

16 Road vs Rail PUBLIC INFRASTRUCTURE PRIVATE INFRASTRUCTURE Publicly Funded/Maintained Road Beds Built Beginning 1950’s Cost to Improve or Replace? Minneapolis Bridge ($234M vs $5M) Cost to Expand? Who Pays (Autos, Commercial Trucks)? Private Property of Corporations No Return = No Investment Year Commercial Plans Adapting To Economic Changes Expanding Capacity Partnering With Municipal Authorities

17 Fast, Reliable Solutions The West Coast provides the industry’s fastest transit times. The West Coast provides the industry’s fastest transit times. Shanghai, China Atlanta Columbus Croxton, NJ DEPARTSDESTINATIONIPI (Rail Intact)TRANSLOADALL WATER ShanghaiAtlanta20.5 Days21.5 Days26 Days ShanghaiColumbus18.5 Days19.5 Days31.75 Days ShanghaiCroxton, NJ18.5 Days19.5 Days29 Days

18 Chicago Cincinnati Columbus Pritchard Roanoke Norfolk Detroit Harrisburg Philadelphia NY/NJ Mechanicville Ayer Titusville Jacksonville Atlanta Charlotte Lynchburg Shreveport Meridian Birmingham New Orleans Memphis Bethlehem Corridor Projects

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20 Truck/Rail Intermodal Market Share Mileage Blocks TruckRail Intermodal Total MarketTruck ShareRail Share 500 to %6% 750 to %18% 1000 to %21% 1500 to %37% > %64% Total %23% Millions of units Source: Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample Truck and Rail Intermodal in Markets 500 Miles and Greater Ron Sucik RSE Consulting

21 Truck/Rail Intermodal Market Share 2035 Status Quo Mileage Blocks TruckRail Intermodal Total MarketTruck ShareRail Share 500 to %6% 750 to %18% 1000 to %21% 1500 to %37% > %64% Total %23% Millions of units Source: Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample Truck and Rail Intermodal in Markets 500 Miles and Greater Ron SucikRSE Consulting

22 Truck/Rail Intermodal Market Share % Market Share Mileage Blocks TruckRail Intermodal Total MarketTruck ShareRail Share 500 to %39% 750 to %47% 1000 to %48% 1500 to %59% > %77% Total % Millions of units Source: Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample Truck and Rail Intermodal in Markets 500 Miles and Greater One example of the dramatic benefits of shifting to rail intermodal is illustrated by the fact that just one long-distance, double- stack train between Chicago and Los Angeles can save 75,000 gallons of fuel by replacing 300 trucks, each traveling 1,983 miles. Source: Comparative Evaluation of Rail and Truck Fuel Efficiency on Competitive Corridors, ICF International, published by the Federal Railroad Administration (2009) Ron Sucik RSE Consulting

23 CS: Future Corridor Volumes Compared to Current Corridor Capacity (Cambridge/AAR) without improvements Below capacity Near capacity At capacity Above capacity Ron SucikRSE Consulting

24 Over 200,000 Drivers Eliminated During Downturn of Economy Ron Sucik RSE Consulting

25 The Sun Is Setting On The Old Trucking Model PAST (low energy costs) PRESENT (modest energy costs) FUTURE (expect higher energy costs) Large Company-Driver Fleets with National Scope and Scale Company Operated Driving Schools Vast Quantity of Independent Truckers for Hire Less Burdensome Regulatory Environment (Hours of Service, CSA, Etc) Smaller & Regionalized Fleets Owner-Operator Mix Fewer ‘Mom & Pop’ Carriers Early Intermodal Operations Increased difficulty accessing capital. Fewer Trucks/Drivers on Highway Regional Fleets w/Owner Operators Non-Asset (Brokerage) Clearinghouse Requisite Intermodal Operation Disciplined ‘Surviving’ Carriers

26 26 Does Opportunity Still Exist? Millions UNITS M BNSF Union Pacific OTR that fits western intermodal networks 4.1 M International Domestic 1.5 M 3.3 M 1.8 M 1.9 M 2.2 M Opportunity

27 Demand continues to increaseDemand continues to increase Highway capacity continues to decreaseHighway capacity continues to decrease Government regulationsGovernment regulations Comprehensive Safety Analysis (CSA) Comprehensive Safety Analysis (CSA) Hours of Service Hours of Service Trucking bankruptciesTrucking bankruptcies Higher fuel costs Higher fuel costs Limited access to credit Limited access to credit Higher equipment costs and lower resale values Higher equipment costs and lower resale values Marketplace Update 27 Year-over-year July 2011Full Year 2010 Domestic Intermodal 2.9%10.6% International Intermodal -4.6%18.5% For-Hire Truck Tonnage 3.9%5.7% SOURCES: IANA, ATA AND BAIRD

28 More People – More Freight 28 SOURCE: U.S. CENSUS BUREAU; FRA’S NATIONAL RAIL PLAN Americans require a freight system that moves 40 tons of freight per person annually. With current population growth projections, we are looking at moving 4 Billion more tons of freight in the next 40 years.

29 With improvements in service and facilities, Intermodal is becoming more competitive in shorter distances, absorbing more of the projected growth in freight. Modal Shift Opportunity 29 SOURCE: FRA’S NATIONAL RAIL PLAN

30 Temp-Controlled Intermodal - Phase 1 C.R. England now operates 300 reefer containers (introduced in late 2010) Entire fleet of lightweight daycabs has been purchased Container On Flat Car (COFC)

31 Customer Value Intermodal is now viable for shippers moving temperature-controlled freight Intermodal is now viable for shippers moving temperature-controlled freight Cost savings are a critical factor, but due to the improved services the rate gap between OTR and Intermodal is narrowing Cost savings are a critical factor, but due to the improved services the rate gap between OTR and Intermodal is narrowing Dependence on “loading trucks” for the driver’s benefit is removed with Intermodal Dependence on “loading trucks” for the driver’s benefit is removed with Intermodal We expect the trend in temp-controlled freight toward Intermodal to follow the dry market We expect the trend in temp-controlled freight toward Intermodal to follow the dry market Temp-Controlled Intermodal Viability

32 WHAT TO TAKE HOME FROM CCIB Intermodal loadings still below peak of Railroads CapEx $40 Billion last 5 years. Nearly 500,000 truckers left the business. Western carriers OTR market 7-9 million. Eastern carriers OTR market 9 million. Refrigerated and Flatbed Containers enter mkt. Ron SucikRSE Consulting

33 Thank You For Your Time Ron Sucik RSE Consulting


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