2011 Current Issues & Trends Affecting Intermodal

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1 211 Current Issues & Trends Affecting Intermodal CCIB Intermodal Seminar October 5, 211 Ron Sucik RSE Consulting

2 Current Situation and Key Facts to Keep in Mind Intmdl Lds Up +5.8% over 21. Down 3.7% to 26. Int l traffic still more than half of Intermodal loads. 4% of Asian imports come through LA/LB. 31% of Asian imports related to housing industry. Container trade imports increased 2% in first seven months of 211. Exports increased 9%. Containerized imports to rise about 3.6% during 211. Ron Sucik RSE Consulting

3 Selected States Population Change Compared to United States Population Change 199 to 2 3% 26% 25% 23% 21% 24% 2% 15% 15% 13 % 14 % 1% 5% % United States California Texas North Carolina South Carolina Georgia Florida Ron Sucik RSE Consulting

4 Geography & Demographics

5 1997 Import TEUs West Coast 83.25% LA/LB, Oakland, Seattle, Tacoma, Vancouver East Coast 16.75% Gulf Coast.25% NY/NJ/N. East 7.97% South East 8.53% 28 Import TEUs West Coast 75% LA/LB, Oakland, Seattle, Tacoma, Vancouver East Coast 25% Gulf Coast NY, NJ, N. East South East Ron Sucik RSE Consulting

6 Which Route to the Midwest Ron Sucik RSE Consulting

7 What Makes A Location More Favorable Large population or consumption centers (LALB, NYC, Florida and the Southeast) Deep water for ports (Prince Rupert, LALB, Norfolk and Lazaro Cardenas) Port infrastructure (LALB, Norfolk and PANYNJ) Nearby Rail or Highway infrastructure (LALB, PANYNJ, Norfolk and the PNW-Vancouver, Seattle & Tacoma) Space and/or Central Location for Dist. Complexes (Chicago, St. Louis, Columbus, SEUS including Charleston, Savannah & Jacksonville) Ron Sucik RSE Consulting

8 Total Intermodal Loadings Millions ' '1 '2 '3 '4 '5 '6 '7 '8 ' Ron Sucik Source: IANA Intermodal Market Trends & Statistics RSE Consulting

9 Intermodal Loads by Type Intermodal Loads (millions) Dom Cont Dom Trlrs Internatl Cont Source: IANA ACT Research Co., LLC: Copyright 211 Ron Sucik RSE Consulting

10 TOFC VS COFC US Rail: Trailers on Flat Car (TOFC) 4-week moving average US Rail: Containers on Flat Car (COFC) 4-week moving average Loads/week () 6 August '6 - September '11 (9/24/211) Y/Y % Chg 6 Loads/week () 3 August '6 - September '11 (9/24/211) Y/Y % Chg Source: AAR ACT Research Co., LLC: Copyright 211 Source: AAR ACT Research Co., LLC: Copyright 211 Ron Sucik RSE Consulting

11 Domestic Intermodal Volume mestic Intermodal demand continues to show growth versus prior year mparisons.

12 ternational Intermodal Volume ernational Intermodal showed slower inbound US freight volumes in July. ns of seasonal pickup are emerging.

13 S Import Container Volume Growth 211 vs. 21 (January June) Jan Feb Mar Apr May June Total Imports US WC Imports US EC Imports Source: Port Websites YTD Growth: West Coast = 4.5%, East Coast = 5.3%

14 Imports 214 vs. 211: +3.2 M TEUs (+18.4%) Import/Export TEU Projections are Strong,, Imports (U.S. TEUs) Exports (U.S. TEUs) 5,,,, 5,,,, 5,,,, 5,,

15 Railroads Continue to Invest b Group s rail partners have invested nearly $3 billion over the past five rs improving their overall product and service offerings. $12, RAILROAD CAPITAL EXPENDITURES $1, $2, $8, $1,773 $1,74 $1,8 $2,2 $6, $4, $1,639 $1,178 $2,14 $1,341 $1,558 $2,248 $2,167 $1,447 $1,299 $1,991 $1,743 $2,6 $3,5 $2, $2,242 $3,1 $3,1 $2,5 $2,488 $3,3 $ EST UP BNSF NS CSX

16 Road vs Rail PUBLIC INFRASTRUCTURE Publicly Funded/Maintained ad Beds Built Beginning 195 s Cost to Improve or Replace? Minneapolis Bridge ($234M vs $5M) Cost to Expand? PRIVATE INFRASTRUCTURE Private Property of Corporations No Return = No Investment Year Commercial Plans Adapting To Economic Changes Expanding Capacity Partnering With Municipal

17 Fast, Reliable Solutions e West ast vides ustry s test nsit es. Shanghai, China Columbus Atlanta Croxton, NJ DEPARTS DESTINATION IPI (Rail Intact) TRANSLOAD ALL WATER Shanghai Atlanta 2.5 Days 21.5 Days 26 Days Shanghai Columbus 18.5 Days 19.5 Days Days Shanghai Croxton, NJ 18.5 Days 19.5 Days 29 Days

18 rridor Projects Mechanicville Ayer Detroit Chicago Harrisburg Bethlehem NY/NJ Columbus Philadelphia Cincinnati Pritchard Roanoke Lynchburg Norfolk Charlotte Memphis Birmingham Atlanta hreveport Meridian Jacksonville New Orleans Titusville

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20 Truck/Rail Intermodal Market Share Truck and Rail Intermodal in Markets 5 Miles and Greater Mileage Truck Rail Total Market Truck Share Rail Share Blocks Intermodal 5 to % 6% 75 to % 18% 1 to % 21% 15 to % 37% > % 64% Total % 23% Millions of units ource: Assessment of 27 Commodity Flow Survey and 27 ail Carload Waybill Sample

21 Truck/Rail Intermodal Market Share 235 Status Quo Truck and Rail Intermodal in Markets 5 Miles and Greater Mileage Truck Rail Total Market Truck Share Rail Share Blocks Intermodal 5 to % 6% 75 to % 18% 1 to % 21% 15 to % 37% > % 64% Total % 23% Millions of units ource: Assessment of 27 Commodity Flow Survey and 27 ail Carload Waybill Sample

22 Truck/Rail Intermodal Market Share 235 5% Market Share Truck and Rail Intermodal in Markets 5 Miles and Greater Mileage Truck Rail Total Market Truck Share Rail Share Blocks Intermodal 5 to % 39% 75 to % 47% 1 to % 48% 15 to % 59% > % 77% Total % 5% Millions of units ource: Assessment of 27 Commodity Flow Survey and 27 ail Carload Waybill Sample One example of the dramatic benefits of shifting to rail intermodal is illustrated by the fact that just one long-distance, doublestack train between Chicago and Los Angeles can save 75, gallons of fuel by replacing 3 trucks, each traveling 1,983 miles. Source: Comparative Evaluation of Rail and Truck Fuel

23 Future Corridor Volumes Compared to Current Corridor Capacity (Cambridge/AAR) without improvements Below capacity Near capacity At capacity Above capacity

24 Truck Transportation Employment January May 211 (Seasonally Adjusted) Employment ('s) M-M jobs Chg (s) Over 2, Drivers Eliminated During Downturn of Economy ' '1 '2 '3 '4 '5 '6 '7 '8 '

25 The Sun Is Setting On The Old PAST (low energy costs) rge Company-Driver Fleets with National Scope and Scale Company Operated Driving Schools Quantity of Independent Truckers for Hire ss Burdensome Regulatory Environment (Hours of Service, CSA, Etc) Trucking Model SENT (modest energy costs) Smaller & Regionalized Fleets Owner-Operator Mix Fewer Mom & Pop Carriers Early Intermodal Operations RE (expect higher energy costs) Increased difficulty accessing capital. Fewer Trucks/Drivers on Highway Regional Fleets w/owner Operators Non-Asset (Brokerage) Clearinghouse

26 Does Opportunity Still Exist? 7 11 M UNITS Millions 6 Domestic International Opportunity M 3.3 M 2.2 M M 1.5 M 1.9 M Union Pacific BNSF OTR that fits western intermodal networks

27 Marketplace Update Demand continues to increase Year-over-year July 211 Full Year 21 Domestic Intermodal 2.9% 1.6% International Intermodal -4.6% 18.5% For-Hire Truck Tonnage 3.9% 5.7% Highway capacity continues to decrease Government regulations Comprehensive Safety Analysis (CSA) Hours of Service Trucking bankruptcies Higher fuel costs Limited access to credit Higher equipment costs and lower resale values

28 More People More Freight mericans require a freight system that moves 4 tons of freight per person annually. ith current population growth projections, we are looking at moving 4 Billion more tons of freight in the next 4 years.

29 Modal Shift Opportunity th improvements in service and facilities, Intermodal is becoming more mpetitive in shorter distances, absorbing more of the projected growth in ight.

30 emp-controlled Intermodal Container - Phase On 1Flat Car (COFC).R. England now operates 3 reefer containers (introduced in late 21) Entire fleet of lightweight daycabs has been purchased

31 stomer Value Temp-Controlled Intermodal Viability Intermodal is now viable for shippers moving temperature-controlled freight Cost savings are a critical factor, but due to the improved services the rate gap between OTR and Intermodal is narrowing Dependence on loading trucks for the driver s benefit is removed with Intermodal We expect the trend in temp-controlled freight toward Intermodal to follow the dry market

32 HAT TO TAKE HOME FROM CCIB termodal loadings still below peak of 26. ilroads CapEx $4 Billion last 5 years. arly 5, truckers left the business. stern carriers OTR market 7-9 million. stern carriers OTR market 9 million. frigerated and Flatbed Containers enter mkt.

33 hank You For Your Time Ron Sucik RSE Consulting