Engineering Inc. - November/December 2015 - (Page 4)

MarketWatch BY G E R RY D O N O H U E Domestic Freight Market Surge on Horizon T he outlook for the domestic freight market is bright. Propelled by continued population growth, an expanding economy, the energy sector and rising foreign trade, the major modes of domestic freight transportation-trucking, rail and pipeline-are forecast to grow strongly over the coming decade. In the short term, however, the market could be in for a bumpy ride. Mode Shares to Shift According to the American Trucking Associations' (ATA) U.S. Freight Transportation Forecast to 2026, domestic freight volumes will increase by 28.6 percent over the next 11 years. Trucking is the primary freight hauling mode, and while its tonnage will grow substantially over the ATA's forecast period, trucking's share of total freight will fall from 68.8 percent in 2014 to 64.6 percent in 2026. Rail faces the same situation. Overall tonnage volumes will increase, but its share of the overall market will decrease, from 14.2 percent in 2015 to 12.3 percent in 2026. Within the rail segment, intermodal freight will be an increasingly important segment, rising by 4.5 percent annually through 2021 and then increasing by 5.3 percent annually to 2026. Propelled by the dramatic growth in domestic energy production, pipeline volumes will increase by an average of 10.6 percent a year, and the sector's share of freight tonnage will rise from 10.8 percent in 2015 4 ENGINEERING INC. to 18.1 percent in 2026. (For more on energy production and pipelines, see Market Watch in the July/August 2014 issue of Engineering Inc.) In the even longer term, Keith Bucklew, freight practice leader at CDM Smith, forecasts that "between now and 2040, freight volumes are projected to increase by 40 to 60 percent." Dip in the Road Stuart Matthis, vice president for business development at STV, Inc., says that 2014 and early 2015 were great years for the U.S. freight business. "In fact, they were so good that it created shipping problems brought on by the higher demand for freight carrier traffic," he says. Two factors that propelled the sector were the economy's accelerating emergence from the 2008 recession and the exponential growth of the domestic energy market. In recent months, however, the sector's momentum has slowed, and engineering firms are feeling the impact. Firm leaders point to Congress' repeated failure to pass a long-term transportation funding bill as a huge drag on the domestic freight sector. "We're seeing DOTs and other public entities actually walking away from federal highway grants because they don't have the local matching funds," says Jeff Keating, senior associate of rail and transit at H.W. Lochner. "We've rarely seen that before." "Financially, many states are struggling," Bucklew says. "They're so far behind in their NOVEMBER / DECEMBER 2015 TranSystems transformed a heavily congested freight yard into this threelevel rail overpass to eliminate a major bottleneck near Kansas City, Mo. The project featured a 9,300-foot-high flyover and was a 2005 Engineering Excellence Awards Grand Award winner. infrastructure programs that they need an increase in both federal and state funding just to preserve and maintain existing highways." Railroads are also feeling the pinch, due primarily to turmoil in the energy markets. Coal has long accounted for a substantial share of railroad freight tonnage, but "the movement of thermal coal has been significantly reduced due to market changes [and] environmental and political pressures," says Scott Goehri, senior vice president and global market sector director for freight rail at HDR. Coal shipments for steel manufacturing have also flattened, and while rail shipments of crude oil have increased, they cannot come close to filling the void. The slowdown appears to have cut into railroad companies' infrastructure spending. Nationally, railroads have been spending more than $100 billion in infrastructure from 2011 to 2014 and were projecting to spend an estimated $29 billion in 2015. "There have been reports that the railroads aren't going to spend the money this year that they had announced," says Keating. "They pay for these investments out of revenues, and when their revenue goes down, they have to cut back." Potential Opportunities Despite these difficulties, the freight sector remains a vibrant market with numerous opportunities for engineering firms. Matthis says railroads are allocating a lot of their project resources to freeing up system pinch points, locations where too many tracks converge and too many trains must pass.

Table of Contents for the Digital Edition of Engineering Inc. - November/December 2015

Engineering Inc. - November/December 2015
Contents
From ACEC to You
Market Watch
Legislative Action
Traveling Smart
Idustry Drone Use Taking Flight
Back to Life
Economic Power of Employee Engagement
Young Professionals of the Year
Market Driven
2015 Fall Conference
Guest Column
Guest Column
Business Insights
Members in the News
Mergers and Acquisitions

Engineering Inc. - November/December 2015