1
00:00:07,800 --> 00:00:11,800
Speaker 1: Hi everyone, and welcome to Bloomberg Intelligence Talking Transports Podcast.

2
00:00:11,880 --> 00:00:15,840
Speaker 1: I'm your host, Lee Klasgaw, senior freight transportation and logistics

3
00:00:15,840 --> 00:00:19,919
Speaker 1: analysts at Bloomberg Intelligence, Bloomberg's in house research arm of

4
00:00:20,000 --> 00:00:24,439
Speaker 1: almost five hundred analysts and strategists. Before diving in a

5
00:00:24,440 --> 00:00:27,600
Speaker 1: little public service announcement, your support is instrumental to keep

6
00:00:27,600 --> 00:00:30,200
Speaker 1: bringing great guests onto the podcast like the one we

7
00:00:30,280 --> 00:00:33,320
Speaker 1: have today. If you haven't already, please do take a

8
00:00:33,360 --> 00:00:37,360
Speaker 1: moment to follow, rate and share the Talking Transports Podcast.

9
00:00:37,479 --> 00:00:41,480
Speaker 1: We really appreciate your support. We're delighted to have Jonathan

10
00:00:41,520 --> 00:00:47,200
Speaker 1: Stark's FTR Transportation Intelligence Chief Executive Officer and Chief Intelligence

11
00:00:47,240 --> 00:00:51,239
Speaker 1: Officer as our guest today. As CEO of FTR, Jonathan

12
00:00:51,280 --> 00:00:56,720
Speaker 1: leverages expertise in freight modeling, modal analysis, and fleet characteristics

13
00:00:56,760 --> 00:01:00,640
Speaker 1: to deliver invaluable insights to the industry. Key figure in

14
00:01:00,760 --> 00:01:05,160
Speaker 1: FDR's operations, he is responsible for the development of ftr's

15
00:01:05,280 --> 00:01:09,679
Speaker 1: Freight Cast Transportation model. His work extends beyond freight analysis,

16
00:01:09,800 --> 00:01:15,480
Speaker 1: encompassing equipment demand, transport pricing, and market dynamics. Thanks for

17
00:01:15,600 --> 00:01:19,240
Speaker 1: joining us on the Talking Transport Podcast. Jonathan, How you.

18
00:01:19,200 --> 00:01:22,000
Speaker 2: Doing, I'm doing great and Lee so happy to be here.

19
00:01:22,040 --> 00:01:24,840
Speaker 2: Thanks so much for inviting me on. I really am

20
00:01:24,880 --> 00:01:26,279
Speaker 2: looking forward to our talk today.

21
00:01:26,640 --> 00:01:27,600
Speaker 1: Yeah, and one of.

22
00:01:27,600 --> 00:01:30,440
Speaker 3: The main reasons why I wanted to have you on

23
00:01:30,680 --> 00:01:35,480
Speaker 3: is I just got back from your annual conference, and

24
00:01:35,560 --> 00:01:39,639
Speaker 3: before we dive into kind of your takeaways from that event,

25
00:01:40,000 --> 00:01:43,280
Speaker 3: I was hoping you might provide the folks listening what

26
00:01:43,440 --> 00:01:45,479
Speaker 3: is FDR, who's FDR, what do you do?

27
00:01:45,560 --> 00:01:48,920
Speaker 1: Because it's not necessarily a household.

28
00:01:48,600 --> 00:01:52,120
Speaker 2: Name, absolutely, and we definitely have a niche focus on

29
00:01:52,200 --> 00:01:55,560
Speaker 2: what we do. So FTR stands for Freight Transportation Research,

30
00:01:55,920 --> 00:01:58,600
Speaker 2: and that's where our focus is, is really understanding what's

31
00:01:58,640 --> 00:02:02,600
Speaker 2: going on within those free transportation marketplace. We talk truck,

32
00:02:02,800 --> 00:02:06,600
Speaker 2: we talk rail, we talk intermodal. Kind of that surface

33
00:02:06,640 --> 00:02:10,640
Speaker 2: transportation environment in North America is our primary focus. So

34
00:02:10,680 --> 00:02:15,720
Speaker 2: we're trying to help brokers, shippers, carriers, the equity analysts

35
00:02:15,840 --> 00:02:19,280
Speaker 2: understand what's happening within the marketplace, and then we do

36
00:02:19,400 --> 00:02:23,200
Speaker 2: forecasts for basically a large extensive swath of the data

37
00:02:23,240 --> 00:02:26,240
Speaker 2: that we analyze, So we're trying to help them understand,

38
00:02:26,520 --> 00:02:30,079
Speaker 2: based on the economy, based on market demand, what's going

39
00:02:30,120 --> 00:02:33,120
Speaker 2: to happen with capacity, how much equipment needs to go

40
00:02:33,160 --> 00:02:36,520
Speaker 2: into the marketplace or are we oversaturated with equipment? And

41
00:02:36,520 --> 00:02:38,119
Speaker 2: I'm sure we're going to talk into some of those

42
00:02:38,160 --> 00:02:40,680
Speaker 2: aspects later today. So it's just about getting them an

43
00:02:40,760 --> 00:02:43,240
Speaker 2: understanding of where the market is at and then some

44
00:02:43,360 --> 00:02:46,960
Speaker 2: fundamental understanding of where the market is likely to go next.

45
00:02:47,760 --> 00:02:50,720
Speaker 1: Okay, great, So you know I mentioned your annual conference.

46
00:02:50,720 --> 00:02:52,799
Speaker 1: It's a conference that I try to attend every year.

47
00:02:52,840 --> 00:02:57,120
Speaker 1: It's usually in September. It's in Indianapolis. It's kind of

48
00:02:57,120 --> 00:03:03,399
Speaker 1: in a cool locale. The venue an old rail terminal,

49
00:03:04,520 --> 00:03:08,160
Speaker 1: so it's kind of very appropriate for the conference. Can

50
00:03:08,200 --> 00:03:11,960
Speaker 1: can you talk about some of the major takeaways that

51
00:03:12,280 --> 00:03:15,119
Speaker 1: you know that we're coming out of the conference this year?

52
00:03:16,040 --> 00:03:17,960
Speaker 2: So I think we have to divide it up between

53
00:03:18,000 --> 00:03:20,400
Speaker 2: what's going on on the truck side and what's going

54
00:03:20,440 --> 00:03:24,520
Speaker 2: on the rail side because they're not necessarily having the

55
00:03:24,560 --> 00:03:26,960
Speaker 2: same type of aspects. Everybody's kind of in a bit

56
00:03:27,000 --> 00:03:29,440
Speaker 2: of a I guess we called a malaise from a

57
00:03:29,520 --> 00:03:33,400
Speaker 2: volume perspective, but the underlying fundamentals are a bit different

58
00:03:33,440 --> 00:03:37,200
Speaker 2: between the two. On the truck side, we're still stuck

59
00:03:37,320 --> 00:03:41,240
Speaker 2: in this sort of bottom of the market environment. That

60
00:03:41,280 --> 00:03:43,840
Speaker 2: we've been in for a period of time. I know

61
00:03:43,960 --> 00:03:46,080
Speaker 2: a lot of people in the industry try to look

62
00:03:46,120 --> 00:03:49,240
Speaker 2: at sort of the traditional cycle. It might be eighteen months,

63
00:03:49,280 --> 00:03:52,760
Speaker 2: twenty four months, it cycles up, it cycles down. But

64
00:03:52,840 --> 00:03:55,040
Speaker 2: the way that FTR looks at it is we're trying

65
00:03:55,080 --> 00:03:58,320
Speaker 2: to understand what's going on from a demand perspective, from

66
00:03:58,320 --> 00:04:01,280
Speaker 2: the economy, because that's really what is going to drive

67
00:04:01,320 --> 00:04:04,080
Speaker 2: what happens within each of the freight sectors. And when

68
00:04:04,080 --> 00:04:08,480
Speaker 2: we look at that, we see a weak market persisting

69
00:04:08,560 --> 00:04:11,320
Speaker 2: for an extended period of time, coming off of the

70
00:04:11,440 --> 00:04:14,480
Speaker 2: highs of twenty twenty one and twenty twenty two, but

71
00:04:14,600 --> 00:04:18,440
Speaker 2: not really coming down drastically. But there's been some fundamental

72
00:04:18,480 --> 00:04:21,640
Speaker 2: shifts within the market that have changed a lot of

73
00:04:21,640 --> 00:04:25,800
Speaker 2: the dynamics, one of those being obviously a lot of

74
00:04:25,920 --> 00:04:29,920
Speaker 2: new small entrance into the marketplace. I know you've covered it,

75
00:04:30,080 --> 00:04:32,000
Speaker 2: We've had a lot of people talking about it. It

76
00:04:32,080 --> 00:04:37,000
Speaker 2: hasn't changed. We're incrementally kind of accreting people out, but

77
00:04:37,080 --> 00:04:40,279
Speaker 2: it's at a very slow level and it's not at

78
00:04:39,760 --> 00:04:44,240
Speaker 2: a pace that is going to drastically change market conditions.

79
00:04:44,400 --> 00:04:47,640
Speaker 2: So we still have this oversupply of capacity that's in

80
00:04:47,680 --> 00:04:50,800
Speaker 2: the marketplace that we're here, and whenever we're talking to brokers,

81
00:04:51,200 --> 00:04:54,359
Speaker 2: when we're talking to small carriers, when we're talking to shippers.

82
00:04:54,560 --> 00:04:58,160
Speaker 2: So the pricing environment because of that is weak. But

83
00:04:58,200 --> 00:05:01,120
Speaker 2: the difference this time around is we're not seeing the

84
00:05:01,160 --> 00:05:05,520
Speaker 2: big decline in volumes all right. So volumes have softened, yes,

85
00:05:05,640 --> 00:05:08,000
Speaker 2: from the big highs we had a couple of years ago,

86
00:05:08,320 --> 00:05:11,200
Speaker 2: but they're not down drastically like you might expect in

87
00:05:11,240 --> 00:05:16,160
Speaker 2: a normal recessionary environment. They're just flat to down some

88
00:05:16,800 --> 00:05:20,520
Speaker 2: obviously different for different markets. But what's happened pretty significantly

89
00:05:20,600 --> 00:05:24,200
Speaker 2: is a shift in the marketplace and out of that

90
00:05:24,360 --> 00:05:28,159
Speaker 2: small carrier spot market where a lot of activity shifted

91
00:05:28,200 --> 00:05:31,240
Speaker 2: in twenty going in through twenty twenty one, twenty twenty two,

92
00:05:31,960 --> 00:05:34,200
Speaker 2: but now shifting back to the carriers, and so that

93
00:05:34,360 --> 00:05:39,440
Speaker 2: baseload environment is restabilized. That's pricing down all right, but

94
00:05:39,520 --> 00:05:43,279
Speaker 2: it really hasn't brought volume down significantly. So the brokers

95
00:05:43,320 --> 00:05:46,320
Speaker 2: are hurting, the small carriers are hurting, the large carriers

96
00:05:46,360 --> 00:05:49,160
Speaker 2: don't have the growth that they would like, but they

97
00:05:49,200 --> 00:05:52,640
Speaker 2: have a relatively stable market that they're operating from which

98
00:05:52,680 --> 00:05:55,880
Speaker 2: I think they can operate efficiently. For a period of time.

99
00:05:56,480 --> 00:06:00,640
Speaker 2: And so the question still remains around that small carrier environment.

100
00:06:00,880 --> 00:06:02,520
Speaker 2: Are they going to be able to stay in and

101
00:06:02,560 --> 00:06:05,520
Speaker 2: stick it out? So far they've been able to, and

102
00:06:05,640 --> 00:06:08,520
Speaker 2: you know, looking at some of the fundamentals underlying it,

103
00:06:09,160 --> 00:06:12,760
Speaker 2: they're not stopping adding in new capacity. All right. We're

104
00:06:12,800 --> 00:06:15,960
Speaker 2: still shedding capacity, but we're still also adding in new capacity,

105
00:06:16,240 --> 00:06:19,240
Speaker 2: So those dynamics haven't shifted. So that's why we think

106
00:06:19,279 --> 00:06:22,640
Speaker 2: it's going to create be a pretty slow accretion of

107
00:06:22,760 --> 00:06:25,080
Speaker 2: capacity out of the marketplace. You're not going to get

108
00:06:25,360 --> 00:06:29,200
Speaker 2: a seismic event like you might have potentially anticipated. You know,

109
00:06:29,279 --> 00:06:31,960
Speaker 2: when we went through the big swings in diesel price

110
00:06:32,000 --> 00:06:36,040
Speaker 2: back in twenty twenty two, that certainly had more negative

111
00:06:36,040 --> 00:06:38,560
Speaker 2: pressure on pulling carriers out of the market, but it

112
00:06:38,600 --> 00:06:42,800
Speaker 2: wasn't sustained enough for long enough to apprecially change the

113
00:06:42,839 --> 00:06:44,480
Speaker 2: overall picture for capacity.

114
00:06:45,000 --> 00:06:47,279
Speaker 1: And so this environment, I guess, you know, you're you're

115
00:06:47,320 --> 00:06:50,719
Speaker 1: shipping customers must be pretty happy. What are they doing?

116
00:06:50,920 --> 00:06:56,440
Speaker 1: Are they taking advantage by locking in longer term contracts

117
00:06:56,560 --> 00:06:59,039
Speaker 1: or are they just operating more and more in the

118
00:06:59,080 --> 00:06:59,880
Speaker 1: spot market.

119
00:07:01,520 --> 00:07:04,080
Speaker 2: So they're taking advantage of the environment, all right, They

120
00:07:04,120 --> 00:07:06,320
Speaker 2: want to be able to lock in capacity. They can

121
00:07:06,400 --> 00:07:09,560
Speaker 2: do that at a rate environment that's a little bit

122
00:07:09,600 --> 00:07:11,960
Speaker 2: lower than it was a year and a half ago,

123
00:07:13,080 --> 00:07:15,720
Speaker 2: and they're using spot market when they need to or

124
00:07:15,760 --> 00:07:18,360
Speaker 2: want to, but they don't have this big push of

125
00:07:18,400 --> 00:07:20,600
Speaker 2: freight that they need to get out the door rapidly,

126
00:07:20,920 --> 00:07:23,200
Speaker 2: and so they're not pushing a lot of activity into

127
00:07:23,240 --> 00:07:25,960
Speaker 2: the spot market. So that's keeping the spot market pricing

128
00:07:26,480 --> 00:07:30,160
Speaker 2: much more subdued compared to contract So while both are down,

129
00:07:30,680 --> 00:07:33,120
Speaker 2: spot pricing is back down to levels we were seeing

130
00:07:33,320 --> 00:07:37,920
Speaker 2: you before COVID back in twenty nineteen, whereas contract pricing

131
00:07:38,000 --> 00:07:41,040
Speaker 2: is down, but it's still much more elevated compared to

132
00:07:41,120 --> 00:07:43,960
Speaker 2: where it was a few years ago prior to COVID,

133
00:07:44,240 --> 00:07:45,880
Speaker 2: And that's I think a lot of that just has

134
00:07:45,880 --> 00:07:49,720
Speaker 2: to do with the ability for that large carrier contract

135
00:07:49,840 --> 00:07:53,680
Speaker 2: environment to build in a lot of these inflationary impacts,

136
00:07:53,840 --> 00:07:56,040
Speaker 2: whereas when you're on the spot market, it's pure supply

137
00:07:56,080 --> 00:07:59,280
Speaker 2: and demand. There's too much supply, not enough demand, and

138
00:07:59,360 --> 00:08:01,320
Speaker 2: so the pricing is very weak because of that.

139
00:08:01,960 --> 00:08:04,560
Speaker 4: Right, And so what what are you guys expecting to

140
00:08:04,600 --> 00:08:07,520
Speaker 4: see in the pricing and the rate market? Are you

141
00:08:07,720 --> 00:08:11,000
Speaker 4: expecting to see rates rise from here, can you give

142
00:08:11,040 --> 00:08:16,640
Speaker 4: us any indication on you know, FDR's forecasts for rates

143
00:08:16,640 --> 00:08:17,600
Speaker 4: in twenty twenty five.

144
00:08:18,600 --> 00:08:21,200
Speaker 2: So you know, if we would have talked six to

145
00:08:21,280 --> 00:08:23,360
Speaker 2: nine months ago, I would have said, let's look at

146
00:08:23,360 --> 00:08:25,600
Speaker 2: the middle of twenty twenty four, and I think we

147
00:08:25,680 --> 00:08:28,280
Speaker 2: have the opportunity to see kind of a clear inflection

148
00:08:28,360 --> 00:08:33,080
Speaker 2: point upwards. And we hit July and we started getting

149
00:08:33,120 --> 00:08:35,839
Speaker 2: some indications of those green shoots of pricing in the

150
00:08:35,880 --> 00:08:39,280
Speaker 2: spot market, and then they just tailed off, right And

151
00:08:39,320 --> 00:08:41,800
Speaker 2: we're starting to get some more green shoots in pricing,

152
00:08:42,160 --> 00:08:44,000
Speaker 2: but some of that's going to tail off because I

153
00:08:44,000 --> 00:08:47,560
Speaker 2: think some of it's just due to comparison because of

154
00:08:47,600 --> 00:08:51,280
Speaker 2: diesel pricing last year, and so we're not getting enough

155
00:08:51,320 --> 00:08:54,880
Speaker 2: of the green shoots to see real strong improvement in

156
00:08:54,920 --> 00:08:57,679
Speaker 2: spot pricing. But we do think as we move through

157
00:08:57,720 --> 00:09:01,160
Speaker 2: Q four and especially into Q one, we should start

158
00:09:01,200 --> 00:09:06,280
Speaker 2: seeing improvement in the overall spot pricing environment, which then

159
00:09:06,400 --> 00:09:10,640
Speaker 2: as you move out later into twenty twenty five second

160
00:09:10,640 --> 00:09:12,839
Speaker 2: half of the year, you should start seeing some clear

161
00:09:12,880 --> 00:09:16,440
Speaker 2: improvement in the contract pricing. But none of that is

162
00:09:16,480 --> 00:09:19,080
Speaker 2: to say we do have no expectation that you should

163
00:09:19,080 --> 00:09:23,320
Speaker 2: see strong surge pricing up twenty thirty percent like you

164
00:09:23,400 --> 00:09:27,240
Speaker 2: might anticipate in an upswing environment. It's really just about

165
00:09:27,280 --> 00:09:30,280
Speaker 2: rebalancing the market and getting pricing back to a more

166
00:09:30,760 --> 00:09:34,520
Speaker 2: normal level for the spot market, and that'll put incremental

167
00:09:34,600 --> 00:09:37,160
Speaker 2: upward pressure on contract So.

168
00:09:37,200 --> 00:09:40,120
Speaker 1: From what you said, are you saying on the contract market,

169
00:09:40,160 --> 00:09:43,360
Speaker 1: excluding fuel search charge, you're expecting rates to be flat

170
00:09:43,600 --> 00:09:46,520
Speaker 1: up low single digits.

171
00:09:46,080 --> 00:09:48,560
Speaker 2: Low single digits for twenty twenty five, But we think

172
00:09:48,600 --> 00:09:50,640
Speaker 2: most of that pressure is probably going to be towards

173
00:09:50,679 --> 00:09:51,640
Speaker 2: the back half of the year.

174
00:09:52,320 --> 00:09:56,520
Speaker 1: So outside of the rate cycle and demand, what were

175
00:09:56,559 --> 00:10:00,960
Speaker 1: the other takeaways from your trucking track at the conference.

176
00:10:01,520 --> 00:10:04,280
Speaker 2: I think it's starting to come to the forefront now

177
00:10:05,320 --> 00:10:07,439
Speaker 2: is what's going on on the equipment side, and that's

178
00:10:07,480 --> 00:10:11,440
Speaker 2: going to be some big technological and regulatory changes that

179
00:10:11,480 --> 00:10:15,079
Speaker 2: are coming up starting in twenty twenty seven and going

180
00:10:15,120 --> 00:10:18,199
Speaker 2: beyond that. And I think that's starting to get down

181
00:10:18,280 --> 00:10:21,559
Speaker 2: to the carriers and the people that are following the carriers.

182
00:10:21,840 --> 00:10:25,680
Speaker 2: They're starting to understand that now. So there's a big

183
00:10:26,480 --> 00:10:29,840
Speaker 2: Knox change going into twenty twenty seven, so that's going

184
00:10:29,920 --> 00:10:33,760
Speaker 2: to require changes for the diesel engines ahead of that,

185
00:10:34,640 --> 00:10:39,040
Speaker 2: and so there is a big push or a expectation

186
00:10:39,320 --> 00:10:43,200
Speaker 2: of a strong push to buy equipment before they have

187
00:10:43,320 --> 00:10:45,760
Speaker 2: those new engines in place, all right, So that's the

188
00:10:46,160 --> 00:10:49,320
Speaker 2: putting upward potential on the marketplace to add in more

189
00:10:49,679 --> 00:10:54,880
Speaker 2: new capacity for twenty twenty five and specifically twenty twenty six, and.

190
00:10:55,520 --> 00:10:58,600
Speaker 1: That increase in demands being driven because these new trucks,

191
00:10:58,800 --> 00:11:01,760
Speaker 1: new engines are going to be definitely more expensive than

192
00:11:02,760 --> 00:11:07,679
Speaker 1: the prior versions. We see in estimates around thirty thousand dollars.

193
00:11:07,720 --> 00:11:09,640
Speaker 1: I don't know if that's something you're seeing as well

194
00:11:09,760 --> 00:11:10,560
Speaker 1: or a different number.

195
00:11:11,200 --> 00:11:14,480
Speaker 2: Yeah, we still don't have good numbers on what the

196
00:11:14,559 --> 00:11:17,000
Speaker 2: ashal expense is going to be, which is why it's

197
00:11:17,440 --> 00:11:19,720
Speaker 2: difficult to put a real hard estimate on it. But

198
00:11:19,760 --> 00:11:22,720
Speaker 2: that's one of the big portions obviously, is the price.

199
00:11:22,960 --> 00:11:25,440
Speaker 2: And then the other one is anytime you add in

200
00:11:25,679 --> 00:11:29,319
Speaker 2: some new component to change for something as big as

201
00:11:29,360 --> 00:11:32,920
Speaker 2: the Digel engine or the emission components, you just don't

202
00:11:32,920 --> 00:11:35,240
Speaker 2: know exactly how well it's going to operate, and so

203
00:11:35,280 --> 00:11:38,880
Speaker 2: there's just hesitancy to put that new equipment into the marketplace.

204
00:11:40,600 --> 00:11:43,320
Speaker 2: Then the next one after twenty twenty seven, now we

205
00:11:43,400 --> 00:11:47,560
Speaker 2: start building the expectations for greenhouse gases. This is where

206
00:11:47,600 --> 00:11:52,160
Speaker 2: the talk about zero emission vehicles and electric vehicles comes

207
00:11:52,200 --> 00:11:55,320
Speaker 2: into the discussion, and those are going to then start

208
00:11:55,400 --> 00:11:59,800
Speaker 2: taking place. Now, there's a lot of opportunity for changes

209
00:11:59,800 --> 00:12:03,440
Speaker 2: in timing for that, obviously depending on what happens with

210
00:12:03,480 --> 00:12:06,440
Speaker 2: the election with the Senate and all of that, but

211
00:12:06,600 --> 00:12:09,760
Speaker 2: these items are still going to be in place and progressing.

212
00:12:10,040 --> 00:12:12,640
Speaker 2: We just don't know exactly what the timing is. But

213
00:12:12,760 --> 00:12:14,760
Speaker 2: there is a lot of build up that needs to

214
00:12:14,840 --> 00:12:21,320
Speaker 2: happen to successively get to hitting greenhouse gas targets coming

215
00:12:21,400 --> 00:12:24,880
Speaker 2: out of diesel engines, and that's why there's going to

216
00:12:24,880 --> 00:12:28,640
Speaker 2: be a big switch trying to pull in more alternate

217
00:12:28,720 --> 00:12:32,920
Speaker 2: fuel capacity, and so that's yes, that could be electric,

218
00:12:32,960 --> 00:12:36,440
Speaker 2: it could be battery electric, could be hydrogen fuel cell,

219
00:12:36,640 --> 00:12:41,000
Speaker 2: could also be just hydrogen internal combustion. So there's a

220
00:12:41,040 --> 00:12:47,120
Speaker 2: lot of potential sources of technology that they can use

221
00:12:47,160 --> 00:12:54,520
Speaker 2: to get to the recommendations or the regulatory push, but

222
00:12:55,840 --> 00:12:59,040
Speaker 2: it creates a lot more complexity in the system, and

223
00:12:59,120 --> 00:13:03,640
Speaker 2: complexity is not something that carriers really desire, but it's

224
00:13:03,640 --> 00:13:05,600
Speaker 2: something they're going to have to build out as we

225
00:13:05,720 --> 00:13:08,920
Speaker 2: have a lot more technological change coming here in the

226
00:13:08,960 --> 00:13:11,400
Speaker 2: next I'd say ten to fifteen years.

227
00:13:11,760 --> 00:13:13,920
Speaker 1: Yeah. From our vantage point, it seems like a huge

228
00:13:13,960 --> 00:13:19,040
Speaker 1: disconnect between what regulators want to see happen versus where

229
00:13:19,080 --> 00:13:23,760
Speaker 1: the technology and the costs are, and they seem like

230
00:13:23,760 --> 00:13:28,040
Speaker 1: they're very far apart. I've read studies from the ATA where,

231
00:13:28,120 --> 00:13:30,960
Speaker 1: you know, they said that if you really want to

232
00:13:30,960 --> 00:13:32,480
Speaker 1: cut a missions, you just have to get rid of

233
00:13:32,520 --> 00:13:35,480
Speaker 1: really old trucks, and that might have a bigger impact

234
00:13:36,000 --> 00:13:40,480
Speaker 1: on the environment than forcing people to buy these trucks

235
00:13:40,520 --> 00:13:44,160
Speaker 1: that currently that you really can't use them in every

236
00:13:44,200 --> 00:13:47,640
Speaker 1: application for trucking. So it'll be interesting to see how

237
00:13:47,679 --> 00:13:49,160
Speaker 1: this all evolves over time.

238
00:13:49,720 --> 00:13:52,120
Speaker 2: So over the last you know, eighty years, we've really

239
00:13:52,160 --> 00:13:57,440
Speaker 2: developed a truck platform in which you have basically pretty

240
00:13:57,440 --> 00:14:02,079
Speaker 2: close to a singular platform that can most markets, all right,

241
00:14:02,120 --> 00:14:04,079
Speaker 2: But now we're getting to a period of time in

242
00:14:04,120 --> 00:14:07,000
Speaker 2: which that's going to change, and so you're going to

243
00:14:07,040 --> 00:14:12,440
Speaker 2: have specific application technology and that's going to create complexity

244
00:14:12,559 --> 00:14:17,280
Speaker 2: for how carriers and shippers have to manage all of

245
00:14:17,320 --> 00:14:19,040
Speaker 2: the freight transportation moves.

246
00:14:19,360 --> 00:14:22,720
Speaker 1: Right, Adam, do we want to shift gears to rail now?

247
00:14:23,080 --> 00:14:24,520
Speaker 1: Did you have anything else to add I don't know

248
00:14:24,520 --> 00:14:25,320
Speaker 1: if I cut you off.

249
00:14:25,520 --> 00:14:27,520
Speaker 2: Let's talk about the rail side, because I think it's

250
00:14:28,000 --> 00:14:32,520
Speaker 2: an interesting environment in what's happening there over the last year.

251
00:14:32,640 --> 00:14:35,280
Speaker 2: Anybody who's probably been listening to you knows that the

252
00:14:35,400 --> 00:14:39,640
Speaker 2: rail side has been a bit weak, depending on the

253
00:14:39,680 --> 00:14:43,840
Speaker 2: specific markets that you're looking at, but overall, rails are

254
00:14:43,880 --> 00:14:47,600
Speaker 2: struggling to grow. They've seen growth in intermodal in the

255
00:14:47,720 --> 00:14:50,560
Speaker 2: last year, but that is merely to get intermodal back

256
00:14:50,640 --> 00:14:54,200
Speaker 2: to a normal level of activity because it was very

257
00:14:54,240 --> 00:14:58,000
Speaker 2: depressed in twenty twenty three. Once you account for that,

258
00:14:58,040 --> 00:15:02,040
Speaker 2: the market is growing very slowly, maybe two to three

259
00:15:02,120 --> 00:15:05,680
Speaker 2: percent in inner moodal and one to two percent in

260
00:15:05,760 --> 00:15:08,920
Speaker 2: car load. Those are not real store on growth metrics

261
00:15:09,760 --> 00:15:13,720
Speaker 2: and not the type of activity. When you listen to

262
00:15:13,840 --> 00:15:16,800
Speaker 2: a lot of the railroads and the associated companies here,

263
00:15:17,760 --> 00:15:22,160
Speaker 2: they often are talking about the ability to grow, but

264
00:15:22,240 --> 00:15:25,880
Speaker 2: we're not seeing it. And we had a specific panel

265
00:15:25,920 --> 00:15:30,480
Speaker 2: with shippers talking about their pain points and what they

266
00:15:30,520 --> 00:15:34,200
Speaker 2: really need to see to grow in their rail capacity.

267
00:15:35,280 --> 00:15:38,200
Speaker 2: I think what we have seen over the last say

268
00:15:38,240 --> 00:15:42,000
Speaker 2: two years is a return to at least normal metrics

269
00:15:42,000 --> 00:15:44,440
Speaker 2: for service, and service is an item that gets a

270
00:15:44,440 --> 00:15:47,840
Speaker 2: lot of talk in the rail space. So we've gotten

271
00:15:47,920 --> 00:15:54,720
Speaker 2: back to normal velocity, normal dwelled times, normal online car activity.

272
00:15:55,760 --> 00:15:58,760
Speaker 2: But that just gets them back to normal. They're not

273
00:15:58,840 --> 00:16:02,440
Speaker 2: seeing significant proof. But I think where they're talking about

274
00:16:02,480 --> 00:16:05,800
Speaker 2: service now is shifting. It's really about sort of that

275
00:16:06,400 --> 00:16:09,600
Speaker 2: first mile last mile component, Right, it got to where

276
00:16:09,680 --> 00:16:12,000
Speaker 2: I need it, but can I get it into the

277
00:16:12,120 --> 00:16:15,040
Speaker 2: yard in order to load it? Right? So it's can

278
00:16:15,160 --> 00:16:19,120
Speaker 2: do I know exactly where that car is at any

279
00:16:19,160 --> 00:16:22,760
Speaker 2: point in time. They're struggling to have those kinds of

280
00:16:22,840 --> 00:16:26,040
Speaker 2: basic answers and that makes it more difficult for them

281
00:16:26,080 --> 00:16:30,520
Speaker 2: to plan and utilize car load in a more significant way. So,

282
00:16:31,160 --> 00:16:35,880
Speaker 2: like I said, we've seen some normalization of service, but

283
00:16:36,040 --> 00:16:39,680
Speaker 2: there still needs to be improvements throughout in order to

284
00:16:39,800 --> 00:16:44,080
Speaker 2: allow those shippers to really have the impetus to put

285
00:16:44,080 --> 00:16:47,400
Speaker 2: the investment in to use railcar more because it's going

286
00:16:47,480 --> 00:16:51,920
Speaker 2: to take significant investment for them to grow that space right.

287
00:16:52,000 --> 00:16:55,120
Speaker 1: And it's interesting right now this week as we're recording

288
00:16:55,120 --> 00:16:58,320
Speaker 1: this episode, a lot of the railroads are going up

289
00:16:58,360 --> 00:17:02,360
Speaker 1: in front of the STV Transportation Board to talk about

290
00:17:02,400 --> 00:17:07,000
Speaker 1: growth and making a case for you know, where they

291
00:17:07,080 --> 00:17:11,280
Speaker 1: want to be growing more so, it'll be interesting to

292
00:17:11,280 --> 00:17:13,640
Speaker 1: see what comes out of those hearings.

293
00:17:13,480 --> 00:17:16,600
Speaker 2: It will be What will be more interesting is what

294
00:17:16,680 --> 00:17:18,720
Speaker 2: do they do coming out of that hearing. Do they

295
00:17:18,800 --> 00:17:22,640
Speaker 2: try to develop some sort of plan that they can implement,

296
00:17:22,920 --> 00:17:27,000
Speaker 2: because I think most everybody's in agreement, there's relatively little

297
00:17:27,400 --> 00:17:31,520
Speaker 2: that the STV can do to focus on growth. Now,

298
00:17:31,600 --> 00:17:36,480
Speaker 2: they can focus on rate and service and competition, all right,

299
00:17:36,560 --> 00:17:40,640
Speaker 2: but those are separate from actually how do we grow

300
00:17:41,280 --> 00:17:44,119
Speaker 2: this marketplace? And so it'll be very interesting to see

301
00:17:44,680 --> 00:17:47,439
Speaker 2: what the STV does by taking all this in and

302
00:17:47,480 --> 00:17:50,320
Speaker 2: what kind of a plan do they put together to

303
00:17:50,440 --> 00:17:54,240
Speaker 2: make that really a focal point of them of their

304
00:17:54,440 --> 00:17:56,280
Speaker 2: agenda going forward.

305
00:17:56,760 --> 00:17:59,879
Speaker 1: Right, And just shifting back to truck as you're mentioning

306
00:18:00,040 --> 00:18:02,639
Speaker 1: in the rail side, there's different markets, I mean trucking,

307
00:18:02,680 --> 00:18:05,879
Speaker 1: there's a lot of different markets. Are any of the

308
00:18:05,880 --> 00:18:11,679
Speaker 1: market's better position, whether it's you know, flatbed, refrigerated, drive in,

309
00:18:12,240 --> 00:18:17,159
Speaker 1: specialty trucking equipment, Is there one that you think is

310
00:18:17,160 --> 00:18:20,359
Speaker 1: that going to outperform the others in the next eighteen months?

311
00:18:20,960 --> 00:18:24,119
Speaker 2: Drive in it follows obviously a lot of the economy.

312
00:18:24,119 --> 00:18:27,600
Speaker 2: It's just such a broad sector. But if you look

313
00:18:27,640 --> 00:18:31,640
Speaker 2: at refrigerated that's been more stable, all right. I think

314
00:18:31,760 --> 00:18:36,120
Speaker 2: there's also more opportunity to add more equipment into that space.

315
00:18:36,440 --> 00:18:40,439
Speaker 2: It's a smaller, more niche market, but you definitely have

316
00:18:40,640 --> 00:18:45,800
Speaker 2: growth in things like pharmaceuticals, in items that just need

317
00:18:45,800 --> 00:18:50,160
Speaker 2: that temperature controlled unit. We've seen that grow pretty significantly,

318
00:18:50,160 --> 00:18:53,000
Speaker 2: i'd say, over the last two decades, relative to the

319
00:18:53,040 --> 00:18:56,320
Speaker 2: traditional view of refrigerated moving food.

320
00:18:56,480 --> 00:18:56,800
Speaker 4: All right.

321
00:18:56,840 --> 00:19:02,720
Speaker 2: So that's transitioned quite a bit. Flatbed has been weak.

322
00:19:03,359 --> 00:19:07,120
Speaker 2: There's obviously lots of talk about, you know, the Infrastructure

323
00:19:07,160 --> 00:19:12,240
Speaker 2: Act and that might boost activity, but we're not seeing

324
00:19:12,280 --> 00:19:16,880
Speaker 2: it yet in actual volumes for flatbed. Now, infrastructure's only

325
00:19:16,920 --> 00:19:20,080
Speaker 2: one portion. You also need a lot of industrial activity,

326
00:19:20,760 --> 00:19:24,080
Speaker 2: movements of steel, you know, movements of heavy goods to

327
00:19:24,160 --> 00:19:28,320
Speaker 2: really impact that flatbed market. It's really dependent on a

328
00:19:28,320 --> 00:19:31,359
Speaker 2: lot of good industrial activity, and we're just not seeing

329
00:19:31,440 --> 00:19:34,399
Speaker 2: strong industrials right now, and so we've got a pretty

330
00:19:34,400 --> 00:19:35,879
Speaker 2: weak market for the flatbed.

331
00:19:36,680 --> 00:19:40,280
Speaker 1: Yeah, the ISM indicator has been down something like twenty

332
00:19:40,320 --> 00:19:42,960
Speaker 1: one over the last twenty two months. It's been in

333
00:19:43,080 --> 00:19:47,480
Speaker 1: contraction territory, which obviously isn't good for flatbed demand. We

334
00:19:47,560 --> 00:19:48,200
Speaker 1: all got.

335
00:19:48,040 --> 00:19:51,520
Speaker 2: Excited in March when that number jumped above fifty right,

336
00:19:51,560 --> 00:19:54,679
Speaker 2: and we're like, oh, this looks this looks good, and

337
00:19:54,720 --> 00:19:57,600
Speaker 2: then it ticked right back down just been sitting right

338
00:19:57,640 --> 00:19:58,560
Speaker 2: below it ever since.

339
00:19:59,520 --> 00:20:02,560
Speaker 1: So when you're looking at I guess we'll go to

340
00:20:03,160 --> 00:20:04,959
Speaker 1: focus on trucking fir ust and go to rail when

341
00:20:04,960 --> 00:20:08,160
Speaker 1: you're when when you guys are doing your models, what's

342
00:20:08,240 --> 00:20:12,600
Speaker 1: the number one input that you're looking at when trying

343
00:20:12,600 --> 00:20:14,080
Speaker 1: to figure out trucking demand.

344
00:20:16,840 --> 00:20:20,280
Speaker 2: So we always start with a top down process of

345
00:20:20,400 --> 00:20:23,959
Speaker 2: understanding where the economy is at. So we're looking at

346
00:20:24,000 --> 00:20:28,240
Speaker 2: the you know, the key elements of gross domatic domestic product,

347
00:20:28,359 --> 00:20:33,480
Speaker 2: understanding where the consumption is, an investment is, how inventories

348
00:20:33,520 --> 00:20:38,280
Speaker 2: are moving all right. Then we get down to an

349
00:20:38,359 --> 00:20:43,359
Speaker 2: understanding of at a commodity level, what's happening in the

350
00:20:43,400 --> 00:20:47,480
Speaker 2: economy based on the different areas of growth that we're seeing.

351
00:20:47,800 --> 00:20:50,800
Speaker 2: So we're trying to understand demand at a commodity level

352
00:20:51,400 --> 00:20:53,800
Speaker 2: and then trying to understand what does that mean for

353
00:20:53,840 --> 00:20:57,199
Speaker 2: trucking because if you get growth in you know, a

354
00:20:57,240 --> 00:21:01,040
Speaker 2: lot of heavy haul aggregates, that's going to impact the

355
00:21:01,160 --> 00:21:05,440
Speaker 2: rail side more that it impacts the truck side. Whereas

356
00:21:05,480 --> 00:21:08,919
Speaker 2: if you get a lot of consumption and retail growth,

357
00:21:09,240 --> 00:21:11,560
Speaker 2: that's going to be good for trucking, it's not going

358
00:21:11,600 --> 00:21:14,080
Speaker 2: to be good for rail. So we start with this big,

359
00:21:14,119 --> 00:21:16,399
Speaker 2: broad top line measure of what's going on in the

360
00:21:16,440 --> 00:21:20,000
Speaker 2: overall economy and then back down into what does that

361
00:21:20,080 --> 00:21:24,320
Speaker 2: mean for individual commodities, because that's how we view the marketplace.

362
00:21:24,359 --> 00:21:27,800
Speaker 2: By understanding commodities, then we can understand what's going to

363
00:21:27,840 --> 00:21:31,000
Speaker 2: apply pressure to trucking versus what's going to apply pressure

364
00:21:31,040 --> 00:21:35,080
Speaker 2: to rail. And then of course there's that intermediary of

365
00:21:35,160 --> 00:21:39,920
Speaker 2: Inner Moole which has the most truck and rail competitive

366
00:21:40,080 --> 00:21:43,760
Speaker 2: environment and it has a mix then of both retail

367
00:21:44,200 --> 00:21:46,439
Speaker 2: and industrial supplies within it.

368
00:21:46,720 --> 00:21:50,520
Speaker 1: Right on the rail side, are you guys agnostic when

369
00:21:50,520 --> 00:21:55,560
Speaker 1: you're doing your forecasts like eastern rails versus Western rails,

370
00:21:55,640 --> 00:21:59,080
Speaker 1: or do you look at it that detailed on where

371
00:21:59,160 --> 00:22:01,880
Speaker 1: there might be more growth opportunities east of the Mississippi

372
00:22:01,960 --> 00:22:03,080
Speaker 1: or west of the Mississippi.

373
00:22:03,440 --> 00:22:06,280
Speaker 2: We look at that data right by each of the

374
00:22:06,320 --> 00:22:09,199
Speaker 2: individual railroads they put it out every week. We like

375
00:22:09,240 --> 00:22:12,639
Speaker 2: to look at that railroad specific data to get an

376
00:22:12,680 --> 00:22:15,520
Speaker 2: understanding what's happening. But when we're doing our forecast, we're

377
00:22:15,520 --> 00:22:18,160
Speaker 2: just trying to understand what's the big level of demand,

378
00:22:19,119 --> 00:22:23,240
Speaker 2: and since it's going to typically be commodity dependent, it'll

379
00:22:23,440 --> 00:22:26,760
Speaker 2: likely have more or less impact on different railroads. But

380
00:22:26,800 --> 00:22:28,960
Speaker 2: we're not focusing on which railroad is going to be

381
00:22:29,040 --> 00:22:32,240
Speaker 2: driving growth. We're just trying to understand where's the demand

382
00:22:32,400 --> 00:22:36,840
Speaker 2: for rail coming from and forecasting that, and then we

383
00:22:36,880 --> 00:22:40,520
Speaker 2: can overlay onto that how different rails are doing and

384
00:22:40,560 --> 00:22:42,600
Speaker 2: are they able to capture those results or not.

385
00:22:42,960 --> 00:22:46,760
Speaker 1: Looking on the equipment side or even rail operation side.

386
00:22:47,640 --> 00:22:50,560
Speaker 1: You know, we talked about electric talks. That's obviously a

387
00:22:50,600 --> 00:22:53,640
Speaker 1: new technology that's going to have to be further developed.

388
00:22:53,800 --> 00:22:56,600
Speaker 1: Are there any other technologies that we're talked about during

389
00:22:56,600 --> 00:23:00,280
Speaker 1: the conference that you know gets you excited about the

390
00:23:00,320 --> 00:23:01,360
Speaker 1: future of transportation?

391
00:23:02,640 --> 00:23:05,480
Speaker 2: So specifically on the rail side, there was a lot

392
00:23:05,520 --> 00:23:10,080
Speaker 2: of discussion around telematics, right, and then just the ability

393
00:23:10,119 --> 00:23:13,240
Speaker 2: to get insight into where cars are at right, and

394
00:23:13,600 --> 00:23:17,359
Speaker 2: telematics is potentially a part of the solution, but not

395
00:23:17,520 --> 00:23:22,120
Speaker 2: the only part. So there's also several initiatives once rail

396
00:23:22,200 --> 00:23:25,760
Speaker 2: polls another is rael state to try to give more

397
00:23:25,800 --> 00:23:30,520
Speaker 2: clarity on where the cars are at in that network,

398
00:23:31,280 --> 00:23:34,560
Speaker 2: and if they can do that successfully and in a

399
00:23:34,640 --> 00:23:39,080
Speaker 2: way that integrates to the shippers, so they know much

400
00:23:39,119 --> 00:23:43,040
Speaker 2: more granularly where their car is at and have a

401
00:23:43,160 --> 00:23:46,080
Speaker 2: better idea of when they're going to get their shipments,

402
00:23:46,920 --> 00:23:49,359
Speaker 2: either to get the shipment in or to get it loaded.

403
00:23:50,000 --> 00:23:52,920
Speaker 2: It's going to create a lot of opportunity for rail

404
00:23:53,080 --> 00:23:56,439
Speaker 2: to grow much more efficiently. But this is something that

405
00:23:56,520 --> 00:24:00,600
Speaker 2: is we've been talking about for a decade and we're

406
00:24:00,720 --> 00:24:03,960
Speaker 2: just now starting to get some semblance of activity there.

407
00:24:04,359 --> 00:24:08,000
Speaker 2: I think obviously, coming through the disruptions of twenty twenty

408
00:24:08,040 --> 00:24:11,320
Speaker 2: one and twenty twenty two, when the rails weren't able

409
00:24:11,359 --> 00:24:15,800
Speaker 2: to capitalize and trucking was able to get most of

410
00:24:15,840 --> 00:24:19,320
Speaker 2: that share from all of that activity, I think that

411
00:24:19,440 --> 00:24:21,880
Speaker 2: hurt them, and I think they need to have that

412
00:24:21,960 --> 00:24:24,720
Speaker 2: focus on growth. But like I said, it's been very

413
00:24:24,720 --> 00:24:28,879
Speaker 2: difficult so far to see that it's translating into actual activity.

414
00:24:29,920 --> 00:24:32,240
Speaker 2: But since this is a you know, when you're talking rail,

415
00:24:32,280 --> 00:24:35,160
Speaker 2: you're talking about a potentially a fifty year asset, right,

416
00:24:35,200 --> 00:24:38,399
Speaker 2: so you can't necessarily be focused on what's happening in

417
00:24:38,440 --> 00:24:41,760
Speaker 2: the next two years, right. That impacts operations. But when

418
00:24:41,760 --> 00:24:45,359
Speaker 2: you're trying to understand capacity and the network and how

419
00:24:45,400 --> 00:24:47,639
Speaker 2: they're going to utilize it. You've got to be talking

420
00:24:47,680 --> 00:24:50,440
Speaker 2: in decades because that's how those assets live.

421
00:24:51,400 --> 00:24:54,000
Speaker 1: Yeah, it's really amazing the missed opportunity of the rail

422
00:24:54,119 --> 00:24:58,560
Speaker 1: industry had during during the pandemic, you know, just because

423
00:24:58,600 --> 00:25:01,240
Speaker 1: of laying off and fur loowing too many people and

424
00:25:01,600 --> 00:25:04,280
Speaker 1: demand just snapping back way quicker than I guess anyone

425
00:25:04,320 --> 00:25:08,440
Speaker 1: really thought. You talked about the telematics and having better

426
00:25:08,520 --> 00:25:10,720
Speaker 1: visibility and you mentioned that, you know, we've been talking

427
00:25:10,720 --> 00:25:14,520
Speaker 1: about it for over a decade. Is there a reason

428
00:25:14,560 --> 00:25:16,840
Speaker 1: why you think the rail industry has been so slow

429
00:25:17,000 --> 00:25:20,000
Speaker 1: to you know, because now obviously most of us buy

430
00:25:20,160 --> 00:25:22,679
Speaker 1: or to us, all of us buy things online and

431
00:25:22,720 --> 00:25:25,920
Speaker 1: we know exactly where it is when it's coming, and

432
00:25:26,000 --> 00:25:28,800
Speaker 1: you know, as consumers, whether it's A B two C

433
00:25:29,080 --> 00:25:32,000
Speaker 1: or B to B, you're kind of expecting that visibility.

434
00:25:32,760 --> 00:25:36,800
Speaker 1: What has been so slow in the rail industry up

435
00:25:36,880 --> 00:25:37,480
Speaker 1: until now?

436
00:25:37,760 --> 00:25:42,479
Speaker 2: So there's been a really significant change in trucking starting

437
00:25:42,520 --> 00:25:46,760
Speaker 2: in twenty seventeen, there was the mandate for electronic logging

438
00:25:46,800 --> 00:25:51,359
Speaker 2: devices and that really allowed technology to get into the

439
00:25:51,440 --> 00:25:55,760
Speaker 2: truck via an app for a driver. And so now

440
00:25:55,800 --> 00:25:59,919
Speaker 2: you had much more granular information on where that driver was,

441
00:26:00,160 --> 00:26:03,200
Speaker 2: how many hours they have available, right, are they going

442
00:26:03,240 --> 00:26:06,959
Speaker 2: to be able to make their next drop, pick up

443
00:26:07,000 --> 00:26:10,159
Speaker 2: their next load. And you didn't have that in the

444
00:26:10,240 --> 00:26:13,080
Speaker 2: rail side, all right, So you had this piece of

445
00:26:13,160 --> 00:26:19,000
Speaker 2: technology get incorporated very quickly due to a regulatory push,

446
00:26:19,440 --> 00:26:22,320
Speaker 2: and it had nothing to do with trying to understand

447
00:26:22,480 --> 00:26:29,160
Speaker 2: where equipment was, but it allowed that on the rail side,

448
00:26:29,240 --> 00:26:33,080
Speaker 2: they have a different set of operational constraints.

449
00:26:33,800 --> 00:26:34,040
Speaker 1: One.

450
00:26:34,800 --> 00:26:37,679
Speaker 2: We talked about this fifty year asset, right, and so

451
00:26:37,920 --> 00:26:40,520
Speaker 2: to turn over that equipment and get new equipment in

452
00:26:40,560 --> 00:26:44,720
Speaker 2: the marketplace takes a long time. Now, it might take

453
00:26:45,400 --> 00:26:48,480
Speaker 2: ten years to turn over a good majority of the

454
00:26:48,600 --> 00:26:51,200
Speaker 2: truck fleet, but when you got a fifty year asset,

455
00:26:51,240 --> 00:26:53,719
Speaker 2: and now we're talking about twenty or thirty years, so

456
00:26:53,880 --> 00:26:57,479
Speaker 2: it's just a much longer time frame. And you have

457
00:26:57,600 --> 00:27:03,200
Speaker 2: to be able to weather a lot more different weather impacts.

458
00:27:03,280 --> 00:27:03,480
Speaker 4: Right.

459
00:27:03,640 --> 00:27:05,320
Speaker 2: You've got to be able to run in the north,

460
00:27:05,359 --> 00:27:07,080
Speaker 2: You've got to be able to run through the south,

461
00:27:07,160 --> 00:27:10,199
Speaker 2: so you've got cold and snow, you've got heat and

462
00:27:10,440 --> 00:27:13,720
Speaker 2: rain and humidity, and it's got to be able to

463
00:27:13,840 --> 00:27:16,680
Speaker 2: last through all of those different constraints and still operate

464
00:27:17,040 --> 00:27:18,920
Speaker 2: because it's something that's going to be if you're talking

465
00:27:18,960 --> 00:27:21,720
Speaker 2: about a telematic something else on the outside of the unit,

466
00:27:22,240 --> 00:27:24,840
Speaker 2: all right, So what they're going to focus on, and

467
00:27:24,880 --> 00:27:26,919
Speaker 2: what they have been focused on, is putting that on

468
00:27:26,960 --> 00:27:32,239
Speaker 2: the more important elements of the freight transportation first. And

469
00:27:32,280 --> 00:27:36,600
Speaker 2: when you're talking rail, you're talking covered hoppers and tanks, right,

470
00:27:36,720 --> 00:27:41,399
Speaker 2: that's where sort of the critically important information needs to be.

471
00:27:41,440 --> 00:27:44,080
Speaker 2: So if you're moving hasmat you just have to have

472
00:27:44,640 --> 00:27:48,399
Speaker 2: very good information on those cars, whereas you if you

473
00:27:48,480 --> 00:27:52,760
Speaker 2: have a gondola that's loaded up with scrap metal going

474
00:27:52,760 --> 00:27:55,600
Speaker 2: to the scrapyard and coming back and picking stuff up,

475
00:27:55,800 --> 00:27:58,240
Speaker 2: and you know, back between a mill and a scrapyard,

476
00:27:58,960 --> 00:28:01,720
Speaker 2: you don't really have to have that piece of information

477
00:28:01,840 --> 00:28:07,320
Speaker 2: readily available. Now, as the market aggregates more and more information,

478
00:28:07,920 --> 00:28:11,040
Speaker 2: getting everybody involved will be good, but those aren't going

479
00:28:11,080 --> 00:28:14,960
Speaker 2: to be the critical areas. So you've got these items

480
00:28:14,960 --> 00:28:20,919
Speaker 2: that effectively slow the transition to being a fully telematic environment.

481
00:28:22,080 --> 00:28:24,119
Speaker 2: But I think they're helping fill in the gap with

482
00:28:24,200 --> 00:28:26,360
Speaker 2: the other resources that they're building out.

483
00:28:26,840 --> 00:28:30,520
Speaker 1: So at the conference are the majority of the attendees

484
00:28:30,560 --> 00:28:35,480
Speaker 1: shippers or are they operators on the freight side.

485
00:28:36,119 --> 00:28:42,200
Speaker 2: So we get a wide swath much like our client base.

486
00:28:42,600 --> 00:28:47,200
Speaker 2: We get carriers both truck and rail. We get shippers

487
00:28:47,480 --> 00:28:53,000
Speaker 2: and multi modal shippers. We get people in the finance

488
00:28:53,120 --> 00:28:56,680
Speaker 2: arena because they're trying to understand either from an equity

489
00:28:56,720 --> 00:29:00,600
Speaker 2: investment perspective or those within the operation as they're trying

490
00:29:00,640 --> 00:29:04,240
Speaker 2: to understand where's the market at, where's the market going.

491
00:29:04,680 --> 00:29:07,880
Speaker 2: We get suppliers to the industry, So whether it's an

492
00:29:07,920 --> 00:29:14,840
Speaker 2: equipment supplier, somebody who's making mirrors or tires, or somebody

493
00:29:14,880 --> 00:29:19,520
Speaker 2: doing an operational type item like a TMS, all right,

494
00:29:19,560 --> 00:29:22,240
Speaker 2: that's going to be ingrained within a carrier or a shipper.

495
00:29:22,440 --> 00:29:25,560
Speaker 2: So we've got a wide swath of people who look

496
00:29:25,600 --> 00:29:28,720
Speaker 2: at our information, and all of those people are at the.

497
00:29:28,720 --> 00:29:35,920
Speaker 1: Conference, gotcha, and we're I guess, did you find that

498
00:29:36,000 --> 00:29:39,960
Speaker 1: the rail operators were more optimistic than the trucking operators

499
00:29:41,120 --> 00:29:41,959
Speaker 1: or vice versa.

500
00:29:42,600 --> 00:29:46,680
Speaker 2: Yes, but I think some of that is just because

501
00:29:47,440 --> 00:29:52,360
Speaker 2: they've been in a relatively you know, they've might have

502
00:29:52,480 --> 00:29:54,880
Speaker 2: gone down a few percent or up a few percent,

503
00:29:55,160 --> 00:29:58,800
Speaker 2: but they haven't been through any big swings necessarily outside

504
00:29:58,840 --> 00:30:01,840
Speaker 2: of intermodal, and so the fact that they're seeing some

505
00:30:02,080 --> 00:30:05,800
Speaker 2: growth makes them optimistic and they are working on building

506
00:30:05,840 --> 00:30:08,720
Speaker 2: out a lot more of the potential. Again, I think

507
00:30:08,760 --> 00:30:11,040
Speaker 2: it to grow, but again I think that's going to

508
00:30:11,120 --> 00:30:14,200
Speaker 2: take a few years to really see some of that

509
00:30:14,240 --> 00:30:16,000
Speaker 2: come to fruition. So I don't think we're going to

510
00:30:16,040 --> 00:30:20,239
Speaker 2: necessarily see it here in the more immediate term. And

511
00:30:20,320 --> 00:30:25,120
Speaker 2: on the truck side, they have lost a lot of

512
00:30:25,240 --> 00:30:28,520
Speaker 2: revenue potential over the last year and a half two years,

513
00:30:28,920 --> 00:30:32,160
Speaker 2: all right, They're they're feeling the crunch a lot more

514
00:30:32,440 --> 00:30:35,480
Speaker 2: than the rails. They don't, they haven't. The rail side

515
00:30:35,520 --> 00:30:37,560
Speaker 2: has it taking sort of the pricing hit for the

516
00:30:37,560 --> 00:30:41,560
Speaker 2: most part that the trucks have. Uh, And so the

517
00:30:41,600 --> 00:30:45,560
Speaker 2: truck side is just they've been hit on that revenue portion. Uh.

518
00:30:47,080 --> 00:30:50,640
Speaker 2: It's but like I said, it's definitely a different size

519
00:30:50,640 --> 00:30:53,200
Speaker 2: of impact if you're looking at a you know, a

520
00:30:53,320 --> 00:30:57,400
Speaker 2: large carrier versus a small operation, and the small operators

521
00:30:57,400 --> 00:31:00,080
Speaker 2: are the ones who are really taking the brunt of

522
00:31:00,120 --> 00:31:01,080
Speaker 2: that impact right now.

523
00:31:01,320 --> 00:31:04,960
Speaker 1: Yeah, and rail operators have a very different profitability profile.

524
00:31:05,080 --> 00:31:08,800
Speaker 1: You know, they have ebit margins of you know, call

525
00:31:08,840 --> 00:31:12,760
Speaker 1: it a forty five percent, where truck and carriers in

526
00:31:12,840 --> 00:31:16,720
Speaker 1: this market, the margins are pretty darn thin. So definitely

527
00:31:16,920 --> 00:31:17,840
Speaker 1: you move.

528
00:31:17,720 --> 00:31:21,600
Speaker 2: That needle ten percentage points on the rail and the

529
00:31:21,640 --> 00:31:25,200
Speaker 2: equity guys and what not don't like it, right, but

530
00:31:25,240 --> 00:31:28,280
Speaker 2: they're still making money. You move it ten percent on

531
00:31:28,440 --> 00:31:32,880
Speaker 2: the truck side, and they're now into a negative profitability

532
00:31:33,120 --> 00:31:38,040
Speaker 2: arena and they've been operating pretty close to marginal on

533
00:31:38,160 --> 00:31:42,000
Speaker 2: how much profit they're bringing in over the last year anyways.

534
00:31:41,920 --> 00:31:44,680
Speaker 1: Right, and when you talk about you know, rail growth,

535
00:31:45,040 --> 00:31:47,840
Speaker 1: I guess you guys are at least in the next

536
00:31:47,840 --> 00:31:50,360
Speaker 1: couple of years low single digit growth, kind of a

537
00:31:50,360 --> 00:31:51,760
Speaker 1: little better than GDP.

538
00:31:52,640 --> 00:31:55,920
Speaker 2: Yep, so probably not better than GDP right now. So

539
00:31:56,480 --> 00:31:59,960
Speaker 2: probably something to like two percent growth is pretty reasonable

540
00:32:00,040 --> 00:32:02,720
Speaker 2: to expect, you know, might come in a half percent above,

541
00:32:02,760 --> 00:32:05,880
Speaker 2: half percent below, but you're not likely to see any

542
00:32:05,960 --> 00:32:11,480
Speaker 2: real strong growth, and that's specifically talking car load. Intermodial

543
00:32:11,600 --> 00:32:14,640
Speaker 2: may do it a little better, but I think from

544
00:32:14,800 --> 00:32:19,960
Speaker 2: an expectations perspective, people would expect intermodial to do better,

545
00:32:20,240 --> 00:32:22,120
Speaker 2: and we don't think it's going to quite hit people's

546
00:32:22,200 --> 00:32:25,360
Speaker 2: expectations for growth over the next couple of years and

547
00:32:25,720 --> 00:32:30,200
Speaker 2: probably shift down to maybe something like three percent growth,

548
00:32:31,000 --> 00:32:34,120
Speaker 2: whereas if we were talking about this ten years ago,

549
00:32:34,480 --> 00:32:38,200
Speaker 2: the expectation was in any given year, Animoti would grow

550
00:32:38,520 --> 00:32:41,880
Speaker 2: six seven percent, all right, So we're kind of having

551
00:32:41,920 --> 00:32:45,600
Speaker 2: that expectation on how fast we think intermotial can grow

552
00:32:45,680 --> 00:32:46,320
Speaker 2: right now.

553
00:32:46,480 --> 00:32:49,400
Speaker 1: Right so that the tinderstanding intermodial used to be and

554
00:32:49,760 --> 00:32:53,400
Speaker 1: same with you know, the container global market used to

555
00:32:53,440 --> 00:32:58,239
Speaker 1: grow at two to three times that of GDP and

556
00:32:58,240 --> 00:33:01,720
Speaker 1: then those those days seemed to be well behind us.

557
00:33:02,000 --> 00:33:04,120
Speaker 2: And there's there's there's a lot of talk, you know

558
00:33:04,200 --> 00:33:07,960
Speaker 2: about near shoring reshort and how much that could potentially

559
00:33:08,000 --> 00:33:12,600
Speaker 2: be impacting. We don't think it's the item that's primarily

560
00:33:12,680 --> 00:33:16,360
Speaker 2: impacting the growth in intermodal. We think it's mainly a

561
00:33:16,520 --> 00:33:20,200
Speaker 2: demand function that the demand for it to grow that

562
00:33:20,280 --> 00:33:22,680
Speaker 2: fast just isn't there as we look at over the

563
00:33:22,760 --> 00:33:25,440
Speaker 2: next couple of years. But there is a lot of

564
00:33:25,560 --> 00:33:31,120
Speaker 2: potential as uh near shoring specifically occurs and moves down

565
00:33:31,200 --> 00:33:34,040
Speaker 2: into Mexico, which seems to be sort of the primary

566
00:33:34,160 --> 00:33:38,960
Speaker 2: benefit of the near shoring push that as you built

567
00:33:39,000 --> 00:33:41,400
Speaker 2: out that portion, you can build out in a way

568
00:33:41,480 --> 00:33:45,840
Speaker 2: that rail has a strong component involved in it, and

569
00:33:46,000 --> 00:33:50,240
Speaker 2: rail definitely has some positives when you're talking about moving

570
00:33:50,320 --> 00:33:54,160
Speaker 2: goods back and forth between Mexico, UH and and so

571
00:33:54,200 --> 00:33:57,360
Speaker 2: they have a strong benefit to try and to work

572
00:33:57,720 --> 00:34:00,040
Speaker 2: as they build that out to make sure it's a

573
00:34:00,240 --> 00:34:02,720
Speaker 2: rail beneficial move right.

574
00:34:03,160 --> 00:34:06,880
Speaker 1: And you know, one more question about the conference, if

575
00:34:06,920 --> 00:34:10,839
Speaker 1: I may the you know what, what are people saying

576
00:34:10,880 --> 00:34:13,840
Speaker 1: about peak season this year? Are people expecting a peak

577
00:34:15,280 --> 00:34:17,640
Speaker 1: kind of what were you hearing at the conference about

578
00:34:17,640 --> 00:34:18,240
Speaker 1: peak season?

579
00:34:18,719 --> 00:34:23,280
Speaker 2: Very muted peak season expectations. So I don't think anybody

580
00:34:23,280 --> 00:34:26,560
Speaker 2: should expect to see any real strong growth. If you

581
00:34:26,600 --> 00:34:29,480
Speaker 2: look at the port activity, some of that is just

582
00:34:29,560 --> 00:34:31,920
Speaker 2: due to the fact that shippers, I think we're worried

583
00:34:31,920 --> 00:34:37,000
Speaker 2: about the ILA on the East and Gulf Coast and

584
00:34:37,120 --> 00:34:40,080
Speaker 2: the fact that there could be potential port strike they're

585
00:34:40,120 --> 00:34:42,840
Speaker 2: coming up, so they pulled stuff ahead, they've shipped to

586
00:34:42,880 --> 00:34:47,319
Speaker 2: stuff to the West Coast, They've tried to transition their

587
00:34:47,440 --> 00:34:50,239
Speaker 2: inventory push I think a little bit earlier in the year,

588
00:34:50,640 --> 00:34:54,359
Speaker 2: and that's going to mute some of that traditional October

589
00:34:54,440 --> 00:34:58,319
Speaker 2: peak activity. But we don't think it's necessarily going to

590
00:34:58,400 --> 00:35:01,000
Speaker 2: just you know, be a completely flat market going through

591
00:35:01,000 --> 00:35:03,200
Speaker 2: the peak. It's probably just likely to be a little

592
00:35:03,239 --> 00:35:05,239
Speaker 2: bit more muted this year, right.

593
00:35:05,880 --> 00:35:08,480
Speaker 1: So on a personal note, you know a lot of

594
00:35:08,480 --> 00:35:10,680
Speaker 1: people don't necessarily grow up and say I want to

595
00:35:10,680 --> 00:35:14,240
Speaker 1: get into transportation. Either you're born into it, you step

596
00:35:14,280 --> 00:35:17,520
Speaker 1: into it, or you fall into it. How did you

597
00:35:17,600 --> 00:35:19,839
Speaker 1: get into the freight markets?

598
00:35:20,120 --> 00:35:23,879
Speaker 2: So I graduated from school in two thousand and one,

599
00:35:24,320 --> 00:35:26,480
Speaker 2: and then in December of that year, I was like,

600
00:35:26,680 --> 00:35:29,000
Speaker 2: I don't know what I'm going to do. And Eric

601
00:35:29,120 --> 00:35:31,920
Speaker 2: was working at this small company called FTR, and we

602
00:35:31,960 --> 00:35:34,400
Speaker 2: didn't know what the heck he did there, and he said,

603
00:35:35,000 --> 00:35:38,560
Speaker 2: I need some help burning CDs because we're doing a

604
00:35:38,600 --> 00:35:41,879
Speaker 2: marketing push into the rail market. So the first thing

605
00:35:41,920 --> 00:35:44,600
Speaker 2: I ever did for FTR was I had a dual

606
00:35:44,719 --> 00:35:48,279
Speaker 2: CD burner and I was burning marketing CDs for them

607
00:35:48,320 --> 00:35:51,560
Speaker 2: to send out. So I have done a little bit

608
00:35:51,680 --> 00:35:56,279
Speaker 2: of everything over the years at FTR, and just it's

609
00:35:56,320 --> 00:36:00,600
Speaker 2: been a very incremental process for me. We're a very

610
00:36:00,640 --> 00:36:05,120
Speaker 2: small group obviously, and so just learning from the people

611
00:36:05,120 --> 00:36:07,759
Speaker 2: that were ahead of me about how one of the

612
00:36:07,800 --> 00:36:10,400
Speaker 2: things when you're in the forecast business, you have to

613
00:36:10,440 --> 00:36:14,040
Speaker 2: have a philosophy and a viewpoint on how you're looking

614
00:36:14,080 --> 00:36:17,560
Speaker 2: at the market, all right, because you can't just pull

615
00:36:17,600 --> 00:36:19,560
Speaker 2: the data in and say the data is going to

616
00:36:19,600 --> 00:36:22,279
Speaker 2: make sense, you have to have an understanding of what

617
00:36:22,320 --> 00:36:25,560
Speaker 2: you're trying to understand from that data. And so learning

618
00:36:25,640 --> 00:36:29,720
Speaker 2: that philosophy of what forecasting means and how we forecast

619
00:36:29,800 --> 00:36:34,000
Speaker 2: the market was very influential early on as I was

620
00:36:34,080 --> 00:36:37,799
Speaker 2: just learning about the transportation marketplace. You know, you come

621
00:36:37,840 --> 00:36:42,719
Speaker 2: in green and New and they start talking about reefers

622
00:36:42,800 --> 00:36:45,719
Speaker 2: and you're like, boy, I have no idea what I

623
00:36:45,840 --> 00:36:46,520
Speaker 2: just got into.

624
00:36:48,280 --> 00:36:50,080
Speaker 1: I bet you were disappointed when you found out it

625
00:36:50,120 --> 00:36:54,640
Speaker 1: was a different kind of reefer. So Eric, you mentioned Eric,

626
00:36:54,840 --> 00:36:57,000
Speaker 1: He's your brother, So what you know? I like to

627
00:36:57,040 --> 00:36:59,799
Speaker 1: ask this when people are working at family businesses, what's

628
00:37:00,120 --> 00:37:01,879
Speaker 1: like to work with your brother? Do you guys get

629
00:37:01,880 --> 00:37:05,439
Speaker 1: along at work? Do you hate each other at work

630
00:37:05,480 --> 00:37:07,600
Speaker 1: and love each other outside of work? How does that

631
00:37:07,680 --> 00:37:09,120
Speaker 1: relationship dynamics work?

632
00:37:09,640 --> 00:37:12,400
Speaker 2: Well, I definitely can't say. We never argue, so we

633
00:37:12,840 --> 00:37:16,080
Speaker 2: are definitely opinionated, and we will let our opinions be known.

634
00:37:16,560 --> 00:37:19,800
Speaker 2: But it's actually been really great being able to work together.

635
00:37:20,120 --> 00:37:23,359
Speaker 2: I've learned a lot from him over the years. He's

636
00:37:23,440 --> 00:37:27,399
Speaker 2: just such a wonderful person to be able to get

637
00:37:27,440 --> 00:37:30,040
Speaker 2: out in front of people and talk about the markets

638
00:37:30,080 --> 00:37:33,080
Speaker 2: in a very passionate way, and I think that's something

639
00:37:33,120 --> 00:37:36,040
Speaker 2: that really endears people to FTR. We want to be

640
00:37:36,120 --> 00:37:39,880
Speaker 2: communicators to help people understand what is going on in

641
00:37:39,920 --> 00:37:41,960
Speaker 2: the marketplace, and you've got to be able to do

642
00:37:42,000 --> 00:37:45,759
Speaker 2: that in a clear, concise, and positive manner, because if

643
00:37:45,760 --> 00:37:49,640
Speaker 2: you're just always telling people about potential negative news, after

644
00:37:49,640 --> 00:37:51,640
Speaker 2: a while, they're not going to listen to you. So

645
00:37:51,680 --> 00:37:56,799
Speaker 2: there's definitely a skill to be learned about how to

646
00:37:56,880 --> 00:37:59,440
Speaker 2: talk about transportation and doing it in a way that

647
00:37:59,480 --> 00:38:00,600
Speaker 2: gets people engaged.

648
00:38:01,120 --> 00:38:03,920
Speaker 1: Right well, I think you guys do do do a

649
00:38:03,960 --> 00:38:07,359
Speaker 1: great job of that, and I also, you know, i'd

650
00:38:07,440 --> 00:38:10,160
Speaker 1: kind of be remiss if I mentioned on the Bloomberg

651
00:38:10,200 --> 00:38:14,480
Speaker 1: terminal we do have FTR data that's available to subscribers,

652
00:38:14,520 --> 00:38:17,680
Speaker 1: so you know, we're a customer of FDR and we

653
00:38:17,760 --> 00:38:20,840
Speaker 1: really love, you know, what they do, and I highly

654
00:38:20,840 --> 00:38:24,040
Speaker 1: recommend their conference for those that are interested in learning

655
00:38:24,080 --> 00:38:26,360
Speaker 1: more about free transportation markets.

656
00:38:27,520 --> 00:38:30,160
Speaker 2: And thank you for that, Lee, and I really appreciate

657
00:38:30,280 --> 00:38:33,759
Speaker 2: what you're doing about trying to sort of illuminate the

658
00:38:33,800 --> 00:38:39,799
Speaker 2: marketplace and making sure that the information that's about what

659
00:38:39,920 --> 00:38:43,080
Speaker 2: is going on in transportation is getting out there, and

660
00:38:43,120 --> 00:38:45,479
Speaker 2: so I think that's a really critical piece. There's lots

661
00:38:45,520 --> 00:38:48,360
Speaker 2: of lots of disparate information and trying to pull it

662
00:38:48,400 --> 00:38:50,560
Speaker 2: all together is a really important job.

663
00:38:50,920 --> 00:38:53,120
Speaker 1: Right well, Jonathan, I really want to thank you for

664
00:38:53,200 --> 00:38:54,600
Speaker 1: your time and insights today.

665
00:38:54,880 --> 00:38:56,000
Speaker 2: Thank you, Lee, and I.

666
00:38:55,960 --> 00:38:57,759
Speaker 5: Also want to thank you for tuning in. If you

667
00:38:57,880 --> 00:39:01,000
Speaker 5: liked the episode, please subscribe and leavery you. We've lined

668
00:39:01,080 --> 00:39:03,200
Speaker 5: up a number of great guests for the podcast, so

669
00:39:03,320 --> 00:39:07,560
Speaker 5: check back to hear conversations with c spited executives, shippers, regulators,

670
00:39:07,600 --> 00:39:11,480
Speaker 5: decision makers within the freight markets. I also want to

671
00:39:11,520 --> 00:39:14,560
Speaker 5: say that this is our going to be our fiftieth episode,

672
00:39:14,640 --> 00:39:17,400
Speaker 5: so I'm pretty excited about that. So Jonathan, thank you

673
00:39:17,440 --> 00:39:18,160
Speaker 5: for being part of that.

674
00:39:19,640 --> 00:39:22,040
Speaker 1: And if you have any ideas about a future episode,

675
00:39:22,280 --> 00:39:25,840
Speaker 1: please hit me up on the Bloomberg terminal on LinkedIn

676
00:39:26,000 --> 00:39:27,879
Speaker 1: or on Twitter or x whatever you want to call

677
00:39:27,920 --> 00:39:31,320
Speaker 1: it at Logistics Late. Take care everyone, and thanks so

678
00:39:31,400 --> 00:39:39,960
Speaker 1: much for tuning in. Take care, bye bye