By Jennifer Stoneburgh @ MaRS
May 21, 2013
After a recent discussion with friends regarding greenhouse gas emissions in the transportation industry, I walked away realizing that we hadn t ventured past personal vehicles.
We had covered some interesting topics: the fuel efficiency of different vehicle models, hybrid-electric versus electric vehicles and, of course, alternative methods of transportation, namely walking, biking and public transit. But we hadn t talked about the trucking industry at all! Which left out a significant portion of the fossil fuel-consuming, greenhouse gas-emitting transportation sector from our discussion.
In Canada alone, trucking represents a $65-billion industry, employing over 260,000 drivers. In 2006, heavy trucks accounted for 21.8 billion kilometres of transportation in Canada and medium-sized trucks accumulated an additional 7.4 billion kilometres (Canadian Trucking Alliance1).
To put that in perspective, that s about 730,000 trips around the Earth or 97 round trips to the sun. All of this accumulated mileage requires fuel lots of fuel. However, fuel requirements, primarily diesel, include not just the amount of fuel needed to move the transport vehicle from location to location, but also the energy required to run the HVAC and auxiliary power systems that are necessary to maintain the vehicle s cabin environment.
EnerMotion2, an Ontario-based startup and MaRS client, has developed a method of capturing waste exhaust heat from a vehicle and converting it into useful, practical and efficient energy. EnerMotion s Hybrid Power & Energy Recovery (HYPER) storage system is an innovative mobile waste heat recovery and energy storage system with potentially huge implications in transportation applications.
The goal of the HYPER system is to reduce operating expenses for the trucking industry while meeting anti-idling laws. The system improves the overall efficiency with the vehicle both in motion and at rest. Additionally, the HYPER system is an environmentally friendly solution that has the potential of removing thousands of kilotonnes of carbon dioxide emissions every year. In fact, the carbon dioxide reduction for a long-haul truck with a sleeper cab adopting the HYPER unit is estimated at 92 cubic metres (32.5 tonnes) per year, with an average truck in Canada and the United States realizing 55 cubic metres (19.5 tonnes) per year. The corresponding figure for the entire North American truck fleet would be 48,900 kilotonnes per year!
How does it work?
Waste heat from the truck s engine, in the form of exhaust, is captured and used to drive a refrigeration cycle similar to the process used in your fridge at home. The HYPER system is able to generate cold and hot thermal conditions with the same unit, providing a complete HVAC system for the truck s cabin and sleeper without consuming any extra fuel. Further, the HYPER unit has the ability to store thermal conditions to provide HVAC capabilities for various haul routes in a variety of environmental conditions and climates while the vehicle is at rest, thereby eliminating idling of the main engine or the use of diesel auxiliary power units. The technology offers significant operational cost savings and lowers greenhouse gas emissions.
EnerMotion is currently conducting road trials of their HYPER system on their own heavy-duty truck. They most recently returned from Florida, where the trials yielded very positive results. The company will be expanding field trials with customers in the coming months as traction increases all across North America.
And the award goes to
EnerMotion s HYPER system was recently chosen among thousands of submissions to receive a 2013 Invention Award from one of science s most widely read magazines, Popular Science3, which has more than seven million readers. The magazine s May 2013 issue announced the winners of the 2013 Innovation Awards, giving EnerMotion top honours in the energy category with the award for Hot Savings4.
In a recent Meet the Entrepreneurs panel5 at MaRS, Jack MacDonnell, CEO of EnerMotion, talked about the difficulty of raising capital and emphasized the need to maximize use of government funding programs. Jack and his team have made full use of Canada s funding programs, which have allowed them to finance the development of HYPER.
Thus far, EnerMotion has received financial support from:
EnerMotion has also secured partnerships with strategic players who are helping the company to de-risk its technology and build out customer traction. You can see a list of EnerMotion s partners on their website6.
Advice for entrepreneurs
I sat down with Jack to discuss his business and to get some advice for up-and-coming entrepreneurs.
You ve been extremely successful in securing non-dilutive government funding. How important has this been to growing EnerMotion?
Our government funding has really helped us leverage private capital and achieve progress from one year to the next. It s a tough grind raising capital in North America, either from private investors, venture capital firms or investment banks. Having financial support from the government provides tangible differentiators between you and the next guy and there are lots of other startups out there all vying for the same capital. In my humble view, Canada has one of the most accessible and rewarding funding infrastructures in place anywhere in the world, and if you re not capitalizing on it for your own venture, you and your company are missing out.
What inspired you to tackle fuel efficiencies in the energy sector?
My team and I have been focused on energy efficiency since Day 1 of EnerMotion s existence. We realized that changing infrastructure overnight was unrealistic, but that the world needed an answer to fossil fuel consumption and harmful greenhouse gas emissions now. This is what motivated us to develop the HYPER technology, because tangible benefits are the outcome of improving energy efficiency especially in the heavy-duty transportation segment.
What is the return on investment for your technology? What s the payback period?
Industry average with existing technologies (i.e., idling primary engines or utilizing fuel-powered auxiliary power units) is approximately three-and-a-half years, according to research company Frost & Sullivan. Our HYPER technology offers payback significantly less than one year for line haul drive cycles. Additionally, our HYPER unit functions while the vehicle is in motion, unlike any other commercial system, so there is additional payback associated with the elimination of the A/C compressor being driven off the engine.
Legislation in the United States and Europe is already driving adoption of anti-idle technologies. Canada, Australia, India, China and other countries are not far behind in adopting and enforcing similar legislations. Other transportation sectors are adopting energy-efficient technologies that also contribute to the reduction of greenhouse gases. In addition to all of the vehicles on the road or off road, HYPER technology is being considered by original equipment manufacturers because of its compelling value proposition for their own customers. Mandatory adoption will be driven by clean air legislation and by the market demanding energy efficient products on a global scale.
- ^ Canadian Trucking Alliance (www.cantruck.ca)
- ^ EnerMotion (www.enermotion.com)
- ^ Popular Science (www.popsci.com)
- ^ Hot Savings (www.popsci.com)
- ^ Meet the Entrepreneurs panel (www.marsdd.com)
- ^ website (www.enermotion.com)
- ^ exemptions (oee.nrcan.gc.ca)
- ^ cleantech (www.marsdd.com)
- ^ transportation (www.marsdd.com)
- ^ trucking (www.marsdd.com)
ON THE KHYBER ROAD
When the Pulitzer Center agreed with Foreign Policy to co-publish a series of e-books on borderlands, we hoped to send great writers to explore some of the more contested regions of the world and let them use the longer-form platform of e-books to tell their stories in a deeper, more compelling way. Matthieu Aikins has done just that in Bird of Chaman, Flower of the Khyber: Riding Shotgun from Karachi to Kabul in a Pakistani Truck1, a mesmerizing account of a single trip through the Kyber Pass that somehow encapsulates the whole harrowing story of America s decade-long engagement in that region.
COMBATING FAKE DRUGS
The flood of fake drugs is an increasing threat to public health, and a subject of continuing interest to the Pulitzer Center. Grantee Esha Chhabra, writing for the Guardian2, reports on a promising new weapon in the fight to beat back the fakes: the use of mobile-phone technology to authenticate drugs. The India-based initiative is aimed at coding drugs so that consumers, even those with basic phones, can verify that what they are buying is real. The stakes are high: The experts Esha quotes say that fake drugs lead to 100,000 deaths per year.
THE FIRST 1,000 DAYS
Grantee Roger Thurow s previous book, The Last Hunger Season3, was a novel-like story about the extraordinary challenges faced by small-scale farmers in western Kenya, and the difference that new agricultural techniques and inputs were making in their lives. Roger has just launched an equally exciting project, in collaboration with the Pulitzer Center, that will track the impact of better nutrition and health practices for children in the critical first 1,000 days after conception, with ground-level reporting from Uganda, India, Guatemala and the United States. This week we feature the first of many dispatches4 as we follow Roger on this journey.
CHINA IN ZAMBIA, GOOD AND BAD
Grantee Alexis Okeowo s first report from Zambia is an eye-opening account5 of China s rapidly increasing presence in that country, and across Africa. China is making real improvements, from health care to government buildings and jobs, a local watchdog tells her, but there are also incidents of labor abuse and the sense among many Zambians that they are losing control of their own economy.
FROM BOSTON TO DAGESTAN
The alleged bombers of the Boston Marathon have family roots in the Russian region of Chechyna and one of them spent several months last year in nearby Dagestan. In an Untold Story6 our guest writer James V. Wertsch, vice chancellor of Washington University in St. Louis and a specialist on the Caucasus, says that what we don t know about the Tsarnaevs shouldn t keep us from absorbing what we do know or should about the tangled history of their native land. Washington University is one of our Campus Consortium7 partners.
- ^ Bird of Chaman, Flower of the Khyber: Riding Shotgun from Karachi to Kabul in a Pakistani Truck (pulitzercenter.org)
- ^ the Guardian (pulitzercenter.org)
- ^ The Last Hunger Season (www.amazon.com)
- ^ first of many dispatches (pulitzercenter.org)
- ^ an eye-opening account (pulitzercenter.org)
- ^ Untold Story (pulitzercenter.org)
- ^ Campus Consortium (pulitzercenter.org)
KNOXVILLE, Tenn. – Attorney Mark Tate of Savannah, Ga., law firm the Tate Law Group, which has filed a class action suit in Knoxville, Tenn., on behalf of Atlantic Coast Carriers, said former FBI Director Louis Freeh and his Freeh Group has agreed to work with trucking companies that claim they were cheated out of fuel rebates by Pilot Flying J, said The Tennessean.
Freeh’s most recent high-profile job was with Penn State University, which hired him to investigate the Jerry Sandusky child sex abuse scandal, the report said.
The Freeh Group, Wilmington, Del., declined to comment to CSP Daily News.
Louis FreehAtlantic Coast Carriers Inc., Hazlehurst, Ga., filed a lawsuit on April 20 against Pilot Flying J in Knox County Circuit Court in Knoxville. Attorneys charged that Haslam was trying to short circuit Atlantic Coast Carriers’ class-action lawsuit and asked a Knoxville judge to order Haslam to cease contacting trucking firms that may be victims of the alleged rebate scheme. The judge has denied the charge of witness tampering and a request for a restraining order that would have prevented Pilot Flying J from contacting customers.
Tate filed a lawsuit in Knox County (Tenn.) Circuit Court on behalf of Atlantic Coast Carriers against Pilot Flying J.
In a statement posted on its website, Tate Law Group said:
“Over the course of an investigation beginning in May 2011, the FBI determined that Pilot employees had been intentionally defrauding some of its customers by deliberately charging a higher price than what had been contractually agreed upon. According to recordings from inside informants, sales representatives were advised to commit rebate fraud by sending its customers less than they were owed and trained on how to determine which customers would have difficulty discovering the discrepancies. These same informants stated that the company maintained spreadsheets showing the amount owed to customers under their rebate agreements versus the amount actually paid. Federal agents searched the Knoxville headquarters last week looking for such evidence.
“The same recordings revealed that these actions were taken with the awareness and consent of Pilot executives, including CEO James A. “Jimmy” Haslam, III, president Mark Hazelwood, and CFO Mitch Steenrod.
“Atlantic Coast Carriers states through the complaint that they have been damaged because they were induced to purchase diesel fuel at a rate different than what was promised, and paid substantially more than the agreed-upon rate.”
Meanwhile, Haslam told a gathering of trucking company executives in Indianapolis on Thursday he had no knowledge of a scheme to withhold rebates, reported WATE-TV.
“Absolutely not. I will say absolutely not,” Haslam said, according to a separate report by The Plain Dealer. “I was not aware of any of this.”
Haslam was in Indianapolis for the 2013 Scopelitis Transportation Seminar, attended by approximately 400 trucking industry executives.
Haslam said his short-term goal is to make any wrongs against trucking companies right and to pay back money owed with interest.
He said there are 5,000 trucking companies involved in contracts with Pilot, and of those only 400 were involved with manual rebates. Of those, 250 saw an adjustment made.
“We are going to have a chief compliance officer. I take the blame for us not,” said Haslam.
He said though the company’s reputation has been damaged, oil companies continue to work closely with Pilot and the company is assuring customers they will continue to have the same high supply of fuel.
Pilot business is down 3%, Haslam said, but he blames that on a shrinking market.
Pilot Flying J has more than 650 retail locations and is the largest operator of travel centers and travel plazas in North America. Its network provides customers with access to more than 60,000 parking spaces for trucks, more than 4,400 showers and more than 4,000 diesel lanes, of which more than 2,800 offer diesel exhaust fluid (DEF) at the pump.
Transport Intelligence s Cathy Roberson has done a brief round up of the major forwarders first quarter results and discovered a stagnant ocean freight market and depressed air freight. However, the Americas is starting to look brighter, especially for Panalpina and K+N.
INDIANAPOLIS (WISH) – Butler University’s famed bulldog mascots made a rare appearance at the Indianapolis Motor Speedway Wednesday morning courtesy of driver Ed Carpenter.
The owner/driver is a proud Butler graduate and is seen in the front row at Hinkle Fieldhouse every chance he gets.
His pride is reflected on his car, and with Blue II and Blue III on hand with basketball coach Brad Stevens, Carpenter proudly displayed the Butler logo sticker on the machine he hopes to roll into victory lane next week.
“It’s a lot of fun being in Indianapolis my hometown, and Butler’s just down the road,” Carpenter said. “To be able to do something together and hopefully to be able to celebrate together at the end of it sounds fun, but Butler has been great to me from the time I was there and since I’ve graduated. It’s a great community and its fun to do things together.”
Having Stevens on hand has become q tradition with Carpenter and Butler.
“It has and obviously it’s fun when you get a chance to follow the race so close,” Stevens said. “This is in his hometown, and to have a sincere rooting interest, it’s fun, too. Ed’s been great to us and we re proud of him and were rooting for him, and I’m proud he put the Bulldog on his car.”
EC transport commissioner Siim Kallas has bowed to pressure from road haulage federations and shelved plans to introduce a cabotage scheme without restrictions across the EU from 2014.
Last December, France s leading road haulage federation, the FNTR, teamed up with its counterpart in Scandinavia, the Nordic Logistics Association (NLA), to oppose the move. The Netherlands transport and logistics federation, TLN, had also come out against the total liberalisation of cabotage the movement of goods within a national state from 2014.
The FNTR s efforts have paid off following active lobbying in Paris and Brussels to block the transport commissioner s commitment to liberalising cabotage at all costs in 2014, the trade body said.
The creation of a coalition of European road haulage federations against the proposed cabotage legislation had proved its worth, it added.
At a time of deep economic crisis and in the absence of harmonisation in the European Union on employment and tax regulations, the liberalisation of cabotage was utter folly. It would have cost France and other European countries thousands of jobs.
Hauliers in the 27 EU member states are at present restricted to carrying out a maximum of three domestic transport operations in fellow member states over a seven-day period, immediately following an international operation. But in 2014 cabotage would have been free of any restrictions.
The current cabotage restrictions go against the spirit of a European Single Market which guarantees the rights of all citizens to work, travel and trade freely. Nonetheless, they exist because of fears of possible abuse and lowering social standards, said EC spokesperson for Transport, Helen Kearns.
For this reason, we have commissioned a number of studies on the issue. Vice-President Kallas has also established a high level group to look into this issue.
It is clear that cabotage rules must evolve over the long term, but it needs to be done properly and in consultation with all stakeholders. That process is complex and it takes time making it difficult to deal with this issue in the lifetime of this Commission.
This week sees the UK s Export Week ; a government launched series of events around the UK to promote exporting to small businesses.
The aim of Export Week is to increase the number of small businesses that currently export. The national target set by the government is for 100,000 more businesses exporting over the next 5 years.
This would increase the number of UK manufacturers that export from 20% to 25%, and add to the UK economy an estimated 36 billion.
UK businesses can see an increase in up to 34% of productivity when they start exporting, so if you have the opportunity to export it s a no-brainer!
Small businesses might be daunted by the prospect of exporting from the UK, however, it is becoming increasingly more evident that smaller businesses can also win international business.
Of course, larger firms may already have trained staff in exporting their goods, and may even have dedicated staff for this purpose.
Smaller firms need not fear; this is where a freight forwarder can step in. By appointing a freight forwarder to handle their export shipment, the whole process can be taken care of. By appointing an experienced freight forwarder (such as Mercator Cargo) the weight can be lifted off your shoulders and you can be safe in the knowledge that your cargo is in expert hands.
Mercator Cargo is an independent freight forwarder who prides itself on offering a personal service. With a team of experienced freight forwarders at hand, we can offer a hand holding service if needs be, and can offer advice at every step along the way.
Tags: export freight, export from the uk, export from uk, freight forwarder, freight forwarder export, freight forwarder exports, freight forwarders, freight forwarders export, freight forwarding, freight forwarding export, freight forwarding exports, uk export, uk freight services45678910111213141516
- ^ Mercator Cargo Systems (www.mercatorcargo.co.uk)
- ^ View all posts in Global News (www.mercatorcargo.co.uk)
- ^ email@example.com. (www.mercatorcargo.co.uk)
- ^ export freight (www.mercatorcargo.co.uk)
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- ^ freight forwarders (www.mercatorcargo.co.uk)
- ^ freight forwarders export (www.mercatorcargo.co.uk)
- ^ freight forwarding (www.mercatorcargo.co.uk)
- ^ freight forwarding export (www.mercatorcargo.co.uk)
- ^ freight forwarding exports (www.mercatorcargo.co.uk)
- ^ uk export (www.mercatorcargo.co.uk)
- ^ uk freight services (www.mercatorcargo.co.uk)
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These services involve analysis of various goods or tasks assigned for transportation. This assists to find the most economical and safe routes for the delivery of task. Best vehicles fleet is offered within the nation to cover all coastal regions. For this they have associated with the world’s most experienced agents to offer quality logistics solutions for all international freight forwarding.
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The author of this article is an experienced writer. He has written many informative articles on various topics. In this article you can find valuable information about logistics services providers in mumbai1.
Consistent with the current macroeconomic trends, railroads started the year on a mixed note. Going by the rail traffic report for the first quarter 2013, growth in automotive and petroleum products shipments was steady while coal and grain shipments continued to cast a shadow over the rail freight industry.
According to the Association of American Railroads (AAR) rail traffic report, cumulative performance of the North American railroads (including U.S., Canadian and Mexican railroads) have fallen 1.5% year over year in the first quarter of the year. The biggest contributor to this decline was grain, which dropped 11%. Coal volumes followed closely, falling around 7%.
Going by the quarterly performance of the class 1 railroad, we see continued lower volumes from most of these carriers. One of the largest class 1 railroads in North America — Union Pacific Corp. ( UNP1 – Analyst Report2 ) — registered first quarter volume decline of 2% year over year. Another major railroad CSX Corp. ( CSX3 – Analyst Report4 ) also reported a similar level of decline in its volumes. Going forward, Canadian counterpart, Canadian Pacific Railway Ltd. ( CP – Analyst Report5 ) also experienced lackluster growth trend with flat volume growth on a year-over-year basis.
However, railroad operators like Kansas City Southern ( KSU6 – Analyst Report7 ) , Norfolk Southern Corp. ( NSC8 – Analyst Report9 ) and Canadian National Railway Company ( CNI10 – Analyst Report11 ) have shown modest volume growth, mainly driven by the emerging automotive business and rising petrochemical shipments.
Notably, despite mixed carload results, these carriers have mostly generated positive earnings in the reported quarter. The primary catalyst to this bottom-line performance was operational efficiency even in times of low market demand. Rising employee productivity, deploying fuel-efficient locomotives and undertaking railroad safety measures are some of the key drivers of profitability even in adverse market conditions.
Rail carriers like Canadian Pacific recorded operating ratio improvement of 430 basis points year over year. Continued focus on maintaining asset efficiencies, safety measures and increased productivity have been the prime contributors to Canadian Pacific s success in the first quarter. There are several other near-term growth catalysts in the railroad industry.
Rising Contribution of Petroleum Product Shipment
According to the AAR report, rail traffic from petroleum products has seen a whopping 46% growth in the three-month period ended Mar 30. According to the Energy Information Administration s (EIA) reports, U.S. crude oil exceeded 7 million barrels per day production, representing record growth since the last two decades. Further, in 2013, long-term projections of EIA suggest that this growth may also go up to 10 million barrels per day over a period of 2020 to 2040.
As a result, this surge represents a potential opportunity for revenue accretion, which the railroads are trying to tap with infrastructural development. According to industry sources, the role of crude oil as a revenue contributor has grown by leaps and bounds in a four-year span from a mere 3% to 30% of the oil and petroleum products shipment by railroads.
Despite the fact that rail-based crude transportation costs five times more ($10 $15 per barrel), crude shippers are compelled to rely on rail-based transport. This is due to the lack of pipeline infrastructural support in key oil and gas fields like Bakken Shale Formation in North Dakota and Montana, Eagle Ford Shale, Barnett Shale and Permian basin in Texas, the Gulf of Mexico and Alberta oil sand fields in Canada.
In 2012, Canadian National Railway, which operates along the Western Canada (Alberta region) to the Gulf Coast, has shipped approximately 30,000 tank cars of volumes of crude oil, while its counterpart Canadian Pacific shipped 53,000 tank cars of crude during the same period. Another giant railroader, BNSF Railroad of Berkshire Hathaway Inc. (BRK-B), which serves the North Dakota region reportedly earned $272 million from crude shipments last year by shipping approximately 100 million barrels of oil.
In the coming days, we expect railroads to accelerate their investment in order to create adequate service capacity for the oil and gas markets. Canadian Pacific projects crude shipment to reach up to 70,000 oil-tank cars by the year-end and move to 140,000 by the end of 2015. This kind of exponential growth in crude oil shipments is taking place across the rail industry. Consequently, we expect petroleum shipments to remain favorable and emerge as a significant revenue contributor in the long term.
Currently, Mexico is a growing market for automotive production and assembly given the lower cost of production there. As a result, markets sources predict that in the coming years, auto manufacturers are expected add capacity to accelerate manufacturing by 600,000 additional vehicles per annum. In the first three months of 2013, auto shipments by rail in Mexico increased 4.6% while in the U.S., auto shipment via rail rose about 2%. This counterbalanced the 1% drop in rail auto shipments in the Canadian market.
We believe upcoming plants by Honda Motor Co., Ltd. (HMC12), Nissan Motor Co. (NSANY13), Mazda and Audi would further boost auto production in Mexico. The facilities would also bode well for automotive shipments. Based on these proposed expansion plans, finished vehicle production in the Mexican market is expected to reach 3.5 million units in 2015, up about 35% from the 2012 production level.
The growth will provide carriers like Kansas City Southern, which operates across the Gulf of Mexico, ample opportunities to ship raw material into Mexico and return the finished products to the domestic market as well as to the U.S. and Canada. The increase in automotive production is also giving rise to new steel plants and processing centers across the company s service networks. These steel plants are likely to bring opportunities for steel shipments and other related products.
However, in the coming year, the growth can be slightly muted by the onslaught of the fiscal cliff. According to market reports, auto sales may see single-digit growth due to a change in consumer behavior owing to the U.S. tax policy changes. If the situation improves on the macro front, there should not be a cyclical downturn in the way of automotives.
The railroad industry is gaining largely from the ongoing conversion of traffic from truckload to rail intermodal. Intermodal is gaining popularity among shippers given its cost effectiveness over truck. On average, railroads are considered 300% more fuel-efficient than trucks, and we believe that intermodal will play an important role in driving the rail industry based on the growing awareness among shippers about its benefits.
Currently, rail intermodal accounts for over 20% of the railroads revenue, second in line after coal. In the coming years, we expect this contribution to only rise given the growing dependence of shippers on intermodal services.
Apart from these positives, other factors likely to have a material impact on Railroads near-term, top and bottom line growth include:
Coal represents important commodities and accounts for over 40% of railroad tonnage. According to EIA reports, coal production hit lows of 9.9 million short tons (MMst) in first quarter 2013, representing a steep decline from 22.7 MMst in the year-ago quarter. As per AAR reports, coal shipments by rail also continued to decline 8% in the U.S. market. The decline was partially offset by 11% and 9% growth in rail shipments in the Mexican and Canadian markets, respectively.
Domestic coal demand, of which utility coal accounts for approximately 93%, is witnessing persistent declines. Lower natural gas prices imply that gas is largely substituting the demand for utility coal. Additionally, higher stockpile levels have resulted in lower utility coal demand. Besides, natural gas prices, another important factor that resulted in the decline of coal-powered plants are the environmental issues associated with coal burning.
However, in 2013, coal consumption in the domestic market is expected to grow 7% year over year to 948 MMst and reach up to 957 MMst in 2014 on the back of rising natural gas prices.
On the export front, the scenario remains entirely different. After reaching highs of coal export in 2012 (126MMst), EIA projects U.S. coal exports to decline 15% year over year to 107 MMst in 2013. However, 2014 may show modest improvement with exports of 109 MMst. Factors like an economic overhang in European markets, lower U.S. coal pricing, higher stockpile levels and increased exports from Indonesia as well as a recovery in the Australian mines are the primary reasons for the expected decline.
Since 2012, the Grain market has been experiencing lows due the drought in the Mid-West markets. The outlook for 2013 is also not encouraging enough to elevate rail freight shipment from its current lull.
According the rail traffic report of AAR, North American grain shipment registered a decline of almost 11% in the first three months of 2013, which was partially offset by 24.6% growth in Mexican grain shipment. In April, the U.S. Department of Agriculture (USDA) released the World Agricultural Supply and Demand Estimates (WASDE) report, which states that total U.S. corn demand, will go down by 11.1% from the year-ago level.
U.S. corn exports will hit a low of 48.2% from last year with use of ethanol decreasing 9.2%. We believe that the impact of lowered estimates would be felt on railroad shipment as rail freight serves the majority of export shipment in the crop market.
Investment in development and expansion plans remain critical when analyzing railroads prospects. These capital investments are a double-edged sword. While the investments put significant stress on margin performance, forgoing these would result in a loss of growth prospects.
Railway investments are paramount given the evolving supply chain management and increasing role of airfreight carriers in offering freight transportation services. These investments build the required infrastructure needed for railways to stay afloat in a competitive environment not only within the railroad industry but also with other modes like truck, barges and cargo airlines.
As a result, investments in infrastructural projects have been an integral part of railroads development. However, this sector, characterized by huge capital influx has been drawing funds primarily through private financing.
As a result, investment plans when undertaken can have a considerable impact on the liquidity position of the company and may lead to a highly leverage balance sheet. According to AAR reports, railroads invest approximately 17% of their annualized revenue, which compares with only 3% of average U.S. manufactures revenue on capital expenditures.
According to the Department of Transportation (DOT), the demand for rail freight transportation will increase approximately 88% by 2035. As a result, Class I carriers would have to expedite their investments to meet this growing demand.
It is estimated that railroads would require $149 billion to improve rail network infrastructure within this stipulated period. In respect of current investment requirements, railroads would invest about $24.5 billion in 2013 according to AAR. This figures project an escalating trend when compared with recorded investment of $23 billion in 2012 and $12 billion in 2011 as per AAR.
Given the growing demand and need to upgrade railroad infrastructure to meet new regulations, deployment of fuel-efficient locomotives, upcoming rules on track sharing, railroad safety and high-speed rail services make it mandatory for railroads to infuse more capital on development projects. According to DOT, almost 90% of the railway capacity needs to be upgraded to meet the expected rise in demand level by 2035. Hence, for railroads it is important to balance profitability levels while investing in infrastructural development projects.
Currently, the U.S. railroad industry dominates less than 50% of total freight in America , indicating a huge opportunity for increasing market share. This opportunity can only be exploited by building railroad infrastructure that caters to the varied requirements of shippers.
The railroad industry as a whole offers a number of opportunities that are difficult to ignore from the standpoint of investors.
Discretionary Pricing Power: The freight railroad operators function in a seller s market and have enjoyed pricing power since 1980, when the U.S. government adopted the Staggers Rail Act. The idea was to allow rail transporters to hike prices on captive shippers like electric utilities, chemical and agricultural companies in order to improve profitability of the struggling railroad industry. As a result, of the Staggers Rail Act, railroads are hiking their freight rates by nearly 5% per annum on average, while maintaining a double-digit profit margin.
Duopolistic Market Structures: Railroads have by and large gained by practicing discretionary pricing in the freight market. In the prevailing duopolistic rail industry, railroad operators will be able to reap maximum benefits from rising prices when the overall demand grows.
This remains evident from the geographic distribution of markets between major railroads. Union Pacific and Burlington Northern Santa Fe control the western part of the U.S., while CSX Corp. and Norfolk Southern control the eastern part. On the other hand, Canadian Pacific and Canadian National control inter country rail shipment between the U.S. and Canada.
Despite the above mentioned positives, the freight railroad industry, like other industries, faces certain external and internal challenges. These are as follows:
Capital Intensive Nature: Railroad is a highly capital intensive industry that requires continued infrastructural improvements and acquisition of capital assets. Moreover, industry players access the credit markets for funds from time to time. Adverse conditions in credit markets could increase overhead costs associated with issuing debt, and may limit the companies ability to sell debt securities on favorable terms.
Positive Train Control Mandate: The Rail Safety Improvement Act 2008 (RSIA) has mandated the installation of PTC (Positive Train Control) by Dec 31, 2015 on main lines that carry certain hazardous materials and on lines that involve passenger operations. The Federal Railroad Administration (FRA) issued its final rule in Jan 2010, on the design, operational requirements and implementation of the new technology. The final rule is expected to impose significant new costs for the rail industry at large.
Price Regulations: The pricing practices of U.S. freight railroads are the major reasons of friction with captive shippers, who move their products through rail and do not have effective alternatives. According to the latest studies by the STB, approximately 35% of the annual freight rail is captive to a single railroad, allowing it monopoly pricing practices.
The unfair pricing power exhibited by the U.S. railroads has attracted congressional intervention for exercising stringent federal regulations on railroads. Congress has discussed railroad price regulation but has not passed any new rule so far.
U.S. Environmental Protection Agency: Railroads remain concerned about the proposed regulation by the U.S. Environmental Protection Agency (EPA) for power plants across 27 states. The proposed guideline Carbon Pollution Standard for New Power Plants aims at restricting emission of carbon dioxide by new power plants under Section 111 of the Clean Air Act. The standard proposes new power plants to limit their carbon-dioxide emission to 1,000 pounds per megawatt-hour.
Power plants fueled by natural gas have already met these standards but the majority of the units using conventional resources like coal are exceeding the set limit, as they emit an average of 1,800 pounds of carbon-dioxide per megawatt-hour. Railroads, which transport nearly two-thirds of the coal shipment, are most likely to be impacted by the implementation of the new regulation that could pose a significant threat to utility coal tonnage.
- ^ UNP (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ CSX (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ KSU (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ NSC (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ CNI (www.zacks.com)
- ^ Analyst Report (www.zacks.com)
- ^ HMC (www.zacks.com)
- ^ NSANY (www.zacks.com)
Rookie driver Carlos Munoz gets last minutes tips from Andretti Autosport teammate James Hinchcliffe at Indy on Saturday.
By John Sturbin | Senior Writer
Native son Ed Carpenter topped the speed chart on Opening Day at Indianapolis Motor Speedway, where his second-year IZOD IndyCar Series team is looking to bolster its history in the 97th running of the Indianapolis 500 on May 26.
Carpenter, winner of the most recent IndyCar Series race on a superspeedway, posted a hot lap of 40.7296-seconds/220.970 mph Saturday around the 2.5-mile oval. Carpenter recorded 21 laps in the No. 20 Fuzzy s Ultra Premium Vodka Dallara/Chevrolet under cloudy conditions and an ambient temperature of 51 degrees (66-degree track temp)when the six-hour session started at noon.
My sister reminded me that it s been a decade since I won the Indy Lights race here, the first Freedom 100, Carpenter said. That seems crazy. It seems even crazier that this will be, hopefully, my 10th 500 start. I consider myself pretty lucky to have made so many of these.
Josef Newgarden, driver of the No. 21T Century 21 Dallara/Honda for Sarah Fisher Hartman Racing, was second-fast (220.920 mph/40.7387-seconds) on 59 laps. And rookie Carlos Munoz cranked out a best lap of 220.720 mph in the No. 26 Unistraw Dallara/Chevy fielded by Andretti Autosport during the waning minutes of practice.
Charlie Kimball was fourth (220.633 mph/40.7917-seconds) in the No. 83 Novo Nordisk Chip Ganassi Racing Dallara/Honda, while 2011 Indy 500 pole-sitter Alex Tagliani kicked off practice fifth overall at 220.248 mph in the No. 98 Barracuda Racing Dallara/Honda fielded by Bryan Herta Autosport with Curb-Agajanian.
Meanwhile, three-time Indy 500 winners Dario Franchitti and Helio Castroneves shook down their respective entries. Franchitti, the defending race champion, posted laps in his primary and No. 10T Target Chip Ganassi Racing Dallara/Hondas. Castroneves started his day in teammate AJ Allmendinger s No. 2 IZOD Dallara/Chevrolet before lapping in his No. 3 Shell V-Power/Pennzoil Ultra Team Penske Dallara/Chevy.
Carpenter became the lone IndyCar Series owner/driver at the end of the 2011 season, when he competed in 10 events for Sarah Fisher Racing and earned his first career victory on the 1.5-mile Kentucky Speedway. Carpenter s fledgling team struggled throughout the 2012 campaign en route to an 18th-place point finish. The highlight was a victory in the season-ender at the 2-mile Auto Club Speedway in Fontana, Calif., on Sept. 15 _ the most recent IndyCar Series race contested on an oval. The first four races of 2013 have been conducted on either temporary street or natural terrain road-courses.
Carpenter qualified 28th and finished 21st at IMS last May, finishing a lap down to Franchitti.
To be honest, when I think back to the last month of May, we had a good race, and a good car in the race, said Carpenter, a 32-year-old native and resident of Indianapolis. But really, I have bad memories from last May because we really struggled a lot. We came in unprepared, and we were lucky to get it sorted out by race day and have a chance to have a good finish. But even then, we still didn t get a good finish.
The whole team was really determined to come in prepared this year, and they ve done that. I m really proud of the work they ve put in this offseason. We ran well in the race, but you have to look at the whole month of May and we under-performed. It wasn t a month that I was proud of even though we had good moments in the race.
Carpenter began his IndyCar career with PDM Racing in 2003 after honing his oval-track skills in the U.S. Auto Club s National Midget, Sprint Car and Silver Crown series.
The 2013 season has been an anomaly, in that traditional powerhouses Penske Racing and Target Chip Ganassi Racing have failed to win. The last time Ganassi Racing and Team Penske both entered the Indianapolis 500 without a victory in the preceding races of the season was 1991.
Andretti Autosport has won three of the first four races this season courtesy of James Hinchcliffe (Streets of St. Petersburg, Fla., and Sao Paulo, Brazil) and reigning series champion Ryan Hunter-Reay (Barber Motorsports Park). Takuma Sato (Streets of Long Beach) posted his breakthrough series win for A.J. Foyt Racing. So heading into the Month of May, why not Ed Carpenter at IMS?
I felt like we were going to be strong coming in just because we ve learned a lot since we were here last year, and the team s worked really hard, said Carpenter, who graduated with a marketing degree from Butler University in Indianapolis in 2003. You always have confidence when you win races. It was good to finish last year with a win; it did a lot for the team. Gave the whole team motivation to keep pushing over the offseason. Hopefully we can continue having a good month, and be there when it counts.
There was some things we wanted to try (Saturday) regardless of the weather. So we ran through a couple of settings that we hadn t done last year. It s still very early in the process. We really aren t worried about trying to get a fast lap right now. We certainly want to be competitive, so if we are at the top each day, that ll make us happy as we move toward qualifying. We make so many plans coming into the month of May and we get our competitive juices flowing. You have to try very hard to stay with your plan and not move off of it. It s not even a nice day out here, and I m very excited to be here and driving on the track.
Three first-year Indy 500 entrants needed only 90 minutes to complete the three required phases of the Rookie Orientation Program.
We really economized, Tristan Vautier joked. Vautier, driver of the No. 55 Schmidt Peterson Motorsports Dallara/Honda, joined AJ Allmendinger of Team Penske and Carlos Munoz of Andretti Autosport in breezing through the session that split full-field practice. They were cleared to join veterans for practice building up to Pole Day qualifying on May 18.
The Rookie Orientation Program is designed to provide first-year drivers an opportunity to get acquainted with the racetrack. The three speed phases, set by sanctioning body INDYCAR based upon the weather and track conditions, include 10 laps at 200-205 mph, 15 laps at 205-209 mph and 15 laps at 210 mph-plus.
INDYCAR driver stewards Arie Luyendyk, a two-time Indy 500 champion, and Johnny Unser also monitor car control, placement and a consistent driving pattern. The program has proven to be an invaluable asset, even to individuals who previously have competed on the racetrack.
Additionally, Conor Daly is expected to begin the ROP process Monday in the No. 41 ABC Supply Dallara/Honda for A.J. Foyt Racing. Daly had weekend racing commitments in Barcelona, Spain, where he finished third Saturday in the first of two GP3 races.
It s a busy weekend for me in Barcelona, but the INDYCAR guys have been really good to us in saying we can do it Monday, Daly said. It s unfortunate that I ll miss the first two days but it s still a lot of track time. I m just excited to get to work.
Kurt Busch, the 2004 NASCAR Sprint Cup Series champion, completed ROP on Thursday in an Andretti Autosport Dallara/Chevy. Busch, who drives for Front Row Motorsports in NASCAR, is not assigned to a car this month.
Three-time Indy 500 winner Johnny Rutherford turned laps in the 2014 Corvette Stingray Indianapolis 500 Pace Car Saturday. Rutherford, who serves as pace car driver at all IndyCar Series events, will be inducted into the USAC Hall of Fame during ceremonies at nearby Lucas Oil Raceway next Saturday.
Yeah, that s a neat deal. I m looking forward to that, said Rutherford, of Fort Worth, Texas. There s going to be a Silver Crown race and will honor the inductees, and I m really honored. You know, I get introduced all the time as a three-time Indy winner, and young people will say to me, What years? And I will say 74, 76 and 80, and they get a blank look on their face and say, I wasn t born until 1983.
Fifteen drivers were on-track and turned 480 laps Saturday and for the month. AJ Allmendinger recorded 91 laps, including Rookie Orientation Program, most of any driver. There were four cautions for a total of 53 minutes. Practice is scheduled to continue Sunday from noon-6 p.m.
FIRST ON TRACK, 1984-2012
Year Driver Started/Finished
2012 Ryan Briscoe 1st/5th
2011 Helio Castroneves 16th/17th
2010 Helio Castroneves 1st/9th
2009 Robert Doornbos 23rd/28th
2008 Will Power 23rd/13th
2007 Jaques Lazier 28th/27th
2006 Marco Andretti 9th/2nd
2005 Danica Patrick 4th/4th
2004 Sarah Fisher 19th/24th
2003 Felipe Giaffone 16th/33rd
2002 Billy Boat 23rd/18th
2001 Stephan Gregoire 29th/28th
2000 Stephan Gregoire 20th/7th
1999 Stephan Gregoire/Did Not Qualify
1998 Mike Groff 32nd/15th
1997 Dr. Jack Miller 17th/20th
1996 Michele Alboreto 12th/30th
1995 Eliseo Salazar 24th/4th
1994 Raul Boesel 2nd/21st
1993 Jimmy Vasser 19th/13th
1992 Scott Brayton 7th/22nd
1991 Scott Brayton 19th/17th
1990 Tero Palmroth 16th/12th
1989 Arie Luyendyk 15th/21st
1988 Raul Boesel 7th/20th
1987 Ludwig Heimrath Jr. 10th/30th
1986 Chip Ganassi 26th/25th
1985 Dick Simon 26th/14th
1984 Dick Simon 20th/23rd