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Trade, Economy, and Transportation Predictions for 2017

Posted on Thursday January 19, 2017 by admin

AmericanShipper.com published a recent article by Walter Kemmsies, the managing directory, economist, and chief strategist for JLL Ports Airports and Global Infrastructure. Kemmsies identified a handful of trends relevant to the transportation industry which he believes will impact the industry in 2017 and beyond. What follows is a summary of his comments specifically as they pertain to:

  • Trade
  • E-commerce
  • Distribution
  • The Ocean Container Carrier Industry
  • U.S. Transportation Infrastructure
  • Technology

 

Trade

Of interest is that Kemmsies specifically avoids discussing macroeconomic issues given the recent political disruption in some countries. New world leaders and changes in the European Union have the potential to dramatically alter existing trade policies and regulations applicable to freight transportation.

What the article does say is, “Prices of commodities, including energy, metals and agricultural goods, have declined in the last two years due to a combination of slower demand growth, increased production capacity, and a stronger U.S. dollar. This has dragged on investment spending globally and dampened the volume of world trade growth. With improving growth prospects in much of the global economy, demand growth could rise and the dollar could weaken as other currencies strengthen.” This is expected to be a boon to US manufacturing and related industries.

In addition, since the expansion of the Panama Canal, the Gulf of Mexico has been preparing for direct shipping to and from Asia. Increased direct imports to the Gulf Region from Asia, would enable the re-positioning of shipping carriers and freight moving equipment thus in turn supporting the expansion of ocean going transport in the region.

E-Commerce

E-commerce will continue to grow as an increasing number of households have secure, reliable and cost-effective internet service and with the expanded use of smartphones and tablets. A major differentiation in the competition for e-commerce sales is the order-to-delivery time and price for shipping. Large international sellers are currently leading the shift from retail to e-commerce. The question is how will mid-sized retailers stay competitive? Kemmsies posits that mid-sized retailers might form cooperatives to achieve economies of scale in for logistics operations so that they can offer more competitive order-to-delivery times and secure favorable rates.

Distribution

Despite considerable construction of new distribution centers, there are very few vacancies. Distribution center real estate is selling at a premium in major port cities and inland markets related to increased transloading from the spread of e-commerce. Due to the fact that some areas contain a cluster of distribution centers, congestion is a real concern. There is also the concern that labor availability might not keep up with expansion, which would strain the ability of these centers’ to quickly move goods in and out driving demand to secondary markets for fulfillment.

Ocean Container Carrier Industry

The ocean container carrier industry has been undergoing a system-wide restructuring. The industry has seen mergers, bankruptcies, container ship scrapping and a sell-off non-core assets to reduce costs and generate cash. This includes the sell-off of marine terminal facilities which has proven to be an acquisition opportunity for investors who have been funding the consolidation of these facilities. Capacity reductions combined with an increase in global trade would stabilize ocean carrier rates sooner than is currently anticipated.  Reduced choices and back-ups at terminals will ultimately impact how cargo owners choose to route their goods.

U.S. Transportation Infrastructure

The U.S. needs to improve and repurpose its transportation infrastructure to meet the needs of a 21st Century economy. An increase in investment spending could boost economic growth, which would benefit the industrial and construction sectors, commodity shipping and the bulk liquid transportation industries.

Technology

Technology continues to progress at a faster than expected rate. Progress in the area of self-driving vehicles is going to help some companies, while negatively impacting others. Each company must judge the potential for leveraging technological developments. The bottom line, look forward to 2017 and beyond, and engage in strategic discussions in order to remain ahead of the curve.

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