Backing Capacity

 If you think supply-demand dynamics in the freight transportation business have been confused in the economic downturn, just wait for what you’re likely to see in a recovery.

That’s a growing concern for many in the transport world — carriers and shippers alike — as one of the worst years in memory begins to wind down and operators on all sides of the shipping equation begin to assess not only the prospects for a true recovery but also the shape a return to economic expansion will take.

There already are hints of the headaches that may come in Asia, where ocean and air shippers are reporting delays in getting space for exports. And the question of how fast capacity may return and the impact decisions on ships, trucks and trains will have on supply chains was an undercurrent at last week’s Transcomp and Intermodal Expo event in Anaheim, Calif.

To be fair, few of those on hand seemed to believe there’s much of a recovery worth talking about. Of the 500 or so people at the event’s opening session, only 10 percent said in electronic polling the general economy is “significantly improving.” Most — 56 percent — see things only “mildly improving,” and 26 percent see “no change” this fall.

But 81 percent believed business will be better next year — How could it be worse? — raising the question of how many of those trucks, planes and container ships will be available to haul the freight, and what will happen as carriers look to take part in the recovery.

John Barnes III of RPC Capital Markets believes market dynamics will work rapidly to bring capacity back in a recovery. “We believe any tightness will be very short term. At the first sign of life, you will see many trucking companies bringing their idled capacity back on line to take advantage of the environment,” he said.

Trucker ABF Freight System certainly backs that up. The less-than-truckload carrier has ratcheted back its fleet 10 to 15 percent, but like the “hot layups” that leave container ships ready to return to service quickly, many of ABF’s idled tractors are just parked, and not gone forever.

Jerry Moyes, chairman and CEO of truckload carrier Swift Transportation, says adding just 1 or 2 percent to GDP growth could trigger “a huge supply-demand situation.”

That means higher prices, of course, and maritime carriers say they can’t wait for a recovery for the dynamics to change. “If (pricing) doesn’t move by very much or soon enough, then there will be some people that will not survive this,” Ron Widdows, chairman of APL parent NOL, told the Anaheim meeting. “The losses we are seeing today probably will continue into 2010.”

Martin Bernstein, director of transportation excellence at retailer J.C. Penney, already is seeing the trouble tight capacity can cause. With ocean carriers consolidating ship space and strings, “25 percent of the sailings have changed since the summer,” he said. “We’re moving all the pieces around, and it plays havoc with our schedules.”

The capacity, he believes, can’t come back soon enough.

Paul Page is editorial director of The Journal of Commerce. He can be contacted at 202-355-1170, or at ppage@joc.com. Follow Paul Page on Twitter, www.twitter.com/paulpage.