Insights - September 2016 - 5
EXPO's FREIGHTCAST to Address Maritime Issues
The 2016
Intermodal
FREIGHTCAST session, EXPO's
annual
in-depth
review of
the industry's recent
performance, future prospects and
key trends, will bring together a
panel of expert analysts moderated
by Peter Tirschwell of IHS. The session will commence the educational programming on Monday, Sept.
19. In advance, Brandon Oglenski,
director, senior equity analyst at
Barclays, and one of the featured
FREIGHTCAST speakers, has provided his thoughts on several key
maritime themes to Intermodal
Insights.
Insights: What is your read
regarding import and export
volumes for the rest of this year
and why?
Oglenski: Global trade has been
challenged the past two years
by soft economic expansion and
currency fluctuations. Consumer
spending remains robust in the
U.S. and is expanding in developed
Europe; however, services rather
than physical goods appear to
be driving consumption growth.
North American imported volume
in 2016 is so far tracking up 1 percent and exports are only marginally improved. Inventory levels
are high but sequentially lower
in recent months, suggesting
U.S. import demand heading into
2017 could begin to better match
retail sales growth which has been
tracking closer to 4 percent this
year (ex-autos and fuel). Given the
strength in the U.S. dollar relative to other global currencies,
we expect U.S. export activity to
continue underperforming import
volumes.
Insights: Maritime capacity is up,
rates are down - if and when do you
see this trend rebalancing?
Oglenski: Global ocean container
markets have been challenged for
several years, both a function of
recent softer demand and a steady
increase in large vessel capacity. The
container shipping industry's focus
on lowering unit costs by operating ever larger vessels has led to
compounding annual supply growth
nearing 10 percent for the past
decade, vastly exceeding demand
expansion which has remained
much closer to global GDP of
around 5 percent during the same
time period. Recent vessel orders
have slowed and capacity growth in
2017 is expected to be up modestly,
which should help to stabilize the
currently weak freight rates realized
by the carriers. However, given a decade of oversupply, we think vessel
deliveries need to remain subdued
for several years in order to positively align demand with capacity and
allow freight rates to reach sustainable levels for the industry.
Insights: Is there room for more mergers among ocean carriers? What is the
overall impact of the realignment of
alliances?
Oglenski: Given recent industry
consolidation, carrier alliances have
gone through a significant shakeup.
We estimate that roughly 75 percent
of current industry containership capacity is operating in one of the four
major carrier alliances, which are
expected to reorganize into three
by April of next year. While the alliances do not function as pure joint
ventures - antitrust concerns limit
the ability to set pricing, the sharing of vessel capacity and schedules
does provide some benefit to the
industry. Through alliance marketing access, individual carriers are
able to compete for traffic with
competitive schedule offerings in
multiple markets without having
to deploy dedicated vessels for
each sailing. We expect the industry will likely expand the future use
of alliances to help control capacity and ultimately seek sustainable
freight rates.
Insights: What impact do you expect
the Panama Canal expansion to
have on the U.S. Gulf and East Coast
intermodal markets?
Oglenski: The expanded Panama Canal enables a lower cost and
faster all-water service from Asia
to the U.S. east coast. We estimate
that 5-10 percent of Asia to west
coast U.S. port traffic could switch
to the all water routing, utilizing
lower cost large vessel economics
via the expanded canal as opposed
to faster, but higher cost railroad
intermodal service to inland destinations. However, given significant
west coast port delays in 2015, we
suspect many large shippers may
have already diverted a material
share of their volume to the eastern destinations via ocean service
through the Suez Canal. Further
complicating the analysis is the
arrival of mega containerships
- 18,000 TEU plus, which have
already exceeded the size limits
of the new Panama Canal. These
vessels have significantly greater
capacity than is required for local west coast markets, requiring
some inland and eastern bound
U.S. traffic to reach sustainable
utilization. Nonetheless, we expect
to see the new Panama Canal
incrementally win some share from
current west coast sailings and
potentially have a larger impact on
all water routes to the east coast
via the Suez Canal.
September 2016 | Intermodal Insights 5
Table of Contents for the Digital Edition of Insights - September 2016
Insights - September 2016
FMCSA Proposes Pilot Qualifying Military Drivers
STB Decides Rail Cost of Capital
From the IANA President & CEO
Board Nominations Close on Sept. 5
Fall Webinar to Kick Off Enriched Education Program
IANA’s Information Services Premier at EXPO
EXPO Preview: Insights from Barclay’s Brandon Oglenski
Reflections from the 2016 Silver Kingpin Winner
Freight Reports
Port News
Key Moments in IANA’s 25 Year History
IANA Salutes Intermodal Truck Drivers
EXPO Mobile App Now Available
Get Social at Intermodal EXPO
Sustainability News
Maritime Industry Loses a Champion
Mexican Rail and Intermodal Leader Emilio Sacristán Roy Dies at 77
People in the News
Get Your Name in Intermodal Insights!
2016 Sponsors
In Brief
Welcome New Members
Intermodal Calendar
Insights - September 2016 - Insights - September 2016
Insights - September 2016 - STB Decides Rail Cost of Capital
Insights - September 2016 - IANA’s Information Services Premier at EXPO
Insights - September 2016 - 4
Insights - September 2016 - EXPO Preview: Insights from Barclay’s Brandon Oglenski
Insights - September 2016 - 6
Insights - September 2016 - Reflections from the 2016 Silver Kingpin Winner
Insights - September 2016 - 8
Insights - September 2016 - 9
Insights - September 2016 - 10
Insights - September 2016 - 11
Insights - September 2016 - 12
Insights - September 2016 - 13
Insights - September 2016 - 14
Insights - September 2016 - Freight Reports
Insights - September 2016 - 16
Insights - September 2016 - Port News
Insights - September 2016 - 18
Insights - September 2016 - 19
Insights - September 2016 - 20
Insights - September 2016 - Key Moments in IANA’s 25 Year History
Insights - September 2016 - 22
Insights - September 2016 - 23
Insights - September 2016 - 24
Insights - September 2016 - 25
Insights - September 2016 - 26
Insights - September 2016 - IANA Salutes Intermodal Truck Drivers
Insights - September 2016 - 28
Insights - September 2016 - Get Social at Intermodal EXPO
Insights - September 2016 - 30
Insights - September 2016 - Sustainability News
Insights - September 2016 - 32
Insights - September 2016 - Maritime Industry Loses a Champion
Insights - September 2016 - 34
Insights - September 2016 - People in the News
Insights - September 2016 - 36
Insights - September 2016 - Get Your Name in Intermodal Insights!
Insights - September 2016 - 38
Insights - September 2016 - 2016 Sponsors
Insights - September 2016 - In Brief
Insights - September 2016 - Welcome New Members
Insights - September 2016 - 42
Insights - September 2016 - 43
Insights - September 2016 - 44
Insights - September 2016 - 45
Insights - September 2016 - 46
Insights - September 2016 - 47
Insights - September 2016 - Intermodal Calendar
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