Transport Intelligence Ltd: First signs of upturn in the US logistics market?

Jul 25, 2008 (M2 PRESSWIRE via COMTEX) -- YRCW | Quote | Chart | News | PowerRating -- Latest news and brief from Transport Intelligence First signs of upturn in the US logistics market? 25/Jul/2008 There is no doubt that the market environment in the US logistics sector is tough. Many small and medium truckers are suffering, with a substantial number either going out of business or approaching their bigger rivals to be bought-out. Many of the bigger players are also finding it challenging, with Arkansas Best Corporation reporting a 7% drop in profits (Ti Logistics Briefing, News, July 25). YRC Worldwide, reporting yesterday, also announced a fall in revenue and a loss over the first half of the year. However this is only part of the story.

There are some pockets of good news in the market. Con-way, for example, has just reported strong figures for both its less than trailer load and full truck load business. Its operational income increased 7.2% to $77.4m for the second quarter compared to the same period 2007 and revenue climbed 10.6%. Yield is improving even after fuel surcharge, as is capacity utilisation which is running at over 90%. Its newly created full truck load business is also in profit. Intermodal and non-asset based operators such as Hub Group and CH Robinson have also announced positive results, with both companies seeing profits up 9% over the quarter (Ti Logistics Briefing, News, July 22).

There are now signs that the balance within the market is starting to change. Demand may have fallen, but so has capacity. There are not as many trucks on the road, yet key areas of the economy are still growing, such as the coal and the agri-bulk sector which continue to drive profits. US export traffic is also strong. This means that in a number of areas capacity has tightened. As Douglas Stotlar, the CEO of Con-Way commented "The trend of capacity leaving the market is improving the supply/demand balance which is benefiting Con-way Truckload." There is no doubt that the industry seems to be consolidating around larger, stronger players.

Even the fuel price variable may be about to turn in the industry's favour. As suggested by the Wall Street analyst Ed Wolfe, just as the speed of fuel price rises affected the industry badly, any steep fall is likely to benefit the sector. This is because there is a time lag between a fall in prices at the pumps and the reduction in fuel surcharges applied by many express and trucking firms. Crude oil has fallen from a high of $145 a barrel earlier in the month (July 2008), to around $125 today (Friday, 25 July), a drop of almost 14%.

Although it is far too early to say whether the US transport and logistics industry has seen the worst of the downturn, there are more positive indications now than at any time over the last year.

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1. K+N consolidates Greek activities under one brand[Freight Forwarding] The Kuehne + Nagel group of companies in Greece decided this week to establish Kuehne + Nagel A.E. to provide its full range of logistics services under one brand.

2. Arkansas Best reports lower Q2 income[Road Freight] US transportation company Arkansas Best Corporation this week announced 2008 second quarter net income of $16.2m, compared to a Q2 2007 figure of $19.6m.

3. ProLogis leases 540,000 sq ft to JVC America in Atlanta[Warehousing] ProLogis announced this week that it had leased space in Atlanta, Georgia, to a leading manufacturer of home, mobile and automotive electronic equipment and accessories.

4. APM to develop second Vietnam container terminal[Shipping/Ports] APM Terminals and a division of Vietnamese group Vinashin have entered into a joint venture agreement to develop a new container terminal in Vietnam's Dinh Vu Industrial Zone.

5. Norfolk Southern achieves 15% rise in net income during Q2[Intermodal] For the second quarter of this year, US transport company Norfolk Southern Corporation reported record net income of $453m compared with $394m for the same period of 2007.

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