Tag Archive for market share

Is price signaling subject to future anti-trust prosecution risk?

These news reports about iron ore present an open economic question as some mining companies use the news media to signal “Market Supply” changes to their competitors.

Might come back to haunt them later in when attorney generals in the EU, the US, or China consider the tangled web of supply and demand.

The Future accusation could be that they are signaling their competitors as to supply based pricing shifts. Eventually may result in a massive due diligence regulatory hunt for irregularities.

The claim will be that suppliers used the new releases to signal a collusion to economically try and drive prices up by collectively reducing supplies.

Here is a current “supply change” news report as an example circulating this week.

As for rail companies, the signaled message continues to project much lower resources traffic like iron ore and met coal than is probably in your current strategic rail traffic plans.

See: http://m.miningweekly.com/article/metals-investors-look-for-miners-to-cut-supplies-to-lift-prices-2015-07-03

A few points reported include these commodity alerts.

On April 30, Brazil’s Vale, the world’s top iron-ore producer, said it was considering reducing forecast iron-ore production by up to 30 million tonnes over the next two years. Rio Tinto is the second-biggest producer of the raw material for making steel.

Among base metals, the main focus will be on aluminium and zinc, analysts said. “Aluminium tops the list in terms of potential and much needed production cuts in the Western world”

“Top producer Rusal of Russia said in April it might idle 200 000 tonnes of capacity.”

“US group Alcoa said the month before it was reviewing 500 000 tonnes of smelting capacity.” “On Tuesday, Alcoa said it would permanently close its Pocos de Caldas smelter in Brazil, which has capacity of just below 100 000 tonnes per year.”

Economics of a MODERN rail box car (wagon)

From multiple recent news sources.

The railroad box car is threatened with economic extinction.  At least in North America.

No longer the most used piece of shipper equipment. Far from it, Here are a few marketing metrics.

Only THREE PERCENT of North American rail traffic moves in the older technology boxcars.

Shippers paid a noticeable approximate $6 billion in rail freight rates to move their products. That is ~8% of North American industry’s total railway revenue, (according to AllTranstek LLC).

Today, a modern engineered boxcar model would be built at a size of about 60 feet lengthwith an axle load rating of about 33 metric tons per axle when loaded to a maximum weight of 286,000 pounds. Today, that new boxcar can cost between $125,000 and $135,000 if bought in North America.

The older boxcars rent out at between $450 and $700 a month based on their original purchase price on ongoing maintenance costs. But the new boxcars will have a rate closer to $1,000 according to a report by Richard Kloster, senior vice president of AllTranstek.

US Intermodal Rail growth versus truck growth may be slowing after five years…

Intermodal Rail growth from truck may be slowing after five years…

A report in the JOC suggests that U.S. shippers are finding it more and more difficult to rationalize shifting their cargo from highway to rail.

Why?  Questionable service reliability and accelerating intermodal rates are to blame, according to intermodal analysts and a recent shipper survey.

For more details see http://www.joc.com/rail-intermodal/class-i-railroads/signs-point-us-shippers%E2%80%99-slowing-intermodal-conversion_20150617.html?destination=node/3197246%3Fmgs1%3DfafdkhKWld

And contact Reynolds Hutchins at reynolds.hutchins@ihs.com

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A few highlights from published sources:

A Wolfe Research survey of roughly 600 shippers, intermodal share gains have slowed to their lowest level in nearly five years.

In the first three months of 2015, shippers diverted 1.3 percent of their volumes from truck to rail, down nearly 19 percent quarter-over-quarter. On the flip side though, shippers moved 1.6 percent of their rail volumes to the highways during the last quarter.

The Wolfe Research found that this is the second straight quarter that shippers have indicated a net freight diversion from rail to truck, after four years of the exact reverse pattern.

WARNING PICKED UP IN RR FINANCIAL CONFERENCE IN MARCH

Over the past six months, the Cass Intermodal Price Index — a measure of “all-in” intermodal costs including rates and fuel surcharges — has risen more than 4 percent.

In the period, U.S. contract truckload rates rose only half that at ~ 2 percent, according to the Cass Truckload Linehaul Index.

SELECTIVE RR INTERMODL MARKET VOLUME CHANGES

CSX Transportation reported total intermodal volumes were up only 1.2 percent year-over-year in its first quarter.

Norfolk Southern Railway, reported intermodal gains, up 5 percent. Further west,

BNSF Railway reported port congestion among other factors had pulled down its intermodal volume roughly 5.5 percent for the quarter.

Over the longer term, a number of experts still expect railroads “to take market share from trucks” is the conclusion from Wolfe Research in its latest report.

The railroads continue to aggressively invest capital to improve track capacity and deploy more train equipment and train crews.

BNSF, for example, has trumpeted reports of significantly improved intermodal service and performance metrics. According to BNSF, since the fourth quarter of 2014, BNSF intermodal has experienced overall improvement with velocity up 6 percent since the beginning of November and on-time performance up nearly 20 percent since the middle of that month.

Log onto the Journal of Commerce for their complete report.

Poor intermodal rail freight German 1st Qtr results suggests strategic issue

A news report tonight in the IRJ from German sources suggests a broader strategic question. What role does proven rail engineering technology offer a better growth future for Europe’s rail freight sector?

Let’s start with what was reported tonight. GERMANY’s railfreight industry has suffered a disappointing start to 2015 says the headlines. Germany’s federal statistics agency Destatis on June 3rd reported the largest decline in first quarter traffic since the height of the financial crisis back in 2009.

Overall rail freight traffic dropped 4.2% compared with the first quarter of 2014 to 88.1 million tonnes’

In the first quarter 2015′ —

International traffic fell 4.9%, —

German domestic traffic declined 2.1%. —

German rail freight intermodal traffic at 1.4 million TEU units was down a significant 12.8%

The posted rail results gives us the chance to ask about the real prospects for rail freight in Germany and Europe. Here is a short discussion

LENGTH TOO SHORT; HEIGHT TOO SHORT; WEIGHT TOO LIGHT

The German rail unit does not have doublestack container capability like the North American railways offer. With better stack train engineering and routes the North American rail companies have seen intermodal growth rates at a pace generally twice the national GDP rate of change — pretty consistently since 2009.

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