Weak port traffic casts shadow on energy demand

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By Bernie Woodall - Analysis
LOS ANGELES (Reuters) - A dramatic slowdown in activity at U.S. ports may extend well into 2009 as the recession deepens, spelling weak demand for diesel from the shipping and trucking industries.

Cargo volumes at major U.S. container ports have fallen for 17 straight months, and 2008 ended as the weakest year since 2004, according to the monthly Port Tracker survey by IHS Global Insight for the National Retail Federation.

Port activity is a key economic indicator because it reflects consumption and trade. It is also a crucial reflection of demand for diesel, the fuel of choice for trucks moving goods to and from the ports.

U.S. demand for distillates like diesel and jet fuel fell by 5.8 percent in 2008 --the biggest drop since 1980, according to the American Petroleum Institute.
The drop-off in diesel use may be accelerating, port activity statistics show.

The number of loaded shipping containers going in and out of the busiest U.S. port complex in Southern California fell 23 percent in December from a year earlier, and 16.4 percent from the previous month, according to data from the Port of Los Angeles and the Port of Long Beach.

Together the ports -- the two largest in the country -- handle more than 40 percent of U.S. imported goods.
Trucking tonnage carried on U.S. highways has fallen about 20 percent over the past six months -- the biggest decline on record, according to the American Trucking Association.

-- Loaded containers at Long Beach totaled about 299,000 TEUs in December, down 29.4 percent from December 2007 and 29 percent from November -- the biggest one-month drop-off at the port on record.

http://www.reuters.com/article/reutersEdge/idUSTRE50S47V20090129

 

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Rail Loads Test Pricing

Rail Loads Test Pricing

John D. Boyd
Associate Editor

While staving off the worst impact of the country's economic downturn, rail industry leaders are starting to tell how bad they think things may get.

After rail traffic was relatively flat in the first half of 2008, carload traffic fell 10.1 percent in November and then 14.2 percent in December compared to the year before. And the freight outlook is still darkening.

The first half of January saw a tidal wave of shippers closing retail stores and factories, curbing current output and capital spending - measures that can only mean more declines in freight demand.

Just this month large industrial shippers Alcoa, Peabody Energy, Dow Chemical and MeadWestvaco said they will sharply cut production and jobs, bringing more retrenchments to the already shrinking bulk railcar cargoes of metals and ores, coal, chemicals, paper, pulp and scrap materials.

The retail customer base is shrinking, too. The liquidation of Circuit City and its nearly 600 big-box stores will further reduce nationwide intermodal shipments, which were down 7.7 percent in the fourth quarter. Union Pacific Railroad, the country's second-largest intermodal carrier, saw the loads decline 15.5 percent in the fourth quarter, or 126,117 fewer shipments.

Morgan Stanley Research "substantially" cut its rail earnings estimates Jan. 12, warning traffic is falling so hard that even the rails' ability to raise freight prices may no longer boost earnings.

Until now, "pricing has supported rail EPS growth with volume declines," said analyst William J. Greene, "but '09 traffic losses will be too large for pricing alone to overcome."

Hatch thinks carriers may even increase profits if they calibrate their costs well enough against falling demand. But there's no doubt, he said, that "the railroad customers are in trouble."
http://www.trafficworld.com/newssection/rail.asp