Hello again! // Coronavirus and cold trains
Hi all!
On June 4, 2019, I emailed you all saying that Modes would be on hiatus for the next week. Then I vanished for nine months.
I'm sorry about that. But now, Modes is back!
It's been a busy nine months in logistics, and therefore in my life. A truck driver named Chad Boblett shared that trucking was in a "bloodbath" over the summer, I used that quote in several headlines, and then the phrase popped up everywhere from the WSJ to French business television. A few months later, we saw one of the largest truckload bankruptcies in history. On top of that, FedEx dumped Amazon (twice) and the Seattle retailer is becoming more and more of a trucking company than ever. More recently, coronavirus is forcing air and ocean freight numbers to 2008 levels.
New to Modes? Welcome! I'm hoping this newsletter becomes your go-to for understandable, conversational news on America's $2 billion logistics industry. Logistics comprises warehousing, trucks, ocean freighters, river barges, trains, planes, and even pipes (!) — but I'm just one gal. So, I really focus on trucking and companies like UPS, FedEx, Walmart, and Amazon. Find someone else for your scoops on Big Barge.
But let's just focus on what happened this week in logistics.
1. Trucking companies are gearing up (or not) for coronavirus. I did a bit of reporting this week on what Amazon and Walmart told their employed and contract truckers about coronavirus. It turned out — not much at all. The day after I published the story, Amazon changed their tune on communicating with contract carriers. I also got quite a few anecdotes from other drivers that their companies failed to inform them about coronavirus.
Read more: Walmart and Amazon truck drivers say their employers haven't provided guidance about how to deal with coronavirus
I learned something interesting from reporting this. More than a few truckers noted on Facebook that it would be silly for companies to tell truckers what do about coronavirus (fighting words like "dumass's" were used). On one hand, I agree — not much you can do besides stock up on Purell and avoid handshakes. On the other, it shows a sort of feeling among truckers that their employers aren't looking out from them. While white-collar workers can expect, and are receiving, emails chiding them for touching their faces and traveling domestically, truck drivers don't expect the same care.
It's notable because truckers have to do certain "risky" behaviors as part of their job.
The folks who are stocking our grocery stores with the aforementioned Purell don't understand that a key part of their work — namely, traveling across the US — is something that many companies are flatout banning. But these at-risk folks are not only missing out on key communication from their employers, many of them don't even expect it.
2. Train > truck for grocers, says JBHT. On a less doomsday note, I saw an interesting scoop from the JOC this morning about JB Hunt's latest business strategy: more refrigerated intermodal cars. JBHT is doubling its intermodal fleet, growing to 2,500 units before the end of 2020.
(For the uninitiated, JB Hunt is one of the largest truckers. Intermodal cars are special containers that can be moved on a truck or a train. And refrigerated (or "reefer" as it's amusingly called) means what you think it means — it moves food.)
Why should you care about an Arkansas company buying more chilly train cars??? Until recently-ish (the 1990s/2000s), intermodal wasn't really a thing. But, as rail companies add more and more cars to a single train and "precision railroading" makes it easier for loads to get where they need to go via rail, more retailers and manufacturers (called "shippers" in the logistics world) are opting for rail. It's way cheaper and it's much better for the environment.
Read more: Walmart is quietly taking charge of its rail operations — and it could slash transportation costs as the country's largest retailer seeks to boost e-commerce profits
Of course, the big issue for rail is that it's much slower than trucks and it's a bit harder to get a whole train into the loading dock of a suburban Kroger than a single truck. But JBHT's double down on intermodal reefers shows that intermodal is becoming so good that you can even get food where it needs to go. It's bad news for truckers who haven't expanded their intermodal side, but very good news for environmentalists.
3. The ghost ports. Coronavirus is a big threat to the global economy. I don't know if you heard that.
Another piece of news for you — freight indicators are a really great way to track what's up with the global economy! Here are a few quick numbers that show what we're dealing with here, specifically at the ports of Long Beach and Los Angeles:
These two ports are rather crucial to how we have... most things. As of 2014, 40% of the US' containerized imports came through the San Pedro Bay ports (as they're called collectively). That's $2 billion worth of goods *every day*. Also, they employed one in nine people in a five-county region in Southern California. (LA Times.)
Usually, ocean carriers cancel 20 to 30 trans-Pacific sailings in Q1 because of Chinese New Year. For Q1 (and a bit of Q2), carriers have canceled 110 trans-Pacific sailings. (WSJ.)
Terminals at the San Pedro Bay complex are operating at 30-40% capacity. (Same WSJ article.)
A air freight side note: FedEx will lose $1 billion in revenues this quarter from coronavirus, says Credit Suisse's Allison Landry. (Business Insider.)
And one happy remark. Once shipping from China kicks up again (and factories are already re-opening), it could be a boon for carriers as they hustle to move goods (or so says executives like Atlas Air's new CEO John Dietrich.)
It's been a pleasure! Get in touch with me at rpremack@businessinsider.com if you want to chat.
Talk to you next week. (I promise this time.)
— Rachel