Tag Archive for infrastructure

Reports shows just how poor Brazil’s transport infrastructure is. // Two decades of progress hope — wasted on things like global soccer get them this

Something to reflect upon from a Bloomberg global news story on Oct 7, 2015

Two decades of promised growth and investment. Much of it wasted.

Now Brazil is forced to compete against nations like Mexico who have far superior road and highway infrastructure that move their supply chains. What a shame. What a mistake. Where was the oversight due diligence during all of those years?

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Gerald Lee, a former airline executive, thinks he can help ease one of Brazil’s most-absurd problems: “How do you ship large quantities of goods fast from the nation’s manufacturing hub when there’s not a single usable highway in or out of town?” Barge it down the Amazon River for a ten day transload supply chain. That is the best he can make out of a bad situation.

What happens is that products like TVs made in deep-in-the-jungle Manaus float down the Amazon River by barge to the Atlantic Ocean port town of Belem. From Belem, the goods go on trucks for pothole-filled delivery runs, many of them to distribution centers in Sao Paulo, about 1,600 miles away — and 10 days later.

MEXICO WINS

That can be more than twice as long in time as an 18-wheeler traveling a similar distance from Mexico City to the U.S. road-and-rail hub of Kansas City, Missouri. Or to even closer Houston.

When people criticize Brazil’s transportation infrastructure for being among the worst in the world, behind even Ethiopia’s, this is what they’re talking about.

Manaus, the nation’s only tax-free zone and home to 40 percent of its computer and electronics manufacturing, is just one of many reasons the World Bank says companies in Brazil spend more on logistics than in the U.S.  Moving many of Brazil’s exports can take twice as long as out of Mexico.

This was going to be fixed. But it never was.

How long will the needed investments take? No one is saying. I professionally would expect about 15 to 20 years.

The funding for long promised roads and railways is uncertain.

Heck, one point two years ago Brazil was promising foreign aid to help build Ethiopia railways. Unbelievable? Fact is often stranger than fiction.

To read the entire article, go to bloom.bg/1hrwCiI

Stunning graphs on resource capital project spending is a “wake up call” for planners

From mines around the world to the dependent rail and port projects, the changing global economics commodity cycle suggests a downer “Bear” market for projects that add to global capacity and output.

This down cycle could last from a short 2 to 3 years OR AS LONG AS 7 or more years. Strategic Planners to to rethink their now outdated assumptions from supporting logistics projects in diverse places like Mozambique, Botswana, Mongolia, Brazil, and even in the Canadian/Alaska Yukon region.

What ever capital plans for building the supporting ports and railways they had developed by big engineering companies — the underlying due diligence economic assumptions are now likely “under water” so to speak.

Billions and billions of proposed dollars in drawing board completed project engineering can no longer pass an economic feasibility test for recovery of he rail project capital P&I.

Instead these industry planners should brace themselves for at least another two years of shrinking budgets and outlays. The earliest signs of a “subdued” resource recovery might not be until early in 2018 say some experts.

But even this prediction might be too bullish. Why? Because metal prices have already fallen 12% further than they did during the bear market in the 1990s. In that bear market, capex only recovered to its pre-crash (1997) level after seven years (2004),” according to Mark Fellows.

Mark Fellows, director of consulting for a mining research firm reports that “while sustaining capital expenditure is down 13% since the peak in 2012, capital expenditure on new developments has been even harder hit.” “Spending on brownfield expansions is down 25% while greenfield project expenditure has plummeted by nearly one third” on a global basis.

Mr Fellows concludes this by comparing the current 2013-2015 downturn to the previous bear market in mining which ran from 1997 to 2002. He therefore argues that the current witnesses global capex cutbacks are far from over.

The report is published by SNL Metals and Mining. DOLLARS OF PROJECT EXPANSION PLANS AT RISK

The report finds that total capital spending across all mining companies has declined by around $70 billion since the 2012 peak to just over $150 billion forecast for this year. As one business case example, the project investment at BHP Billiton this year will be $10 billion below its 2013 peak. The world’s number one miner only has four projects in the works, two of which are almost complete, compared to 18 mine and infrastructure developments just two years ago.

In a Mining.com press story by Frik Els on 21 September 2015 titled: “This is the scariest mining chart you’ll see today”, the investor alert numbers are brought out visually.

This is another piece of economic trend evidence in my blog’s strategic theme of changing times for traffic that feeds the dreams of massive new rail freight projects.

“a Bridge Too Far” analysis?

Only the strongest as low cost per ton-kilometer cost new rail projects might be competitive.

Too many rail projects on the drawing boards are simply under designed as to the necessary competitive productivity to prosper as investment grade scenarios. Trains would be too small because they often lack big train technology design features of the most successful resource rail carriers. Axle loads too small. Train lengths too short. Clearances too shallow. Net to tare wagon rates are too low

Too many are now ill advised rail schemes. “Schemes” in North American business language generally means a buyer beware concept plan”.

In Africa alone, I estimate that as many as two thirds of “announced” rail line freight projects may be too risky to build as currently designed around old market demand and old post World War-2 rail engineering standards. That could mean as much as $25 to $34 billion of “schemes” seriously require a second due diligence look just in Africa.

Africa is not alone. The billions in proposed rail engineering in the Canadian Yukon/Alaska region also need serious market demand re-examination. If not by the project sponsors, then certainly by the investors they will approach. Brazil, Mongolia, Swaziland, Senegal — all of their rail design and expected market traffic assumptions need serious review for their current planning.

For more, log onto Mining.com

Chart Sources: SNL Metals & Mining

Greenfield cap ex spending chart

Bear market recovery projection for commodities chart

Update on Ethiopia’s Light Rail System as it starts operating // Sept 2015

Multiple reports confirm the start of light rail service in the capital of Ethiopia on 20 September 2015.  The start of service on Line #1 is actually relatively close to the promised service date.  Funding approved in 2011 assumed a two year construction timeline.

The 16.9 km north-south Line 1 line links Minelik Square with Kality and has 23 stations. A 17.4 km east-west line from Ayat to Tor Hailoch is also due to open soon. The two routes share a 2.7 km section between Lideta and Stadium.

This light rail service which includes elevated sections and tunnels, runs from Addis Ababa’s main industrial area on its southern fringe, through the trading district of Merkato to the historic center of Piazza.

I had a chance to review the affidavit Addis Ababa light rail construction process in the capital back in the summer of 2013.  Project construction and the logistics handling of imported rail materials was well organized by the Chinese company.  The track ballast section and some early rail laying were substantial as to the engineering design and initial construction delivery of product in the field.

One of the tunnel projects was a huge physical undertaking.  Well done when I inspected it.  No question that the Chinese companies can build rail projects very well according to plans.

PLANTING THE C”AN DO” FLAG IN FRONT OF AFRICAN RAIL PLANNERS

The east-west light rail line skirts the African Union’s headquarters.  This location marks a great advertising opportunity of the Chinese capabilities with this line placement in front of the African wide headquarters.

Both light rail lines are built by China Railway Engineering Corporation (CREC).

CNR Changchun (now part of CRRC Corporation) has supplied a fleet of 41 low-floor vehicles, which have a maximum speed of 70km/h.

DEAL FINANCING TERMS

China is financing 85% of the $US 475 million project. It is a loan. Not a grant.

The government agreed to borrow the funds in June 2011 from the Export-Import Bank of China.  The to be paid back rate was at the 6-month Libor interest rate plus 2.6 percent and a grace period of three years.  This from Ethiopian Finance Ministry data.

State-owned contractor China Railway Engineering Corp. was the recipient of the export financing.

The financing of the remaining 15% is arranged from other sources by the Ethiopian government.

ON-GOING MAINTENANCE

The 39-station network will be maintained by CREC and Shenzhen Metro Group under a $US 116m five-year contract.

The Ethiopian client for the continuing rail service is the Ethiopian Railway Corporation (ERC).  The ERC rail company is a government corporation with a very small staff.

TRAIN OPERATIONS

The first three to five years of light rail train operation will also be by the Chinese and not the ERC.

At one point back in 2013 the Ethiopians sent out a global request for a  consultant team to build up the Ethiopian internal organization into becoming a world class operating management team.  Then they could take on train operations management themselves.  But that internal skill building process so far appears to not have happened.

Instead of internal managers inside the  Ethiopian Railways Corp, the light rail service will be run day to day by Shenzhen Metro Group.  For at least five years.

LIGHT RAIL TRAFFIC FORECAST

The light rail total system may eventually carry 60,000 passengers an hour, according to project manager Behailu Sintayehu.

Passenger FARES will be subsidized

The maximum one-way fare on the network is about $US 0.29 to $0.30 (cents).

The light rail line operating costs is projected to be about 1.5 billion birr a year to run. Fare box revenues will not cover all of that annual operating cost.

“The government is subsidizing this transportation system. This is not for commercial purpose, it’s for the public” said a local official source to reporters.

Sources also reported that the subsidy to allow such low passenger fares will in the long term have to come out of “expected” freight operating profits from the not yet completed new standard gauge international railroad line.

This cross subsidy practice might be a logical strategy if trucking companies subsidized the passenger buses on highways But they do not.  In the long term of daily rail to truck competition, this creates an advantage for truckers.  It is incredible how state planners historically are blind to this integrated transportation fact of competition economics.  The Ethiopians are no exception to such economic flaws in policy thinking. As the become better trained in economics, this may change their thinking.

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MORE INTEL about this light rail system

THE LONG DISTANCE LINE

The freight and intercity passenger train new railway construction underway will connect the Ethiopia capital city with the port of neighboring Djibouti.

Service there may begin sometime in 2016 say current reports from Bloomberg.

Trains on this inter-nation line might also be operated by a Chinese contractor instead of by the local Ethiopia rail organization.  Too early to tell yet. There is no published report on the success or timeline of building such skills inside the Ethiopian Rail Corp organization.

The long distance line will be standard gauge (1435mm) track.  But not 33 metric ton or doublestack container train capable.

The Ethiopians have settled for a lesser freight train capacity that they received from the Chinese builders rather than adopting the North American commercial and engineering big train technology standards — and having the Chinese contract companies modify their engineering build to standards. The result will give the Ethiopian rail company a rail freight haulage capability equivalent to a 40 to 50 year old post WW-2 North American operating performance. This means missing their chance to become the best of class within the African world of freight railroads.

POWER SUPPLY

Electric power to supply these light rail and intercity train sets in a more dependable manner is to come from the Chinese financed Gibe III hydropower dam’s reservoir set for operation in 2016.  The reservoir has started filling, with its 1,870 megawatts capable of almost doubling Ethiopia’s generating capacity. This will presumably allow for a dependable service day to day performance using straight electric locomotives rather then modern diesel-electric locomotives.

MISSED DOUBLESTACK CONTAINER OPPORTUNITY

With electric power from overhead wires catenary systems, the overhead clearance for doublestack container trains could be restricted.  This overhead wire electric system as currently designed as to height above the top of the rails is another rail marketing (commercial business competition) flaw that could have improved.  How? By increasing the wire height to more than 6.7 meters above the top of the rail.  That would allow doublestacking container trains to have a far superior cost per container advantage in direct competition with highway trucking.  In the US that rail rate advantage can be as large as 50 cents to $1.40 per container moved kilometer.

These simple manmade engineering design changes would have given the resulting rail line a superior economic advantage against long haul trucking.

S. Africa Rail Gauge Conversion Policy Change Announced by Government

Sep 22, 2015 report…

South Africa now has a government transport policy to plan out a widening of the country’s existing railway tracks to international standard gauge. The geographic scope covers as much as 20,000 kilometers (12,427 miles) of track just in South Africa.

This scope would take decades to physically complete. It might cost as much as 1.5 trillion rand ($110 billion),

Cape Gauge existing track width between the inner sides of two rails is 1067mm as a design. Standard gauge design width is 1435mm.

South Africa Transport Minister Dipuo Peters announced the policy to reporters on Tuesday. The gauge conversion would bring the network in line with about 60 percent of other countries, boost capacity and reduce transportation costs, she said.

In response, Transnet Acting Chief Executive Officer Siyabonga Gama said that while the company supports a move to standard gauge, the policy “needs further investigation” to determine its viability. “We did an assessment and we found out that if we had to create 15,000 kilometers of track, we would need up to 1.5 trillion rand,” he said in an interview after the announcement. “It would be a very expensive exercise.”

STRATEGIC FLAW

The assumption is so far that almost all tracks would be converted to 1435mm. Economically, it is more likely that only the strategic high traffic volume density routes and some feeder lines would financially justify the expense of conversion. .

The economic benefits come from more stable train operating wagon movements and possible high clearance doublestack container train economics. Containers stack two high on rail cars cut the expense by as much as 35% to 45%. Stack container trains have been operating successfully in the United States for 30 years. Two decades!

Stack trains cannot physically be operated on Cape Gauge or Meter gauge tracks.

Regardless of the eventual network size, the project could take decades to fully complete. A place to start might logically be between one of South Africa’s premier container sea ports and the Johannesburg regional market.

Meanwhile, much of Africa’s rail planning is already focused on standard gauge 1435mm track for all new railway projects. Ethiopia and Kenya just as two eastern African examples.

Minister Dipuo Peters strategic announcement is simply acknowledging a prudent rail modernization approach for South Africa.

Bravo!

To read the entire article, go to http://bloom.bg/1KxjCiS Sent from the Bloomberg iPad application.

A proposed inland Australian rail freight line MIGHT NOT make economic sense –

The proposed 1,700 Kim’s of new freight railway has a capital cost estimate to build it.

IF BUILT, then it has all kinds of job creation and “soft” society economic benefits that surround the project scope like an angel’s halo.

However, there is no published traffic mix forecast. There is no train operations projected income statement for the generalized scope of possible future rail business.

There is instead a “build it, and they we come” conceptual expectation. The “they” being shippers.

There is no information about commercial rates and the shippers ability or willingness to pay those rail rates.

But there is an acknowledgement that the government will have to write the checks to pay for the capital cost.

In summary, there is very little due diligence as to the economic feasibility of this inland route as an investment. This is the kind of planning that made the recently built north-south Australian rail building project a financial disaster.

I suspect that none of these Australian inland rail proponents could ever hold a job working as rail planners for the big profitable North American rail companies like Canadian Pacific or Union Pacific.

What do you think of the projects financial feasibility prospects?

http://www.macrobusiness.com.au/2015/09/an-inland-rail-freight-line-makes-economic-sense/ Sent from my iPad

Best business ally of the U S freight railroads? Maybe it is the U.S. Congresd

Once we in the USA had a world class interstate and primary national roadway system. Now we as citizen stakeholders  can’t seem to get even basic financing from the Congress to keep it maintained.

Deferred maintenance of highway bridges and road pavement — once a trait of the northeast US railroads like Penn Central — are now a hallmark of the national gas tax financed road system.

Plenty of funding is politically for the new “Mexico border fence” infrastructure. But zero for expanding the highway system that actually handles close to 80% of the nation’s interstate freight by value, and about 50% of the ton-miles.

// Maybe it is time to send most of Congress back to school for a course in Economics 101.  As stakeholders in the outcome, we need 51% of the House and about 60% of the Senate to take & pass the economics course.

In the meantime, the only significant national capacity addition to the US freight network is from the private rail freight companies and some pipeline companies. And a few new toll road concessions.

Once investing in transport infrastructure was at about a 3% to 4% annual clip. We now have fallen in this past decade to probably about 1% to 1.5% rate. To maintain our overall world class transport freight efficiency, those anemic investment rates “are not going to get the job done.”

And that is the way things look in mid year 2015. Do you disagree?

Technical hurdles as CSX pushes towards intermodal growth with No U.S. Master Rail Plan

An 11 year plan. 7 years just to get permitting and financing in place. ====================

The Virginia Avenue Tunnel in Washington DC. is a $400 million project. CSX broke ground on in May.

The Virginia Avenue Tunnel is a critical project in the CSX broader $850 million National Gateway initiative. It is a public-private partnership between CSX, six states and the nation’s capital city. National Gateway is in effect a multiphase, 11-year undertaking to move more freight by rail between selective East Coast ports and the Midwest states. CSX is the plan developer and leading champion.

The entire Gateway Project involves double-tracking some CSX existing routes and increasing the vertical clearance for some tunnels and bridges. A CNBC report by Morgan Brennan for CNBC points out that seven of those years have been dedicated to permitting and complying with regulations. (@MorganLBrennan)

Interestingly, this is a private rail company strategic plan. The government agencies are helping finance and modify or delay the project with regulations and permits. But the government is not the leader.

WHY? CSX is looking to quadruple its rail freight carrying capacity in the 110-year-old single-lane Virginia freight rail tunnel. The tunnel is about one mile long underneath part of the city of Washington, D.C. Technically, a second parallel track will be added to allow two trains to pass at the same time. The vertical clearance height will also be increased to allow for double stacked container trains. To increase the vertical height, the tracks will actually be lowered. Today, CSX trains are restricted to the less efficient single-level intermodal train operations.

A change to double stack can have a 35% or better productivity. Reports indicate that the most challenging part of this engineering feat will be to construct these changes while the tunnel continues to allow some two dozen trains to pass per day.

The entire $850 million National Gateway initiative mirrors a similar bold move completed earlier by the Norfolk Southern for 1) its Norfolk to Ohio double stack corridor project and 2) its Shenandoah Corridor public-private partnership plan.

IN CONTRAST

In much of the rest of the world, these kind of plans are created by the government. In the U.S. business model, it is the reverse process. Private investor lead companies are the lead champions.

The entire North American double stack container train revolution was initiated in 1983 by a commercial deal between American Presidents Lines the ocean carrier and the Union Pacific railroad. Later on, various state and local governments joined in with the private railroads to expand the stack train network.

The federal government has also gotten involved. But there is no giant federal and state government master plan at work. And yet, more than 20% of the U.S. network is today stack capable.

Even without a government master plan, the United States (and Canada) are the world leaders in modern doublestack container train movements.

Emerging Markets were a long term “dog’. // Many new rail projects now “suspect”

Too little emerging market due diligence…

There is an excellent market recap analysis by Bloomberg — on Aug 5, 2015

Emerging markets and the BRICS nations were to be the darlings of investors as growth became slower in the developed world.

Massive new and expanded Railways and ports were to be built around the promoted high growth prospects.

Warnings that the prospects might not be as rosy as predicted were shrugged off. Too often it seems due diligence was overlooked. Now those high prospects require a Strategic Plan B.

“Today, after heady runs and abrupt reversals, most of the BRICs — as well as most emerging nations — look like big-time losers say many of those interviewed by Bloomberg.

The history of emerging markets is a history of booms and busts, but the immediate future may hold something more prosaic: a malaise.

Investors today confront what could turn out to be a lost decade of returns, with four or five more meager years ahead.

It was only 14 years ago Wall Street fell in love with the BRICs, the tidy acronym for four (5 with South Africa) large emerging economies that, to many, looked like sure winners. …

The MSCI Emerging Markets Index nearly quadrupled between 2002 and 2010 .

But now in 2015 that pattern looks to some like it was an anomaly.

“Very few emerging markets historically have ever been able to make it to the developed countries,” said Sharma, head of emerging markets at Morgan Stanley Investment Management Inc. “This is a return to normalcy.”

Currency Rout… “All told, developing-nation currencies have fallen to their lowest levels since 1999, and bonds denominated in those currencies have wiped out five years’ worth of gains.”

“Since 2009, the MSCI index has fallen 10 percent while developed markets have soared about 50 percent” reports Bloomberg.

Looking ahead, 14 of 23 major emerging-market currencies are forecast to decline against the dollar by the end of June 2016, according to data compiled by Bloomberg.

Forecast earnings for companies in the MSCI index have fallen to their lowest since the end of 2009.

Plans for massive new resource hauling freight railroads are ‘on hold across Africa and in Asia and Australia.

To read the entire article, please go to http://bloom.bg/1SPNlh1 Jim Blaze

Satellites Give Real Time Intel even to INVESTORS

From Bloomberg, Jul 8, 2015

Industrial intelligence gathering takes on a new skill up in the sky. Some 250 miles above the Earth, a flock of shoebox-size Dove satellites is helping to change our understanding of economic life below.

To read the entire article, go to http://bloom.bg/1HcnRj0

In Myanmar, night lights indicate slower growth than World Bank estimates. In Kenya, photos of homes with metal roofs can show transition from poverty. In China, trucks in factory parking lots can indicate industrial output (or less output).

Images from these and other satellites, combined with big-data software, are helping to create what former NASA scientist James Crawford calls a “macroscope” to “see things that are too large to be taken in by the human eye.”

Investors can mine them to pick stocks.

“This is one of those really rare game changers that come along very infrequently. For much of the nearly six decades since Sputnik first circled Earth, satellites have been exclusive. They were the domain of the richest governments and companies. Now they are much smaller and relatively cheap.

Planet Labs Inc. Is a San Francisco startup founded in a garage by former NASA engineers. He has one of the largest-ever constellations. More than 50 of its “Doves” orbit the Earth every 90 minutes, snapping high-resolution photographs each day.

Seattle-based BlackSky Global plans to start launching its fleet of 60 satellites next year Those “birds” will scan most of the globe 40 to 70 times a day.

Millions of photos are useless, of course, until they become data. That transformation is the goal for startups such as San Francisco-based Space Know Inc. Its CEO Pavel Machalek says imagery eventually will track all the world’s trucks, ships, mines and warehouses. This may attain what he calls “radical economic transparency.” He created an index of China factory production using algorithms to monitor more than 6,000 industrial facilities.

Gary Indiana is not alone… Chicago South Works review of economic loss as a Case Study // & a Philadelphia rebirth case

The US Steel South Works economic story by  Jacob Kaplan illustrates economic decay even when surrounded by great infrastructure like rail and roads and waterways.

A long Lake Michigan on the Southeast Side of Chicago lies a huge empty tract of land. Probably the largest vacant parcel of land in the city,.

It was formerly home to the U. S. Steel South Works.  Almost 20,000 people were once employed where empty fields of concrete and rubble now sit. First opened in 1882 as the North Chicago Railway Mill Company, the placement of the steel mill at the mouth of the Calumet River at Lake Michigan made for easy transport of goods and raw materials.

The South Works began a long period of downsizing beginning in the 1970s. Finally, on April 10, 1992, the doors closed for good. The mill that once produced steel beams for most of Chicago’s skyscrapers and jobs for thousands of area residents was now gone, and with it went the prosperity of South Chicago.   Like in Gary, the neighborhood became more and more economically depressed.

See review at http://forgottenchicago.com/articles/south-works/

US Steel South Works completely GONE by early 1992 US Steel Chicgo South Works at its zenith

 

SUCESSFUL URBAN CORE INDUSTRY  REINVENTION —  a Philadelphia Case Study

 Sunday, July 12, 2015 in Philadelphia Inquirer 

Ten years after the Navy Yard’s first new offices opened, plans to transform the site from a symbol of the city’s lapsed industrial might into a vibrant new neighborhood are hitting their stride.

The roughly 12,000 workers at the yard now outnumber the 10,000 or so ship workers and others employed there when it closed as a military base in 1996. The yard is estimated to have generated $77 million in local and state taxes in 2012, when its managers conducted their last economic study.

Liberty Property Trust, the yard’s main developer, recently broke ground on its 14th new office building at the site, designed by the architect behind Two World Trade Center, and expects to start two or three more offices this year.

Read more at http://www.philly.com/philly/business/real_estate/commercial/20150712_Navy_Yard_hits_10-year_mark_in_stride.html#HdmulBMvWjSuvPJz.99