Slow Progress on Infrastructure

John Wagner's latest article explores some of the key issues with infrastructure spending and the MAP-21 reauthorization

Dear Friends,

One of the key issues I’m following is infrastructure spending and the MAP-21 reauthorization that needs to happen by the end of May. MAP-21, the Moving Ahead for Progress in the 21st Century Act, will be granted a patch job as the latest projections show the Highway Trust Fund running out of money by August. 

The long-term intent is to look at this issue as part of a larger tax plan and I just don’t see Congress agreeing on anything regarding taxes until a new President is seated.

User fees are declining as more fuel-efficient trucks and cars consume less fuel and owners are paying less fuel tax. The advent of electric cars and hybrids has made the current method of taxation arcane. The President, with support from Rep. Paul Ryan, has been trying to sell the idea of letting companies repatriate foreign-held money at a special tax rate that would be used to fund infrastructure, but I would be surprised to see this go anywhere soon. 

old bridgeIn the meantime, bridges rust, highways are operating beyond their useful design capacity, and congestion increases.
Washington is going to kick this can down the road a little longer as the U. S. creeps towards a third world highway system and infrastructure.

On The Roads

Earnings reports are coming out at this time of year and it appears that the trucking industry is on sound financial footing with LTL and truckload carriers are reporting strong profits. 

Capacity appears to be available as the economy slowly improves and rates are holding steady. According to load board operator DAT, in the last week of April dry van rates fell one cent a mile and spot market load volume fell 2.9 percent. 

Internet Truckstop likewise reported a down market in April, with volume falling 4.5 percent from March. 

The seasonally adjusted FTR active truck capacity utilization rate dropped to about 95 percent in the first quarter, after staying above 100 percent throughout 2014. That means yet another measure of capacity shows a loosening in truck availability. 

The takeaway from this is that if the economy continues as it is today, the predicted growth in truck rates will moderate as more capacity becomes available. If we see a surge of retail spending and growth returning to manufacturing, then capacity will shrink as it did last year and carriers will be inclined to go back to the well for more money. 

Another factor that could impact capacity would be a major hurricane hitting a coastal area or some other major event suddenly shocking the economy and sucking up truck capacity.

Self DrivingCarriers are growing fleets but are having trouble finding drivers, which I know is old news. What I found new and interesting this week is news from Daimler Trucks North America about the first self-driving commercial truck licensed to operate on U.S. highways. This new truck isn’t driverless, but the driver has a lot less to do when on an interstate highway, as the truck drives itself. 

A driver is still needed to back in a trailer, load, and operate on local roads, but once the truck is on an entrance ramp, the driver can kick back and relax as the truck uses sensors and collision control systems to drive itself.

On The Rails

In railroading, the Association of American Railroads reported intermodal traffic rising 5.7 percent for the week ending May 2when compared to the same week last year. U.S. railroads handled 282,696 intermodal trailers. 

Railcar volume fell 4.8 percent in the same year-over-year comparison for the week. Some categories gained in volume, such as motor vehicles and parts, which grew 0.8 percent. 

The Intermodal Association of North America (IANA) reported that despite the strikes and work slowdowns at West Coast ports, truck/rail shipments grew 2 percent in the first quarter. Southeast volume grew 9.9 percent including domestic and international volume. As a comparison, the Southwestern U.S. was affected by the port disruption, handling 5.7 percent less volume. 

Here at Wagner

At Wagner Logistics we continue to work with clients and prospects to solve challenges as inventory levels vary due to demands from our customer’s customers. Several projects are in process and we are looking forward to a successful first half of the year. 

Transportation volume continues to be strong from our perspective and the team is performing very well.  

If you are looking at your warehouse network and need a new provider to replace a weak one, please give me a call. If you find yourself in a capacity crunch in moving loads on budget and on time, we at Wagner love a challenge. Bring it!

Have a great day, 

John Wagner Jr

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