Often discussed diversions from west-coast ports ignoring major players who’ll have an impact
By Joe Rajkovacz, WSTA Director of Governmental Affairs
Nashville, TN – At the recent annual conference of the National Association of Small Trucking Companies (NASTC), Avondale Partners Chief Market Strategist, Donald Broughton gave a very somber presentation laying out the statistical data from rail and trucking that has always portended an economic downturn.
Major news outlets have all been regurgitating talking points originating from the American Trucking Associations about the trucking industry being short tens of thousands of drivers right now building to nearly a million in about five years. However, according to Mr. Broughton, both shippers and brokers are not having any problems finding trucks and broker margins have increased (so how can there be a an actual shortage of drivers?). Those two facts are strong indicators of truck over-supply and more importantly indicate fewer shipments are being made available to truckers especially during what has always been a peak period for truck shipments.
Mr. Broughton then laid out 30 years of statistical data that shows when freight tonnage, truck shipments, rail car shipments, and most importantly the reported profits of transportation companies decline, there is nearly always a corresponding decline in the U.S. economy. While Mr. Broughton did not predict a recession, his data and graphs explicitly showed that the trucking industry is absolutely a harbinger of future economic activity. When trucking activity and profits decline, the overall U.S. economy traditionally follows suit.
Ports of L.A., Long Beach, and Oakland
Part of the discussion of declining truck shipments lead to questioning about a very commonly held belief that once a widened Panama Canal opens there will be dramatic diversions away from west-coast ports. Mr. Broughton mentioned sources stating as much as a twenty-percent diversion of discretionary cargo to Gulf-coast and east-coast ports could occur.
Under questioning about that commonly held belief of significant diversions, Mr. Broughton said that other factors will play a deciding role in the eventual total amount of diversions. The Canadian port at Prince Rupert can be expected to become more competitive as well as every U.S. based west-coast port. While east coast ports have spent roughly $50 billion improving their infrastructure to accept post-Panamax ships, California ports are in a good position to improve their competitiveness.
What defined “competitiveness” was not discussed but an example is certainly the awareness at ports such as Oakland that truck-turn times need to be improved.
“Oracle Of Omaha Will Have A Say In Diversions”
Berkshire Hathaway founder Warren Buffett bought the Burlington Northern/Santa Fe railroad and has recently invested upward of $10 billion in track improvements. Warren Buffet’s railroad has been nothing less than a “cash cow” for Berkshire Hathaway and virtually never discussed is what efforts will be undertaken by rail roads to maintain their customer base for the “overland bridge.” Clearly, rail is not going to just sit-back without a fight and lose significant business for diversionary cargo.
According to Mr. Broughton when all these other factors come into play the ultimate diversion percentage could be less than the twenty-percent number often bandied about.