World Trade - November 2008 - (Page 23)

Pacer Stacktrain is expected to remain high indeﬁnitely. Supply chain businesses are feeling the pinch. Industry bellwether Expeditors International, a Fortune 500 outsourced logistics company offering freight forwarding and customs brokerage services, confirms in its recent 8-K, “The cost of fuel is a serious issue. Historically, fuel has been 15% of carrier operating costs. Today, it is estimated to be substantially over 40%.” The devaluation of the dollar has further added to the blight of global business. Between September 2006 and September 2008, the dollar has lost an average of 11% of its conversion value against the yuan, yen, and euro (see Chart Two). As the U.S. dollar has decreased in value, the cost of purchasing goods and services in countries with stronger currencies (such as China and Japan) has increased, causing outsourcing to be even less competitive. services, and regional warehousing companies in the U.S.- Mexico trade lane. U.S. Exporters A second winner will be those supply chain ﬁrms that target U.S. exports. The Port of Long Beach, California, a major West Coast trade port, reports a 13.5% increase in loaded outbound containers for 2008 yearto-date versus the same time period in the prior year. Container movement trends conﬁrm a shift in U.S. outbound volume. Increasing export activity suggests growing demand for all U.S. export-based service providers, including freight forwarding, customs brokerage, and other export services. Rail Service Providers As trucking costs have increased due to fuel, driver shortages, insurance, and other variables, rail is becoming more costcompetitive. WINNERS As skyrocketing fuel and plummeting dollars shake the foundations of global trade, who will be the winners and losers? U.S.-Mexico Trade Lane 3PLs One winner will be the U.S.-Mexico trade lane, and the supply chain companies that serve it. U.S. imports from Mexico are increasing as fuel costs climb (see Chart Three). The U.S. Department of Commerce reports an 8.7% increase from year-to-date imports through Mexico compared to the year before. Mexico is able to offer an alternative to expensive overseas outsourcing destinations. As a result, we expect increased demand for transportation, customs brokerage, import/export A third winner will be low-cost providers in the rail, intermodal, and drayage arena. As trucking costs have increased due to fuel, driver shortages, insurance, and other variables, rail is becoming more cost-competitive with trucking. Pacer Stacktrain, an intermodal service provider and a division of Pacer International, recently expanded intermodal services with the BNSF Railway. Pacer CEO Michael Uremovich credited much of their recent success and ﬁnancial improvements on the expansion and success of the intermodal segment. Their intermodal operating income increased $7.5 million compared to the second quarter 2007, representing a year-over-year increase of 30%. Other 3PL companies are also experiencing increases in their rail-related services. J.B. Hunt Transport Services reported a 17% yearover-year increase in load counts with their JBI segment, which offers intermodal and drayage services. Due to WWW.WORLDTRADEMAG.COM 23 http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - November 2008

World Trade - November 2008 Contents Unexpected Responses to Unanticipated Change Reading the States of Risk in Today’s Global Economy Supply Chain Watch Tradewinds Failed Promise: Mexico and NAFTA, 15 Years Later The Short Tale Marrying Trade Finance and Transportation into a Single Transaction Trucking Gets a Double Whammy Are We Safe Yet? Logistics Resurrects the Rust Belt Keep on Compressing

World Trade - November 2008

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