Transportation plays a fundamental role in global market integration. The traffic flows of trading nations affect the structure and location of manufacturing facilities, the frequency of trips, distances travelled, transport modes, and equipment selected.

Aviation Traffic

Global air cargo traffic is up. The heads of air cargo surveyed by IATA remain positive in their outlook for air freight and expect continued growth in volume. They are especially bullish on the outlook for cargo yields. Despite increasing trade tensions, global trade is expected to accelerate in the third quarter of 2018. The DHL Global Trade Barometer, a new and unique indicator, confirms this robustness. Growth dynamics are primarily coming from global air.

Airbus and Boeing support these growth conclusions, each having released their 20-year market forecasts at the Farnborough Air Show on July 17th. The demand numbers for single aisles, widebodies, and freighters are all up, based on passenger traffic growth and driven by expected aircraft retirements. The industry’s demand cycle shows no sign of slowing.

Rail Traffic

Rail traffic is up. Traffic on U.S. Class One carriers for the week ended July 7th totaled 485,193 carloads and intermodal units, up 8.6% from the same week in 2017. Carloads were up 5.4% while intermodal volume was up 12%. Nine of the ten carload commodity groups posted year over year increases, led by petroleum (21.4%), grain (17.7%), and nonmetallic minerals, including frac sand (up 7.1%).

Global Trade

Global trade remains potent even in the face of rising interest rates, oil prices, and potential tariff disruption. Second-quarter GDP increased 4.1% boosted by consumer spending and business investment. Investors and Nations pursue their own best interest and prosperity. Recent U.S. steel tariffs are an example[2]. Steel plays a critical role in building infrastructure and in national defense.

Chinese state-owned enterprises have willingly paid the price of economic inefficiency to accomplish political goals. In free market economies, private industry needs long-term confidence to invest. China’s government subsidies have led to global excess steel capacity, increased exports, depressed world prices and hollowed out other countries’ steel producing industrial bases. As long as it continues China is happy. When America no longer has the productive capacity, China will have won the war without firing a shot.

Some Americans are shocked the U.S. is moving to protect American productive capacity (or that the Administration does not believe in infinite American power). European leaders are shocked their free ride might come to an end. And China is shocked that the apparent self-liquidating superpower of the West might not be so self-liquidating after all.

The advantage lies with knowledgeable players who probe for opportunities, build on successful forays, and have an ability to shift flexibly as circumstances dictate. Success comes with leverage, market position, resources, and understanding. Traffic is robust. Contact RESIDCO today.

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