Source (It is The Motley Fool, please do not hate me!)
Other 'Doom and Gloom' that ties to this and maybe referenced or could be helpful for background/additional reading if you like this topic:
Ok, on paper, it appears they are doing well! However, one could only imagine if the entire transportation network had the required labor force (remember, J.B Hunt, estimated they need 5% more workers), those volume numbers wouldn't be so 'rookie'.
Ok, back on the subject: I think that bridge in Vancouver is a bigger issue than they are leading on!
The turtle also had some other interesting tidbits for the Jellyfish (I will go into greater detail and link the user if they give me permission):
- As a night city dispatcher, I can confirm I've never seen so many empty trailers in my yard nor have I seen so little freight going outbounds.
- The one Railtrack out in Vancouver that brings our supplies from China to the central or east coast got caught on fire and got destroyed (see above)--it's a sight to see, especially when its a billion-dollar+ company with only 1 Railtrack out and to Vancouver
- We're delayed on everything from Vancouver going Eastbound
- Also, for example, I have 100-150 drivers total (redacting specific numbers for personal reasons unless given the okay to share) and less than 50 deliveries tomorrow. We usually expect at least 60 to 70
- We're doing 1 on 1 off shipments to Vancouver it seems like. We don't send a lot of full loads that are frozen as they're afraid if they sit out there too long the freight goes bad
- We're basically taking it day by day whether they can handle the freight at Vancouver. A lot of our freight is going to Calgary instead and taken by Road with a driver from there. Drivers don't like it due to all the mountains they need to drive through
Many thanks to the turtle for this awesome peek behind the curtain!
Funny, going over what we have above, the use of 'fluidity' describing all of these situations takes on a new meaning for me.
Let's play with the numbers for a second though. For the 2 weeks, Kamloops and Boston Bar bridge was out (not nearly as important as the Vancouver bridge I am imagining), 350 trains (14 x 25 average per day) were backed up.
This source is a little dated but will work for this example to ballpark what we are working with:
At any given time on Class Is’ networks, trains stretching from 10,000 to 15,000 feet long are snaking their way to a destination. Pulling well more than 100 cars, the trains are much longer than — and in some cases more than double the size of — a typical 5,000- to 6,000-foot train.
Canadian Pacific, CN and Union Pacific Railroad have incorporated long trains into their operating strategies and continue to aggressively push the length envelope. But BNSF Railway Co., CSX, Kansas City Southern and Norfolk Southern Railway only operate them on a case-by-case or limited basis, such as to transport grain or containers in greater volumes.
Last year, the Class I set a record in all five train-length categories. Intermodal trains averaged 173 boxes, up from 170 in 2016 and 172 in 2015; coal trains averaged 131 cars, up from 130 in 2016 and 2015; grain trains averaged 102 cars, up from 101 in 2016 and 99 in 2015; manifest trains averaged 102 cars, up from 98 in 2016 and 94 in 2015; and automotive trains averaged 71 cars, up from 68 in 2016 and 67 in 2015.
Averaging the cars from the types for the year 2016, let's go with 115 cars
115 cars x 350 train backlog = ~40,250 cars backed up to be delivered. YIKES! I wonder if our logistics friends in the comments can fill us in on how long it takes to process each car once it reaches its destination (assuming it doesn't just sit?)
Also, Rob Reily's comment about Calgary lines up with what the turtle told us above.
This backlog was asked about by analysts on the call:
They don't have 'greater' clarity on this because it is the weather, we can only guestimate that stuff like 2 weeks out! However, the data we have reviewed have shown these events are becoming more frequent and extreme 😐.
This is because Grain is being affected by the very same extreme weather patterns we have been covering.
While the short to medium-term future for Canadian National seems solid, that one and only bridge out of Vancouver cast doubt, along with the items they raised that make the whole situation 'fluid'.
The entire transportation network is already facing spikes in costs and supply/labor shortages, and you can bet any of the severe weather we have discussed above will exacerbate and compound those issues. This will continue to raise costs and those costs will get passed down the line. More fun to look forward to over the coming months. The CPI number from last week is a lie and a joke and this inflation is not transitory--as Covid-19, Suez Canal, and Mother Nature all have continued roles to play in seeing it stick around.
With inventories depleted, trouble likely on the horizon from Mother Nature, how is there any chance of prices going down? This inflation beast in the 'real economy' is insatiable and wants EVERYTHING!! (sidenote, I do think we will see deflation in asset prices when all of this goes down).
All of this pain in the transportation system happening in the backdrop of the Fed still plowing away with $120 billion in assets purchases each month:
$40 billion a month in mortgage-backed securities. This will continue to depress mortgage rates and only continues to add gasoline to the inflation fire.
$80 billion in Treasury securities a month (with policy rates near 0%): represses short-term and long-term interest rates in general, and inflates asset prices and consumer prices, which further DESTROYS the purchasing power of the dollar.
TL:DR The Dollar losing purchasing power + Inflation = Permanent Loss of purchasing power. This will likely be amplified by the demand created from extreme weather events and the lack of current inventory discussed above.
Unless one of the many other catalysts triggers the MOASS, I believe inflation is the match that has been lit that will light the fuse of the rocket.