Economic Climate - Transportation
A Message From Jim McConoughey
Just like many industries, transportation is feeling the effects of this economic downturn. Transportation is the second largest industry in this region. We have a large section of Central Illinois employees who do behind the scenes work with transportation and logistics.
The hardest hit portion of the transportation industry is the trucking sector. Business is down 15-20% mainly because of the decline in consumer goods. The rail system hasn’t been hit as hard because it has a buffer of sorts with other business to fall back on like coal and agricultural products which are always moving.
The railroad has quite a presence in the Peoria area which is surprising to many. We are served by five (out of seven) class 1 railroads. They are all freight lines primarily dealing with manufacturing based loads. The hits on manufacturing in our region have reduced some rail car loads but the impact hasn’t been as severe on the railways.
Waterways transportation infrastructure is affected even less by the recession. That’s mainly because the commodities hauled here aren’t as seriously affected by economic downturn. Grains are big business for river and it’s only down approximately 3%. The commodities that are really hurting are construction materials.
The river is a huge piece of our local economy. So far because it’s holding up well. We haven’t see a lot of job losses and the traffic bases are still balanced. We turned to the Executive Director of TransPORT, The Heart of Illinois Regional Port District for more on the industry.
Steve Jaeger:
The Transportation Situation:
A National Overview and Local Update
By Steve Jaeger Exec Dir. of TransPORT
The most severe consequences of the global economic slump have affected international transportation of consumer goods. For the period August through November 2008, the traditional holiday shipping season, merchandise imports were down 11% in 2008 versus the previous year. This decline was generally borne out by actual holiday sales figures. The slow season following the holiday rush, from December through the first week of January, we were down by 9%. Now we're seeing around a 16% decline.
Reduced activity levels are impacting all transportation players, but not equally. American railroads, scrambling to add new capacity to their physical plant, are momentarily placing many capital expansion plans on hold. The falloff is very palpable: the Galesburg rail hub on the “Transcon” main line of BNSF has reported 110 daily train movements today compared to 150 trains a day just a year ago. Fortunately, the railroads have other traffic bases, like coal, grain and plastics, which have not fallen off the table like consumer goods and automobiles. The rails will lay off some staff and defer investment, but will emerge from the downturn in reasonably good shape.
Not so for the international ocean carriers that operate the global fleet of containerships. For these multinationals, the slump could not have occurred at a more unsavory juncture. Ship lines have liberally ordered new and larger vessels over the last five years, and many of these new buildings are about ready to emerge from shipyards worldwide. But trade volume has plummeted so drastically that these carriers cannot fill the ships they already have. Accordingly, freight rates have plummeted and vessels are being laid up to await better times. Maersk Line, the world industry leader, forecasted on January 12 that the container shipping industry is unlikely to recover commercially before the end of 2010 at the earliest.
On the river system and the Illinois Waterway in particular, there’s an obvious commercial blip but nothing resembling the drastic declines elsewhere. That’s because barge transportation is primarily a handler of large quantities of dry and liquid commodities, none of which have been clobbered by the downturn like consumer goods. River carriers handle grains and other agricultural products, as well as coal, refined products and liquefied natural gas. They have seen a drop of movements of crushed stone (thanks to hard times in the construction industry) and import steel (due to shifting market patterns and protectionism threats). River traffic nationwide is down only 3%, and indications are that it’s about the same on the Illinois Waterway.
On the real estate side, tight credit and the generalized slowdown are starting to take their toll on developers of warehouses, distribution centers and logistics hubs. Building new capacity on “spec,” all the rage as recently as a year ago, has all but ceased. Rising vacancies, higher construction costs and limited financing will limit near-term plans. Actually, the warehouse segment is faring somewhat better than other commercial real estate sectors, but short term weaknesses abound. The big players and real estate investment trusts all say that they will be highly selective in deploying capital.
March 30, 2009