Ask The Experts: October 9, 2019
Independent Transportation Analyst and Consultant
Q: What are the recent trends in bulk freight?
A: Two areas to note:
Coal – Moody’s downgraded the sector to negative as once again, bankruptcies begin to grow. But globally the situation, while poor, isn’t disastrous (75% of the expected growth will be Asian, enough to more than compensate for the USA). They followed up that report by noting that some $5B of further rail revenue could be lost sooner rather than later, on the order of -7%/year….
Ag – the annual Pro-Farmer tour suggested even the reduced USDA estimates for production were too high (for example its estimated corn crop is 8% below the government’s; soybeans 25%). To add to the China trade war woes, it’s looking like the “worst downturn in the ethanol industry’s history” according to their trade association, a political decision by the DoE that favors refiners over corn growers (over a third of the annual crop, normally). Along with Deere, fertilizer companies (Mosaic, Bayer) have issued earnings warnings. Just Monday it was reported that Japan’s corn bug issue wasn’t severe enough to warrant larger-than-normal purchases of US corn, as the administration had suggested….
Q: What is the latest news in tech and its impact on the freight industry?
A: We have “overestimated” the arrival of Automated Vehicles (AV), it’s not going away, either: UPS bought a stake in AV-tech start-up TuSimple, for example….Other tech news includes Maersk and Ports America investing in a drayage load-matching technology (“LoadSmart”). Uber announced that Uber Freight was opening a Chicago HQ and being seeded with ~$2B over the next decade (which actually isn’t….an enormous amount of $). But another cautionary note: a McKinsey study from late last year reviewed 40 port automation projects globally, and while noting benefits, found that “automated ports were generally less productive than ‘normal’ ones” – is that even possible?!?
Q: What are your thoughts on the new Shell plant in Pennsylvania?
A: Shell’s new plant near Pittsburgh will be a game-changer – but is it the high-water mark for plastics? The NY Times may think so: https://www.nytimes.com/2019/08/12/business/energy-environment/plastics-shell-pennsylvania-plant.html?searchResultPosition=2 ; there are worries that the plastics industry “has yet to come to terms with the growing backlash” (The Economist). Remember Clarence Gooden’s comments from SEARS this past spring: “The future Benjamin, is….paper!”
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