Welcome to the Freight Industry February Roundup, a series of articles where we gather breaking news and important information from the Logistics Industry and add our unique perspective to it. Why waste time searching for news yourself when we do all the work for you? Enjoy!
Business Is Picking Up For Some
PHOTO: ALYSSA SCHUKAR
Old Dominion, the LTL carrier, carried 6.4% more shipments in January and 6.1% more shipments in February over the same months last year.
“There continues to be a demand for LTL service moving freight into distribution centers, where the e-commerce freight goes back out by parcel,” David Congdon, the company’s chief executive, said on the company’s earnings call last month. And with shippers wanting everything “faster and quicker, I think the premium service LTL providers can continue to bring freight into these distribution centers to fill the e-commerce demand.”
The rail industry has some good news too! According to Progressive Railroading
U.S. railroads’ combined carload and intermodal traffic last month was 2,028,168, an increase of 9,646 carloads and intermodal units from February 2015.
“Coal carloads remain very troubling, intermodal is doing well, and the other rail traffic categories are somewhere in between,” AAR Senior Vice President John Gray.
Good news for rail is well overdue but it’s still pretty uncertain out there.
Awash in Oil
The global oil glut is starting to come to a head. Up to 50 oil tankers are waiting to unload in the port of Rotterdam.
Robert Dudley, chief executive of oil giant BP PLC, said earlier this month that in the second half of the year, “every storage tank and swimming pool in the world will be filled with oil.”
Here in the US there is so much oil that producers have taken to storing oil in railroad cars. The oil glut is hitting the US independent shale producers hard. They don’t have the big cash reserves that the majors do to sustain them until oil prices rise.
Low oil prices hurts oil producers but it reduces transportation costs which benefit the consumer and of course the logistics sector. The question I have is what happens when there are no more swimming pools left?
Making Waves Abroad
The end of February saw the first seaborne export of natural gas from the continental US! We have an unprecedented glut because of massive reserves unlocked by fracking. Europeans are quite happy to pay twice the price US domestic customers pay. But the real benefit to Europeans is to unlock the stranglehold that Gazprom, the Russian natural gas producer, has on the market.
“Like shale gas was a game changer in the U.S., American gas exports could be a game changer for Europe,” said Maros Sefcovic, the European Union’s energy chief.
Pres. Putin has often used the supply of natural gas as a political tool by either artificially increasing its price or reducing supply. We have seen that in Ukraine and Reuters reports that Gazprom has recently cut its supplies to Turkey by 10%.
No Sign of Warehouse Construction Slowing
The construction of new “big-box” warehouse space over 300,000 ft.² surged to a total of 61,000,000 ft.² in 2015. 74,000,000 ft.² are set to be constructed in 2016.
The primary drivers are the large retailers such as Home Depot, Walmart and Target scrambling to build fulfillment centers for their rapidly increasing e-commerce business.
Target has hired a 16 year Amazon veteran, Arthur Valdez, as chief supply chain and logistics officer to transform Target from a traditional brick-and-mortar retailer to a leading omni-channel supplier.
Another Win for Mexico
PHOTO: STEVE MARCUS/REUTERS
A large Chinese electronics manufacturer, Hisense Co., has decided that it is too expensive to produce televisions in China for the US market. They are doubling down on last year’s purchase of a manufacturing plant from Sharp in Rosarito, Mexico, and investing an additional $30 million to produce 4 million televisions a year for North America, up from 1.5 million today.
“Labor costs are rising, and other factors are becoming more expensive, too—the cost of land, environmental compliance. They are facing a new reality and they need to adjust to stay in business,” said Thilo Hanemann, an economist with Rhodium. Chinese manufacturers “are being pushed out by a changing economic reality in the Chinese marketplace.”
It’s pretty much in line with my post last week The original outsourcing capital of the world is now having to outsource their own manufacturing. What goes around comes around!