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Wednesday | 11 October, 2017 | 10:01 am

Transportation

By Gretchen Salois

On the road again // Industry waits on Congress to pass infrastructure spending bill

CONTENTS   
> AEROSPACE
> AUTOMOTIVE
> COMPUTERS + TELECOM
> CONSTRUCTION
> DEFENSE
> ENERGY
> HEAVY EQUIPMENT
> TRANSPORTATION

 

October 2017 - Major railroad infrastructure improvements are contingent on government funding. In September, the House of Representatives passed a $1.2 trillion omnibus appropriations bill, including transportation funding.

The bill includes $17.8 billion in discretionary appropriations for the U.S. Department of Transportation. The Federal Railroad Administration receives $2.2 billion and the Federal Transit Administration receives $11.75 billion. The bill allots Amtrak $1.4 billion, which includes $328 million for Northeast Corridor grants and $1.1 billion to support the national rail network. Inspections, training and maintenance/safety for physical rail infrastructure are funded at $258.3 million.

On the freight side of the sector, TTX Corp., which leases railcars, reported in August that the Ports of Long Beach and Los Angeles experienced a 7.9 percent increase in import cargo loads that were transloaded to rail during the second quarter 2017 compared to the same 2016 period. TTX estimates that 33.1 percent of import cargos were transloaded and shipped inland by rail, up from 32.7 percent during second-quarter 2016. Inland point intermodal shipments grew by 2.1 to 753,916 TEUs during second-quarter 2017 versus a year earlier.

The Association of American Railroads includes U.S. and Canadian railroad operators. AAR’s annual Class I Railroads report, released last May, said its members posted operating revenue of $457.91 million in 2015 and the threshold was expected to be lower for 2016 at around $447.4 million.

There was a surplus of railcars during the recession as shippers had too much product and not enough consumption. Demand for rail capacity has since revived.

For example, Tokyo-based MUL confirmed that it will expand its portfolio from 5,000 railcars to 25,000 railcars over the next four years and signed a multi-year purchase commitment for 6,000 new railcars from Greenbrier Companies Inc., based in Lake Oswego, Oregon. Deliveries commence during fourth-quarter 2017 and continue through 2020. Further, MUL will obtain all its new railcars exclusively from Greenbrier through 2023.

Lighter load

Lightweighting is no longer a passing fashion. “It’s here to stay,” says Antti Lindstrom, principal analyst, IHS Markit Automotive-MHCV. “Improving fuel mileage will be the primary driver of any operator, small or large,” which works to lower variable costs.

The trucking industry is particularly sensitive to weight issues, Lindstrom adds. “[That’s] because of the balance between vehicle weight and the cargo-carrying capacity versus compromises in vehicle strength,” he continues. “Wheels, trailers and all superstructures in general are being aggressively developed for lighter weight.”

Vehicle lightweighting has had the most impact on steel, aluminum and magnesium producers. “Each industry is moving quickly to innovate new formulations, processes, joining methods and uses for their metals,” says Michael Robinet, managing director, IHS Markit Automotive Advisory Services.

Fleet operators must consider necessary truck repairs to keep vehicles moving. “U.S. trucking fleets are preparing for a possible increase in freight volume while not aggressively expanding their truck numbers at this moment,” IHS’s Lindstrom says. “Large portions of fleets were replaced during the market boom in 2015. Operators are looking to constantly improve utilization rates and balance transport needs with vehicle longevity.”

Vehicles of economy

Domestic metals manufacturing is also on the forefront of light-duty vehicle fuel economy. In September, Ganesh Panner, chairman of the Aluminum Association’s Transportation Group, testified before an Environmental Protection Agency public hearing to emphasize the importance of regulatory certainty to the aluminum industry.

Since 2013, aluminum companies have invested $2.3 billion in U.S. plant expansions, Panner says. In large part, that investment was in response to more stringent mileage requirements for passenger cars but Class 5-8 truck builders have also responded to the mandates for greater fuel efficiency.

Under the Trump administration, Paneer says, “We have no indication from anyone in the industry that there will be a reversal of the [EPA] standards,” which were crafted by the Obama administration. “In fact, we are seeing a strong pull from customers to use aluminum in more of their designs.”

The same goes for CAFE standards because although the standards goal has been questioned, a reversal is not expected. “We will still reach the same mass reduction levels,” Paneer predicts.

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