Annual Review and Outlook

Today's markets are surrounded by change and volatility. With slower markets, we are cautiously optimistic as it will take time to recover.

Growth will be mixed in 2016. The U.S. traditional manufacturing sector, a key driver of freight volumes, is feeling the adverse effects of a strong U.S. dollar and lower commodity prices. Conversely, consumer spending should benefit from a continuation of lower fuel prices and a declining unemployment rate.

The nation’s economy is wrestling with indicators suggesting a tempered outlook for the first part of 2016, highlighting that freight railroads might do well in good times, but assume huge risk when the economic tables turn.

In the year ahead, we see growth opportunities across most commodity groups and new business opportunities on our network as the economic outlook indicates moderate growth in both the U.S. and Mexico.

At the foreground of industry discussion is the opening of the expanded Panama Canal, and the predicted shift in traditional trans-Pacific trade routes from west to east. Over the past decade, U.S. East Coast ports have prepared by investing in infrastructure and strengthening multimodal transportation solutions.

If railroads want to succeed in a tough market, they must prioritize service, one of the few factors impacting the industry it can directly control.

Logistics providers are in a unique position to create the next strata of value by giving shippers a more complete view of their global processes to mitigate cost by eliminating waste and complexity. To get there means greater consolidation of providers.

The field of transportation and logistics is gaining new levels of attention and boasts one of the most rewarding and vibrant career paths for skilled, college-educated, young professionals. As the millennial generation becomes attracted to this industry, we can anticipate changes in 2016 and beyond.

The most important change in today’s global marketplace is the rapid increase in business-to-business e-commerce. By 2020, the global B2B e-commerce market is expected to reach $6.7 trillion worldwide, with the United States representing $1.9 trillion and China, $2.1 trillion of that amount.

Perhaps at no time since the inception of the Agriculture Transportation Coalition 28 years ago have circumstances conspired to create so many challenges for the U.S. agriculture and forest products exporters, and many importers.

The industrial real estate sector garnered the attention of investors in 2015. U.S. commercial real estate has become the asset class of choice as investors search for yield in a global, low-interest rate environment, and the U.S. industrial sector has become a beacon for capital, evidenced by the $43.2 billion in sales through last year’s third quarter.

The most significant change in the non-vessel-operating common carrier/third-party logistics industry in 2016 will be how individual NVOCC organizations are able to define and highlight where they and their teams create and deliver value and avoid becoming a commodity in a market that is increasingly becoming commoditized.

A seismic demographic shift will take place in 2016 as Millennials, also known as Gen Y’ers, have now surpassed Boomers and Gen X’ers as the largest share of the workforce.

Educating entry, mid-level and high-potential transportation executives is a requirement of 2016. Transportation companies, and those in logistics and supply chain management, will need to rely on a deep bench of skilled employees at all levels, especially as seasoned baby boomers retire from the industry.

In 2016, trade will march on and global businesses will continue to adapt to change — whether it is in the face of labor upheavals, acts of terror, fluctuation of the grape harvest or new trade laws. Shippers, steamship lines, forwarders and trade associations will discuss and adapt to the new SOLAS container weight certification requirements.

Every industry, including ours, must evolve to stay competitive. The excitement in transportation and logistics lies in the pace of change, and in our industry’s response to it. The evolution of supply chain services will be driven not solely by what customers need, but also by the technologies developed to meet those needs.

In 2015, the logistics industry saw equal amounts of challenges and opportunities. Shippers searched for remedies to port congestion that slowed the supply chain and had tangible financial impacts. The industry responded by providing alternative cargo routings, ranging from air freight for time-sensitive cargo to non-traditional port routings.

Elements impacting the air cargo industry this year include whether capacity increases will continue to outpace volume gains, if the worldwide economy can overcome the factors suppressing growth in emerging and developed markets, how fluctuations in national currencies will affect global trade, and if a security-related crisis forcing profound change in our business is looming in the next news bulletin.

The year ahead promises to be a challenging one for air cargo. Recent events across the globe will most certainly have repercussions for our industry, both from a regulatory and operational perspective.

E-commerce will show the way for the future evolution in our sector and, starting from my homeland, China, I think freight forwarders will need to provide much of the facilitation infrastructure for this to take place.

In the trucking industry, the times are definitely changing, and the rate of change is unlike anything I have seen in my 35 years in the industry.

In 2016, two broad-based themes will dominate the transportation and logistics landscape: uncertainty and tension.

This year, there may be a significant shift in how the industry functions. Interactions among shippers, carriers and other logistics providers have already been changed by advancements in technology, and 2016 could usher in new communication tools. It is essential to develop new programs and support systems to provide those solutions.

As market and infrastructure obstacles to attracting and keeping intermodal drivers continue to grow, I sound the alarm for necessary improvements that will keep this critical supply chain link viable. This is critically important to our industry and our customers’ business.

The trucking industry this year will face uncertainties because of the presidential election and potential softening of the economy.

In 2016, I expect to see industrywide technology requirements that increase our sector’s accuracy and accountability.

2016 will be our Year of Partnerships. Our agency will continue to deepen our partnerships with law enforcement, the states, safety advocates and the trucking and motor coach industries.

As we open the curtain on the new year, we face the challenges of an overzealous regulatory climate that insists on placing tremendous pressures on both large and small businesses alike.

The issue of greatest concern to the intermodal trucking industry serving the Port of New York and New Jersey continues to be the Clean Air Strategies Truck Phase-Out mandate, scheduled to take effect on Jan. 1, 2017.

For the first time in nearly a decade, the U.S. Congress in 2015 passed a long-term highway bill — a bill that will, despite being underfunded, make trucking safer and more efficient — and it sets the stage for 2016.

Mega-alliances and big ship deployments remain the dominant theme in the U.S. port industry. With the raising of the Bayonne Bridge and the expansion of the Panama Canal slated to be completed in 2016, East Coast ports will most certainly see continued cascading of ships of between 8,000 and 14,000 TEUs in size.

Going forward, the states and our maritime industry partners will play key roles in the effort to gain congressional support and funding. The fueling, maintenance and crewing of the ships for training cadets are state responsibilities. Industry will be asked to contribute to the outfitting of the ships to support specific training needs. Through this federal, state, and industry partnership, we can meet the national imperative for the NSVMs.

Port congestion and performance issues will be front and center again in 2015. A significant change in 2015 will be in the breakdown of traditional barriers among industry stakeholders that will encourage the resolution of these issues on a systemwide basis.

This year, the port sector will see unprecedented alliances formed and solidified as competition forces seaports to look at more collaborative ways of doing business with their former adversaries. It’s unclear what these agreements may mean for maritime professionals at ports and port-related businesses, but the name of the game will be adaptability, flexibility and innovative thinking.

To keep the ports of Seattle and Tacoma competitive in the 21st century, we need to adapt our businesses to the demands of a changing marketplace. That’s why we plan to form the Seaport Alliance to unify management of our marine cargo facilities and business, a potential game-changer in 2015.

In 2015, we will need to accelerate the development and sharing of new ideas and solutions to address the growing challenges we face in the transportation industry. The biggest change will be the acceptance that this responsibility is not limited to just one participant. Acting as individual entities will not drive any change. Nor will it be conducive to an improvement landscape. To address the core elements needed to position our industry for the future, it will require many of the key stakeholders involved to rethink their position and actually commit to initiatives to improve the shared working relationships we have in place today.

In 2015, the International Labor Organization is providing the United States a rare opportunity to enhance maritime security worldwide. In early February, the ILO will hold a meeting of maritime security and visa experts to examine the feasibility of a cost-benefit analysis of various options involved in ratifying and implementing the Seafarers’ Identity Documents Convention (ILO-185).

With the world economy in a slow recovery phase and major economies facing further downward pressure, global seaborne trade may continue to rebound gently. But we note that overcapacity is still glaring, and its countermeasures such as scrapping of old ships, capacity idling, and slow-steaming have been applied with but limited effects. And fierce competition in cost control has triggered an increasingly high orderbook of mega-ships.

U.S. South Atlantic ports are preparing for the larger vessels that will call when the Panama Canal’s expansion is complete in 2016. Trade with Asia is expected to double during the next decade, especially as China’s demand for U.S. goods continues to increase. With the expanded Panama Canal, shippers will be able to move even more cargo to and from the U.S. via all-water routes to cut fuel costs and reduce emissions. Ports that are not at the required depth for the new generation of cargo business will be at a disadvantage.

The industry continues to change at a rapid pace. Carriers are partnering in global alliances and ports will see fewer vessel calls and larger ships. Beneficial cargo owners demand consistent and reliable delivery. Pressures to improve processes and technology to further increase cargo velocity and terminal capacity will be a priority in 2015 and beyond.