Intermodal Environment 2015

INTERMODAL ENVIRONMENT 2015

CCIB CONFERENCE July 28, 2015

Ron Sucik RSE Consulting1 Ships At Anchor Waiting To Get Into LALB

Ron Sucik RSE Consulting Congestion To Enter Maersk Terminal

Ron Sucik RSE Consulting Containers Waiting To Get Into Maersk Terminal For Export

4 Ron Sucik RSE Consulting Lunar New Year Shadow Effect

Ron Sucik RSE Consulting Cargo Returns to Pre-Recession Levels and Worst Effects of Labor Disruption

Ron Sucik RSE Consulting 22 Containers Across Requires Newer, Larger Cranes

Ron Sucik RSE Consulting The world's biggest ship - for 53 days

China Shipping 19,100 TEU to be eclipsed by MSC 19,224 TEU 8 What Does It Take to Unload A Mega Container Ship

9 Drewry Says Carriers Will Struggle To Break Even This Year

 As many as 129 ships of 8,000 TEUs and above need homes in second half of 2015.

 Drewry : Avgerage Global Freight Rates Could Decline Fastest Pace Since 2011.

 Maersk orders nine 14,000 TEU Ships after their order for eleven 19,630 TEU Triple-E Vessels.  COSCO orders nine 20,000-TEU ships for Europe Service.

 Elusive peak season and excess capacity drives trans-Pacific rate to record lows. RSE Consulting Carriers Preparing for Panama Expansion  April 2016 container ships of 13,000-TEUs.

 Six new Asia to U.S. East Coast since Jan.

 Cap in AWEC pricing Shanghai to New York vs Los Angeles shrunk from $2800 during disruption to $1700 by May.

 Recent surge in AWEC Asia to U.S. has been via Suez Canal because of ability to handle larger ships but trend is now shifting back to Panama.

Ron Sucik RSE Consulting Courtesy IMS Worldwide East Coast Ports Benefit From Diversion  Virginia Por Authority volume record in May.

 All major EC Ports saw cargo increase in the nine months from July 2014 through March 2015 partly due to WC labor issues.

 S.C. and Georgia Port Authorities have agreed to jointly contribute to funding for Jasper Terminal.

 Maersk returns to Baltimore after 20 year absence because larger ships make it more economical to travel up Chesapeake Bay.

 CN will develop Mobile Intermodal Facility 13 patterned after Prince Rupert Success. West Coast Transload

Ron Sucik RSE Consulting Intermodal has dramatically increased its share of US railroad units (carloads, trailers & containers)

Source: AAR, Stifel Nicolaus estimates Note: Volumes in all categories are measured in carloads, except IML which is measured in units Introduction to Intermodal IML share is estimated because the AAR includes intermodal volume in various other freight categories Total Intermodal Loadings 2001-2013

65.0%

60.0%

55.0%

50.0%

45.0%

40.0%

35.0% 2001 2002 2003 2004 2005Source2006: IANA/FT2007R 2008 2009 2010 2011 2012 2013

Domestic International

Ron Sucik RSE Consulting Total Intermodal Loadings

18.0 17.3

17.0 16.1

16.0 15.5 14.9 15.0 14.8 14.6 14.1 14.1 14.1

Millions 14.0

13.0 12.0 12.0

11.0

10.0 05 06 07 08 09 10 11 12 13 14

Ron Sucik RSE Consulting Intermodal Outlook

 International growth will be dependent on the strength of our economy.  Domestic traffic will continue to grow as more carriers recognize the synergies of rail intermodal and continue to adopt regional business models focused on dedicated relationships vs. scattering of trucks.  The long term caveat determining the growth of domestic traffic will be the IPI rates of the Western railroads .

Ron Sucik RSE Consulting Why is Domestic Growing

 Number of Boxes increasing  Fuel Costs increases lead to more intermodal  Huge investments in infrastructure by railroads  Truck driver shortages  Conversion of barge and box car to intermodal  Transloading of intl containers increasing  Improved Technology/Visibility  LTL/Parcel jumping on Board Ron Sucik RSE Consulting Unit Count Intermodal 53’ Container Fleets - United States (dry, for railroad)

73,300 JBHU - JB Hunt (+7300 from last year; doesn't include 200 reefer cntrs) 28,400 HGIU, HGWU, UPHU, NHUU, NHWU, HUNU - Hub Group (+3400 from last year)

17,500 PACU - Pacer (-500 from last year)

17,200 SNLU - Schneider (+3,200 from last year)

9150 SWRU - Swift (+450 from last year)

5000 UPSU - UPS (unchanged)

1850 FDXU, FEDU - FedEx Freight, FedEx Ground (1750 FDXU, 100 FEDU)

1000 APDU - APL Logistics (unchanged)

1000 RBTU - CH Robinson (unchanged)

800 UTLU - Universal Logistics (unchanged, some leased to FedEx) 600 MEQU - Milestone (unchanged)(pool equipment, currently all under lease) 475 CFQU - COFC Logistics (-25 from last year, adding 300 this year, from Marten fleet)

400 MTLU - Marten (ending, 300 will be going to COFC) 300 MLHU - Matson Logistics (+100 from last year)

125 DRTU - Dart (-225 from last year) 100 WARU - White Arrow (+35 from last year) 20 AMHU - American Highway (unchanged) 16 WERU - Werner (pilot program started 2014) total managed by United States, Motor Carrier & 3PL

157,236 (141,550 in 2014) +15,686 since last year

Intermodal 53’ Container Fleets - United States (dry, Unit Count for railroad)

38,800 EMHU - UP/NS/CP (+6800 from last year)

35,000 UMAX - UP/CSX (+4000 from last year)

4000 CSXU - CSX (unchanged)

900 TMXU - NS Thoroughbred Direct (unchanged)

800 XFEU - Florida East Coast (+400 from last year) total managed by United States, Railroad (68,300

79,500 in 2014) +11,200 since last year 157,236 total managed by United States, Motor Carrier & 3PL grand total managed by United States, Railroad+Motor Carrier 236,736 & 3PL (209,850) +26,886 Intermodalsince last year +12.8% 53’ increase Container in total fleet Fleets size – Canada (dry, for Unit Count railroad) CNRU - Canadian National (unchanged, includes Dry and Heated, doesn't 8250 include reefer boxes) CPPU - Canadian Pacific (+350 includes Dry and Heated, doesn't include 5450 reefer boxes)

13,700 total managed by Canada, Railroad around 3000 x 53’ containers made for ocean vessels (Trailer Bridge, Crowley, Sea Star, Alaskan Marine, Totem)

data as of Feb 1, 2015 - researched by Jason Hilsenbeck, owner of Most Common Job by State

Source: NPR’s Planet Money

NPTC Benchmark Survey: ATA: For-Hire TL Carrier Driver Turnover Private Fleet Driver Turnover 2005 - 2014 Q3 2005 - 2014 Percent Turnover Percent Turnover 160 160 Large TL Turnover Small TL Turnover LTL

140 140

120 120 Note that the axis is the same on both graphs 100 100

80 80

60 60

40 40

20 20

0 0

2005 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 . 2006 2007 2008 2009 2010 2011 2012 2013 2014

Not surprisingly, private fleet drivers make $20k-plus more per year on average than for-hire drivers and they also get home more regularly!

From NTI (Klemp): For-hire median (2013) @ ~$46k, Private fleet median @ ~$68k

ACT Research Co., LLC, Copyright 2014 23 DRIVER SUPPLY: U.S. MALES Potential Hirees & Impending Retirees 2000-2030 Warm Bodies (000s) 2600 21 Year-olds SUPPLY OF INCOMING CDL-AGE 2400 65 Year-olds U.S. MALES NARROW S

2200

2000 NOT SO HARD TO FIND 1800 DRIVERS HARD TO FIND DRIVERS U.S. MALES AT 1600 RETIREMENT AGE RISES SHARPLY 1400

1200

1000

2028 2030 2024 2026 2020 2022 2016 2018 2012 2014 2008 2010 2004 2006 2000 2002

 Domestic container loadings still carry the day.

 RR service and infrastructure improvements.

 Truck capacity & drivers remain tight.

 Nearly 250,000 DomCons now in fleet.

 Market share conversion continues

25 Ron Sucik RSE Consulting Thank You For Your Time

Ron Sucik

RSE Consulting 26