North American Freight Trends and Issues Global Insight World Economic Outlook Conference October 26, 2006 Andreas Aeppli
North American Freight Trends and Issues Freight, trade and economic growth Handling the capacity crunch Global Insight developments
Growth in Freight Demand is Expected to be Steady Major drivers consist of population, economic and growth in foreign trade, plus supply chain practices Shifts in supply chain practices have contributed substantially to traffic growth over the past 30 years GI forecast points towards continued growth in transportation demand slightly in excess of GDP growth Growth in truck volumes expected to outpace all other modes
Freight Tonnage Forecast by Mode, 2004-2035 Net Freight Tons (in Billions) 35 Truck Rail 30 Water Other 25 Air With moderate economic growth at about 3 percent CAGR, freight tonnage may double by 2035 (preliminary forecast) 20 15 10 5 0 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Source: Global Insight, Inc., TRANSEARCH, 2004 Year
Trade Growth, 1997 to 2030 Value of U.S. Global Trade Compared to U.S. GDP Real GDP 25 Real GDP Trade Value Compared with GDP 20 15 10 5 0 1997 2001 2005 2009 2013 2017 2021 2025 2029 Year
Comparison of Truck Highway Units 2005 and 2035
Comparison of Rail Volumes - 2005 and 2035
Major Freight-Truck Bottlenecks, 2004 Source: Cambridge Systematics, Inc., An Initial Assessment of Freight Bottlenecks on Highways, for FHWA, October 2005
Major Freight-Rail Choke Points and Congested Areas
The Increasing Cost of Our Transportation System Capacity constraints are present in all major modes; at present, these constrains are primarily located in metropolitan regions, but in the future they will become far more pervasive. Total logistics costs have been rising after bottoming out in 2002-2003 In 2004 highway bottlenecks caused 240 million hours of delay and cost truckers $8 billion in lost time; urban Interstate interchange bottlenecks accounted for most of the delay about 124 million hours of delay at a cost to truckers of $4 billion From 1994 to 2006, fuel cost (in current dollars) has tripled Foreign trade is consuming capacity previously available to domestic producers
Estimated Highway and Transit Program Levels and HTF Account Balances Assuming Level Funding After 2009 Dollars (in Billions) 50 40 30 Highway Program 20 10 Transit Program 0-10 Transit Balance -20-30 -40 Highway Balance 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Cambridge Systematics
How Do We Address Capacity Issues? With constrained funding, many strategies must be pursued: Expanded private involvement in infrastructure Adaptation of private supply chain logistics to changing circumstances The supply chain responds quickly to changing conditions; infrastructure cannot. While such changes usually happen all by themselves, they need to be understood and recognized from a micro and macro perspective. On highways, perhaps we can t afford to invest everywhere. Prioritize by creating a core network, similar to what the railroads have done: Optimize operations: continuous monitoring, maintain fluidity, improved maintenance strategies, etc. Understand and respond to trends and needs of economic sectors by core network segment, linkage to regional economy Generate revenues to support core network at top level
Freight Investment Payback
Filling the Gap With Private Investment? Private investment favors projects with clear, stable and immediate returns Though the sector is large, individual entities in the private transportation industry are small relative to capital requirements. Therefore the availability of capital is limited to very narrow activities. For large-scale solutions individual investment is insufficient. Cost of large investments must be shared by many users Broaden concept of proposed rail investment tax credit beyond railroads to cover other types of transportation infrastructure. There is a shared interest in freight transportation capacity, thus increasing revenue through user fees is a necessary part of the solution.
New Global Trade and Transportation Capabilities European Inland Trade Model (EITM) Connect international sea trade with inland movements within Europe. Scheduled for release in 2007. Domestic inland trade Connect overseas trade with inland traffic in the U.S. Hazmat Service Provide emergency planning agencies a picture of hazardous goods movements across all modes within a region
Andreas Aeppli Principal Global Insight, Inc. 24 Hartwell Avenue Lexington, MA 02421 +1 781 301-9075 Andreas.aeppli@globalinsight.com