2011 Current Issues & Trends

Affecting Intermodal

Ron Sucik RSE Consulting

CCIBIntermodal Seminar

October 5, 2011

Current Situation and Key Facts to Keep in Mind

Intmdl Lds Up +5.8% over 2010. Down 3.7% to 2006.

Int’l traffic still more than half of Intermodal loads.

40% 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 2011. Exports increased 9%.

Containerized imports to rise about 3.6% during 2011.

Ron Sucik RSE Consulting

Ron Sucik

Selected States Population Change Compared to United States Population Change 1990 to 2000

13 % 14 %

2 3 % 2 1%

15%

2 6 %

2 4 %

0%

5%

10%

15%

20%

25%

30%

UnitedStates

California Texas NorthCarolina

SouthCarolina

Georgia Florida

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Geography & Demographics

1997 Import TEUsWest 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%

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2008 Import TEUsWest Coast 75%LA/LB, Oakland, Seattle, Tacoma, Vancouver

East Coast 25%Gulf Coast

NY, NJ, N. East

South East

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Which Route to the Midwest

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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)

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Total Intermodal LoadingsM

illio

ns

Source: IANA Intermodal Market Trends & Statistics

10.3 10.2

11.2

11.9

12.9

13.6

14.2 14.113.7

11.7

13.413.7

10.0

11.0

12.0

13.0

14.0

15.0

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 10 11

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Intermodal Loads by Type

1999 - 2010

Source: IANA ACT Research Co., LLC: Copyright 2011

2.2 2.4 2.5 2.7 3.0 3.1 3.1 3.3 3.6 3.8 4.0 4.5

2.9 2.6 2.4 2.3 2.4 2.6 2.6 2.4 2.1 2.1 1.61.7

4.8 5.3 5.4 5.96.5

7.1 7.9 8.5 8.3 7.7

6.1

7.2

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0Intermodal Loads (millions)

Dom Cont Dom Trlrs Internatl Cont

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US Rail: Containers on Flat Car (COFC) 4-week moving average

August '06 - September '11 (9/24/2011)

Source: AAR ACT Research Co., LLC: Copyright 2011

06 07 08 09 10 11

0

50

100

150

200

250

300

-50

-100

Loads/week (000)

0

10

20

30

40

50

60

-10

-20

Y/Y % Chg

US Rail: Trailers on Flat Car (TOFC) 4-week moving average

August '06 - September '11 (9/24/2011)

Source: AAR ACT Research Co., LLC: Copyright 2011

06 07 08 09 10 11

0

10

20

30

40

50

60

-10

-20

-30

-40

-50

Loads/week (000)

0

10

20

30

40

50

60

-10

-20

-30

-40

-50

Y/Y % Chg

TOFC VS COFC

Ron Sucik RSE Consulting

omestic Intermodal demand continues to show growth versus prior year omparisons.

Domestic Intermodal Volume

ternational Intermodal showed slower inbound US freight volumes in July. gns of seasonal pickup are emerging.

nternational Intermodal Volume

US Import Container Volume Growth2011 vs. 2010 (January – June)

%

%

%

%

Jan Feb Mar Apr May June

Total Imports US WC Imports US EC Imports

Source: Port WebsitesYTD Growth: West Coast = 4.5%, East Coast = 5.3%

Import/Export TEU Projections are Strong

0

5,000,000

0,000,000

5,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000 Imports (U.S. TEUs) Exports (U.S. TEUs)

Imports 2014 vs. 2011: +3.2 M TEUs (+18.4%)

ub Group’s rail partners have invested nearly $30 billion over the past five ars improving their overall product and service offerings.

Railroads Continue to Invest

$2,242 $3,100  $3,100  $2,500  $2,488 

$3,300 

$2,014 

$2,248  $2,167 $1,991  $2,600 

$3,500 $1,178 

$1,341  $1,558 

$1,299 $1,743 

$2,200 

$1,639 

$1,773  $1,740 

$1,447 

$1,800 

$2,000 

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2006 2007 2008 2009 2010 2011 EST

RAILROAD CAPITAL EXPENDITURES

UP BNSF NS CSX

Road vs RailPUBLIC INFRASTRUCTURE PRIVATE INFRASTRUCTURE

Publicly Funded/Maintainedad Beds Built Beginning 1950’sCost to Improve or Replace?• Minneapolis Bridge ($234M vs

$5M)• Cost to Expand?

• Private Property of Corporations• No Return = No Investment

• 5-10-20 Year Commercial Plans• Adapting To Economic Changes

• Expanding Capacity• Partnering With Municipal

Fast, Reliable Solutionshe West

oast ovides e dustry’s stest ansit mes.

Shanghai, China

Atlanta

Columbus Croxton, NJ

DEPARTS DESTINATION IPI (Rail Intact) TRANSLOAD ALL WATER

Shanghai Atlanta 20.5 Days 21.5 Days 26 Days

Shanghai Columbus 18.5 Days 19.5 Days 31.75 Days

Shanghai Croxton, NJ 18.5 Days 19.5 Days 29 Days

Chicago

Cincinnati

Columbus

Pritchard Roanoke

Norfolk

Detroit

Harrisburg

Philadelphia

NY/NJ

MechanicvilleAyer

Titusville

Jacksonville

Atlanta

Charlotte

Lynchburg

Shreveport

Meridian

Birmingham

New Orleans

Memphis

Bethlehem

orridor Projects

Truck/Rail Intermodal Market Share

Mileage Blocks

Truck Rail Intermodal

Total Market Truck Share Rail Share

500 to 749 17.8 1.2 19.0 94% 6%

750 to 999 10.1 2.3 12.4 82% 18%

1000 to 1499 7.7 2.0 9.7 79% 21%

1500 to 2000 3.7 2.1 5.8 63% 37%

>2000 2.8 4.9 7.7 36% 64%

Total 42.1 12.5 54.6 77% 23%

Millions of units

Source:  Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample

Truck and Rail Intermodal in Markets 500 Miles and Greater 

Truck/Rail Intermodal Market Share2035 Status Quo

Mileage Blocks

Truck Rail Intermodal

Total Market Truck Share Rail Share

500 to 749 22.0 1.5 23.5 94% 6%

750 to 999 12.4 2.8 15.2 82% 18%

1000 to 1499 9.4 2.5 11.9 79% 21%

1500 to 2000 4.6 2.7 7.3 63% 37%

>2000 3.4 6.0 9.4 36% 64%

Total 51.8 15.5 67.3 77% 23%

Millions of units

Source:  Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample

Truck and Rail Intermodal in Markets 500 Miles and Greater 

Truck/Rail Intermodal Market Share2035 50% Market Share

Mileage Blocks

Truck Rail Intermodal

Total Market Truck Share Rail Share

500 to 749 14.3 9.2 23.5 61% 39%

750 to 999 8.1 7.1 15.2 53% 47%

1000 to 1499 6.1 5.8 11.9 52% 48%

1500 to 2000 3.0 4.3 7.3 41% 59%

>2000 2.2 7.2 9.4 23% 77%

Total 33.6 33.6 67.3 50% 50%

Millions of units

Source:  Assessment of 2007 Commodity Flow Survey and 2007 Rail Carload Waybill Sample

Truck and Rail Intermodal in Markets 500 Miles and Greater 

One example of the dramatic benefits of shifting to rail intermodal is illustrated by the fact that just one long-distance, double-stack train between Chicago and Los Angeles can save 75,000 gallons of fuel by replacing 300 trucks, each traveling 1,983 miles.Source: Comparative Evaluation of Rail and Truck Fuel Efficiency on Competitive Corridors, ICF International,

: Future Corridor Volumes Compared to Current Corridor Capacity (Cambridge/AAR) - 2007

2035 without improvements

Below capacity

Near capacity

At capacity

Above capacity

Truck Transportation EmploymentJanuary 1996 - May 2011 (Seasonally Adjusted)

BLS AC T R h C i h 2011

96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 10 1100

50

00

50

00

50

00

50

00

50

00Employment (000's)

0

10

20

30

40

50

60

70

-10

-20

-30

M-M jobs Chg (000s)

Over 200,000 Drivers Eliminated

During Downturn of

Economy

The Sun Is Setting On The Old Trucking Model

PAST (low energy costs)

ESENT (modest energy costs)

URE (expect higher energy costs)

arge Company-Driver Fleets with National Scope and Scale

• Company Operated Driving Schools Quantity of Independent Truckers for Hire

ess Burdensome Regulatory Environment (Hours of Service, CSA, Etc)

• Smaller & Regionalized Fleets• Owner-Operator Mix

• Fewer ‘Mom & Pop’ Carriers• Early Intermodal Operations

• Increased difficulty accessing capital. • Fewer Trucks/Drivers on Highway

• Regional Fleets w/Owner Operators• Non-Asset (Brokerage) Clearinghouse

R i it I t d l O ti

Does Opportunity Still Exist?

MillionsUNITS

6

4

2

7‐11 M

BNSFUnion Pacific

OTR that fitswestern intermodal 

networks

4.1 M

International

Domestic

1.5 M

3.3 M

1.8 M

1.9 M

2.2 M

Opportunity

Demand continues to increase

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

Marketplace Update

Year-over-year July 2011 Full Year 2010Domestic Intermodal 2.9% 10.6%International Intermodal -4.6% 18.5%For-Hire Truck Tonnage 3.9% 5.7%

More People – More FreightAmericans require a freight system that moves 40 tons of freight per person annually. With current population growth projections, we are looking at moving 4 Billion more

tons of freight in the next 40 years.

ith improvements in service and facilities, Intermodal is becoming more ompetitive in shorter distances, absorbing more of the projected growth in eight.

Modal Shift Opportunity

Temp-Controlled Intermodal - Phase 1

C.R. England now operates 300 reefer containers (introduced in late 2010)

• Entire fleet of lightweight daycabs has been purchased

Container On Flat Car (COFC)

ustomer Value

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

Temp-Controlled Intermodal Viability

WHAT TO TAKE HOME FROM CCIBtermodal loadings still below peak of 2006.

ailroads CapEx $40 Billion last 5 years.

early 500,000 truckers left the business.

estern carriers OTR market 7-9 million.

astern carriers OTR market 9 million.

efrigerated and Flatbed Containers enter mkt.

Thank You For Your Time

Ron Sucik

RSE Consulting