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US: Increased exports offer logistics opportunity

The falling value of the dollar, infrastructure improvements have created the potential for significant growth of U.S. exports in the next several years. As a critical link in the supply chain, pallet companies are uniquely positioned to benefit from any growth of international trade. Though many industries are still struggling with the effects of the recession, one area has actually benefited from the struggles of the U.S. economy – exports. Due to the weak economy, the U.S. dollar has been progressively decreasing in value compared to many other currencies. And every time the dollar falls it makes U.S. exports more competitive across the globe as it shifts exchange rates in favor of other currencies. As a critical link in the U.S. supply chain, pallet companies are uniquely positioned to benefit from current and future  increased export volumes.

A considerable increase in exports has already been seen this year and that trend is expected to continue. Exports increased almost 16% during the first half of 2011 to a value of $1 trillion dollars, compared to the $888 billion of exports during the first half of last year. In July 2011 alone, exports of goods and services were totaled at $178 billion, a $6.2 billion increase from the previous month. “The global marketplace presents vast opportunities for U.S. companies, and [the July 2011] trade report shows they are taking advantage of those opportunities,” said acting U.S. Commerce Secretary Rebecca Blank. Many industries have seen an increase in exported goods over the past year. The largest increase was in industrial supplies and materials which saw an increase of $9.6 billion from July 2010 to July 2011. Other export increases over the same period include $3.4 billion in capital goods, $2.7 billion in automotive vehicles, parts, and engines, $2 billion in foods, feeds and beverages and $0.8 billion in consumer goods. Agricultural exports have especially remained strong, making it one of the few sectors of the nation’s economy to enjoy a trade surplus. According to U.S. Agriculture Secretary Tom Vilsack, this year’s surplus is projected to be a record-setting $42.5 billion. Agriculture exports have already reached an all-time high of $75 billion in the first half of fiscal year 2011, up 27% from the same period last year and on track to reach the $137 billion forecast for the entire year.

Growing Exports and Opportunities in the Pallet Industry

A push by the federal government to increase exports presents an excellent opportunity for providers of export pallets to benefit from a growing market and it is an area where non-pooled pallets have some advantage over the large pooled companies. Neither iGPS nor PECO have operations outside North America. And while CHEP has large pallet pools operating in multiple countries the North American pool is not integrated with international pools which have different standard sizes. James Hall a public spokesman for Brambles Ltd, the parent company of CHEP, said that its pooling business in China (the third largest trading partner of the United States, behind only Canada and Mexico) is for shipments within the country not for export. He added that most of the loads shipped from China for export to the West remain unpalletized, and he doesn’t see that changing in the near future. He also confirmed that although CHEP does allow some pallets to be shipped from South America for import into areas, such as the United States, this is done only for very specific items, such as bananas, where it works for both the customer and CHEP on a transportation and logistics basis.

Based on market differences and logistics limitations, the formation of an intercontinental pool of rental pallets is unlikely even if a universal standard size was ever agreed upon. Providers of non-pooled pallets, however, are able to offer their customers custom sized pallets, including sizes that are standard in other markets. Even companies that provide pallets that cannot actually be exported due to a lack of phytosanitary treatment could benefit from the increased exports, particularly with goods that are exported by air. According to Albert Rodriguez, a public relations specialist at Los Angeles International Airport, which processed over 1.9 million tons of air cargo last year, most cargo arrives at the airport on pallets where it then gets placed inside containers, which limits the cargo from moving around in the aircraft, before air transport. This means that even pallets that are not ISPM-15 certified can still play a role in the export supply chain.

Export Growth Trends, Trade Barrier and Supply

Forecasts for U.S. agricultural exports for 2012 remain strong. Taken as a whole, the United States is in the midst of experiencing the three best years in our history in terms of agricultural exports. There have also been notable increases of exports by geographic area. Texas had the highest increase in exports of any state during the first six months of 2011. With exports up $22.5 billion compared to the same period last year, Texas was also the top exporting state by far, with over $120 billion in exports. California, Louisiana, New York, and Illinois also saw notable increases ranging from $8.9 billion to $7.4 billion. According to the International Trade Administration (ITA), there are still additional opportunities to increase U.S. exports. China, Brazil, India, Colombia, Indonesia, Saudi Arabia, South Africa, Turkey, and Vietnam were all identified by the Trade Promotion Coordinating Committee last year as markets where U.S. companies have increasing opportunities in the next five to ten years – as having high growth rates, a reasonable business climate, and significant export opportunities.

The passage of pending Free Trade Agreements (FTA) also holds some of the best potential for increases in other markets. FTAs reduce barriers to U.S. exports and create a more stable and transparent trading and investment environment, making it not only easier, but cheaper for U.S. companies to export to trading partner markets. Currently, the United States has FTAs pending with three additional countries, Columbia, Korea, and Panama. The passage of the FTAs will reduce costs for exporters to those markets.

Infrastructure Spending Hopes to Boost Export Potential

Improvements to the U.S. supply chain infrastructure that will support and expedite increased exports over the next several years are also in the process of being put in place. Some of this is due to the National Export Initiative (NEI) launched by President Obama last year with the goal of doubling exports by the end of 2014. These improvements include the railroads adding capacity to intermodal and bulk operations and ports both restructuring terminals and building new facilities. The U.S. Department of Transportation is investing nearly $50 million in Texas alone to bolster both passenger and freight service through the state. When combined with projects funded by BNSF Railway, Union Pacific Railroad, and local and state governments rail capacity will be increased by more than 30%, increasing efficiency for rail freight shippers. CSX is building a new $15 million intermodal terminal in Louisville, Ken. and a $59 million intermodal freight terminal expansion in Columbus, Ohio. Not only is Union Pacific Railroad investing millions into new facilities and rail improvements, but earlier this year it also opened up a new transloading service for agricultural products customers. This new program provides product transfer from covered hopper unit trains directly to marine containers at the railroad’s Yermo, Calif. facility.

Seaports, through which 99% of overseas trade volume enters or leaves the U.S., are expanding capacity. The Port of Longview will soon open a new grain terminal, the first export grain terminal built in the United States in more than 25 years, designed to automatically handle bulk grain. Between this and many other expansions, grain export capacity alone is expected to grow by 25% by 2015. The Port of Long Beach is consolidating and reconfiguring existing terminals to make additional room for growing cargo volumes. The Port is also investing $4 billion over the next decade to improve its facilities, including the Middle Harbor Project, which will double the capacity of two existing terminals.

Panama Canal Expansion Could Transform Logisitics Flows

A major factor that will impact U.S exports and imports in the near future is the expansion of the Panama Canal. Set to be completed in 2014, this project will double the capacity of the canal by allowing more and larger ships to move through it. With two-thirds of the U.S. population on the East Coast, many of the products that had previously been transported across the country on rail after delivery from Asian markets may now remain on vessels all the way to eastern ports. This strategy saves money while sacrificing time. One of the biggest reasons that there will be little change at first is the shallow depth of many East Coast facilities.
The only East Coast port with the depth to support the larger ships is Norfolk. Currently, the ports in New York, New Jersey and Miami have projects underway to increase the depths and raise bridges.

A research paper by the real estate firm Jones Lang LaSalle, suggests that cargo could be divided up as “discretionary” and “high-value.” High-value items will still likely come across the country via rail from Pacific ports, but “discretionary” items, such as furniture or household products, could reach the East Coast via all-water routes. This also could have a large impact on the Midwest because they may find many goods they use to get via rail from the West Coast may actually come from East Coast ports as traffic is reconfigured. Changes in the Panama Canal will likely impact both U.S. exports and imports, which means pallet companies servicing these East Coast port areas may be able to capitalize on the situation. As export volumes rise, pallet companies need to be aware of how logistics demands and supply chain routes may shift. It would be a good idea for pallet companies to talk with customers that deal with exporting or are considering exporting to see how they can better meet their needs. This is also a good time to consider ways to get involved in the export supply chain.

Are You Ready for the Future?

Smart pallet companies can tap into this market by seeking out new customers and offering new services. New customers could include companies that export their own products, third-party logistics providers and freight forwarders. As they increase their exports they will also have an increased need for efficient transportation of products. New services to consider include ISPM-15 treatment, pallet storage, and offering pallets in metric sizes, which are used by many international markets. A good way to determine if these would be smart business moves is to talk with your customers and see what services they would utilize if you offered them. With exports expected to continue increasing over the next several years, now is the time for pallet companies to position themselves to benefit from this growing market.


Publication date: 10/3/2011


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