Today's Pickup: CSX is coming after trucking

 ( Photo: Wikimedia Commons )

(Photo: Wikimedia Commons)

Good day,

FreightWaves’ chief economist Ibrahiim Bayaan reported this morning that demand for freight is likely to remain strong in the economy, as the manufacturing and construction sectors continue to see solid gains. Strong performance in sectors like mining and automobile production, when coupled with a stellar Q1 earnings season, indicates that fundamental economic activity—which is strongly correlated to demand for freight—will continue to grow steadily.

The capacity side of the industry—trucks and drivers—has not and is not expected to loosen up, contributing to an inflationary climate for transportation and logistics costs. 

Did you know?

FreightWaves’ national tender-rejection index has fallen from about 26.8% on March 25 to about 21.3% today; higher contract rates are keeping carriers satisfied, for the time being.

Quotable:

“What we’re trying to get to is taking something that is moving in a straight line, rather than a crooked line, is less miles, and getting paid the same amount for doing it.”

-James Foote, CEO of CSX, on precision railroading in yesterday’s earnings call

In other news:

Hapag-Lloyd explores priority baggage concept for container shipping

Would you pay more to have your container loaded last and unloaded first? Hapag-Lloyd has confirmed that they’re exploring a new model based on this idea. (Splash 247)

Metals gripped by turmoil as Rusal’s sanctions fallout spreads

Consumers, manufacturers and traders are scrambling to secure supply cut off by Rusal, the largest aluminum producer outside China. Aluminum reached a six-year high and nickel jumped the most since 2009. (Bloomberg)

UPS goes Groupon, launching discounts for retailers

UPS is taking a page out of a retailer’s playbook, offering discounts on everything from Costco memberships to luxury clothes and Disneyland tickets to loyal customers. (Reuters)

CSX is back on track

The railroad reported Q1 profits of $695M, up from $362M year-over-year. CSX’s operating ratio for the quarter improved 950 basis points to 63.7 percent from 73.2 percent in the prior year. (WSJ)

project44 raises $35M Series A round

Logistics technology provider project44, which builds software that connects transportation operations in the supply chain, has raised $35 million in venture-capital funding to expand beyond its North American base. (WSJ)

Final Thoughts:

In yesterday’s earnings call, CSX CEO James Foote said the railroad was deliberately going after truckload carriers’ business. “The big area of opportunity is to convert those customers using trucks for reliability to your network on the merchandise side of the business,” Foote said. “Half the intermodal business is looking just for price, and the other half is looking for just price but at the same time a real high premium on service. So an area where we can focus on and do the best good for CSX is on the merchandise side of the business, and we will be transitioning.” However, Foote added that he expects that push to be more in the "out" years of the plan to 2020.

Hammer down everyone!

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