OCEAN CARRIER REVIEW - With freight recession over, trucking rates poised to rise

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By Paul Scott Abbott, AJOTHundreds of leaders of the US trucking industry and other logistics professionals got some good news last week at the NASSTRAC 2008 Logistics Conference & Expo.
A two-year freight recession has finally come to an end, they were told by a leading industry financial analyst, who said a “freight pricing renaissance” is on the horizon.
“We’re past the bottom,” Jon A. Langenfeld, senior research analyst for Robert W. Baird
& Co., told the gathering of some 400 industry leaders April 29 in Lake Buena Vista, Fla. “However, you may not feel it for the next nine to 12 months.
“A transportation pricing renaissance is forthcoming,” Langenfeld said, in one of numerous conference sessions at the April 27-30 event. “Freight rates need to go higher.”
In an interview with the American Journal of Transportation, Langenfeld, whose opinions are frequently heard on CNBC, said that, as the overall economic outlook improves in 2009, truckload and less-than-truckload rates are both destined for “mid- to high-single-digit increases.”
Langenfeld added that the industry as a whole has failed to reach a favorable cost-to-capital balance for the past 15 years. He said the 24-month freight recession that began in early 2006 marked only one of three downturns of such duration since 1974, with the others having occurred in 1979-81 and 2000-02.
He termed as “myths” four widely held views – that truckers took advantage of shippers in the last rate cycle, that railroads are generating excess profits from pricing, that parcel pricing outpaces the broader transports due to lack of competition and that fuel surcharges are a source of profit.
A second analyst panelist, Tom Connolly of EVE Partners LLC, listed the key factors currently impacting the transportation industry as “fuel, fuel and fuel.”
Indeed, the issue of skyrocketing fuel costs was an overriding theme at the NASSTRAC gathering.
In his keynote address, Thomas J. Donohue, president and chief executive officer of the US Chamber of Commerce, condemned US fuel policy as “a cross between stupidity and hypocrisy.”
Donohue said swift presidential and congressional action to permit oil-drilling activities at limited sites in Alaska, North Dakota and the Rocky Mountains, as well as offshore, while taking years to bring additional product on stream, would instantly reduce prices for diesel and other fuels.
Donohue also called for actions to make more federal money available to meet multitrillion-dollar transportation infrastructure demands. He called for removal of unnecessary regulations, including those deterring private investments in such infrastructure; “no more stealing the money,” meaning an end to diverting highway-designated funds to nontransportation uses; and “quit fooling everybody” and put appropriate levels of user fees in place.
Nonetheless, Donohue urged conference attendees to “be optimistic.”
Kevin Smith, senior vice president of supply chain and logistics at Woonsocket, R.I.-based CVS, which serves its more than 6,300 US pharmacy stores through 15 regional distribution centers, said encouragement must come from improved business practices – not false hope that fuel costs will decline.
“We can’t fix the fuel price – we’re going to be a slave to that for quite some time,” Smith said. “However, we can do things better.”
For example, he said, CVS trucks are now equipped with global-positioning systems, and efforts are in place to maximize the number of deliveries each truck makes in a day.
Speaking on a panel of four carrier executives, Douglas G. Duncan, president and chief executive officer of less-than-truckload leader FedEx Freight, said, “The only way to get the price of fuel down is to reduce demand. We terribly need a solid energy policy in this country.”
Of the current fuel-related crisis, Duncan said, “I just don’t think there are any short-term answers for it. I wish there were.”
Mike Smid, president and chief executive officer of North American transportation for

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For more than a quarter of a century, Paul Scott Abbott has been writing and shooting images for the American Journal of Transportation, applying four decades of experience as an award-winning journalist. A graduate of Northwestern University’s Medill School of Journalism, with a master’s magna cum laude from Trinity Evangelical Divinity School, Abbott has served as president of chapters of the Propeller Club of the United States, Florida Public Relations Association and Society of Professional Journalists. Abbott honed his skills on several daily newspapers, including [em]The Cincinnati Enquirer, The Richmond (Va.) News Leader, Albuquerque Journal and (South Florida) Sun-Sentinel, and was editor and publisher of The County Line, a weekly newspaper he founded in suburban Richmond, Va.[/em] A native Chicagoan, he is a member of American Mensa and an ever-optimistic fan of the Chicago Cubs.