The year 2015 was a challenging one for the intermodal industry.
Let’s look at some of the year’s highlights:
- The year began with the West Coast strike, costing U.S. $1.2 billion dollars in losses per day and creating chaos in the supply chain.
- After the strike, freight still was not flowing as expected. This required shippers and buyers to get creative with moving their freight into stores.
- Many of the large shippers unloaded their freight at East Coast, Gulf, and Southeast regions and domestically moved as inventory depleted, causing the Midwest to experience unusually slow freight movement by April.
- Bigger ships were introduced by the steamship line. (For perspective, if one were to tilt these new vessels vertically, they’d be taller than the Empire State building.) Each ship takes 3–5 years to build, and the original prediction for 2015 was that demand volume would increase to support the size of the ship — this ended up not being the case. Bigger ships are more efficient and effective, but the timing wasn’t optimal.
- Oil prices affected the steamship line industry in that the bigger ships didn’t create efficiencies and ended up competing at the same price. With ocean rates being so low due to less demand in freight, steamship lines were faced with huge challenges to making a profit. This is where we saw steamship line consolidation: Cosco & China Shipping, and APL & CMA.
- The Intermodal trucking sector experienced no shortage of drivers, while the domestic side was short on driver talent.
- The slowdown in China caused huge impacts on both import and export, particularly in Brazil as their iron ore export decreased significantly.
These all sound like negatives, but they give us the opportunity to look back and review the innovations we’ve put in place for our business. All businesses are not good or bad at the same time. When steamship lines suffered due to the strike, the airline industry benefited. The automotive industry is still strong, yet due to the warmer weather this year, the winter garment industry isn’t doing so well. There’s also lots of good indicators: the housing sector is rebounding nicely, and the furniture and home appliance sectors are doing well.
If we study the trends, we can understand where we are in the business cycle. Based on my experience in the trucking industry, we typically experience a business cycle of around 6 years. Many of the economists I’ve met with have stated that we are not going to have the recession that so many people are worried about: the economy is rebounding at a steady pace. Before the recession we were moving at a speed of 100 miles per hour, and now we’re moving at 40 miles per hour. This can seem like we are moving far too slow or making too little progress.
The prediction is that although the first two quarters of 2016 will be soft, the second half will be strong until 2018, so we need to prepare ourselves and take advantage of the stronger economy to come down the road.