What’s Up With All This Good News?

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I’m getting deluged from all sides with great news and very busy identifying new opportunities as I hope you are too! Something very near and dear to my heart is the latest Association of American Railroads report which shows growth in nearly all sectors. Here are some highlights.

  • US rail traffic increased 5.7% to 526,970 carloads and intermodal units for the week ending May 13, compared with the same period last year.
  • Grain up 26.3% to 23,256 carloads
  • Coal up 14.5% to 74,000, 290 carloads
  • Chemicals up 2.4% to 31,300 carloads
  • Nonmetallic minerals up 6.5% to 38,167
  • The only commodity group to go negative, interestingly, was petroleum and petroleum products which is down 20% to 9387 carloads (more on this below!)
  • For 2017 US railroads had a combined traffic total of 9,829,358 carloads and intermodal units which is up 4%
  • Our Canadian cousins posted an even greater increase of 10.7% on a cumulative volume of 2,698,147 carloads, containers and trailers
  • Our Mexican cousins didn’t fare so well with a 2.2% decrease on 498,560 carloads and intermodal containers

Let’s keep this up! If we can bump coal volumes up and turn oil from a negative into a positive, and we have a very good chance of that, we should be in good shape this year.

750,000 Barrels a Day Increase

Which segues neatly into my next piece of good news. Domestic oil production is going up and prices are coming down. That means cheaper transportation and more oil and frack sand shipped by the railroads.

There is a global oil glut so OPEC in November decided to curtail oil production thinking that the US shale drillers would be too weak to fill the void. Big mistake! The American shale producers are busy innovating with new techniques for hydraulic fracturing.

According to the Wall Street Journal Laredo Petroleum Inc. is now drilling horizontal wells 2 miles long and doing it twice as fast, which has lowered their break-even price to under $40 a barrel, down from $63 in 2014. Many Middle Eastern nations need at least $95 a barrel to fund their government run social programs.

Allen Gilmer Chairman of the Austin consulting firm Drillinginfo, said “60% of the horizontal wells in the major shale basins now are breaking even between $35 and $55 a barrel.”

The result is that the US is pumping 750,000 barrels of oil a day more. Alan Eyre, in charge of Middle East energy at the State Department remarked –

“The more success OPEC has in complying with and extending its November deal, the more it ensures US production bounces back – taking a bite out of OPEC’s market share.” He predicted that US production would reach 10 million barrels a day before mid-2018.

For everyone in the logistics industry this is great news. Frack sand will need to get from the quarries to the drillers and all that crude will need to get from the drillers to the refineries. More business for transportation companies!

World Trade Is Increasing

According to an article in the Wall Street Journal the Netherlands Bureau for Economic Policy Analysis said that the volume of world exports and imports rose by 1.5% in March and was up 1.4% in the first quarter compared with the final quarter of 2016.

The International Air Transport Association reported that air freight demand was 11% higher in the first quarter compared to the same period a year earlier.

Danish shipping giant A.P. Moller-Maersk said container volumes were up 10% during the first quarter.

More world trade means more domestic transportation. As I said earlier this year I believe the freight recession is over. I’m looking forward to a great 2017 – how about you?

If you’re interested in learning how shipping by rail might better meet your freight transportation needs call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.

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