(OT) Shipping Industry not too Concerned:
- From: "Lord Gow, rogue bull of the 333!" <lordgow@xxxxxxxxx>
- Date: Thu, 1 Sep 2005 16:25:23 -0400
Let's hope they're right...
http://tinyurl.com/dbr52
Hurricane Has Limited Effect On Shipping Companies
Thursday September 1, 4:12 PM EDT
CHICAGO -(Dow Jones)- Some U.S. shipping companies may see higher costs in
the third quarter for equipment damage and business interruptions related to
Hurricane Katrina. But analysts Thursday downplayed the impact of these
costs on earnings in the current quarter.
Further, they said, by the fourth quarter of the year, revenues could grow
as railroads and trucking companies help rebuild and resupply the devastated
city of New Orleans and the neighboring Gulf Coast area.
The spike in fuel costs this week is unlikely to hurt shipping companies,
since both air and ground shippers can add fuel surcharges, analysts said.
Railroads were the only shippers to suffer serious equipment damage from the
hurricane and the subsequent flooding in New Orleans. Trucking and
air-shipping companies were mostly able to drive or fly out of harm's way,
although some of their facilities remained closed Thursday.
Among rail carriers, CSX Corp. (CSX) (CSX) has the most exposure in the
Gulf, said Donald Broughton, an analyst with A.G. Edwards.
A CSX spokesman said Thursday that a 100-mile route between Mobile, Alabama,
and New Orleans was completely shut down, and would require "considerable
repairs." Among other products, the line carries chemicals from Texas to the
East Coast.
Analyst Broughton said that's a small part of the railroad's business. "We
estimate that normally about 3.5% of CSX traffic actually flows through the
New Orleans/Mobile area of its network."
"As recently as last fall, CSX recorded $25 million of costs in the third
quarter of 2004," related to six hurricanes, wrote analyst Ken Hoexter at
Merrill Lynch. He said that worked out to a 6-cent reduction in per-share
third- quarter earnings last year.
"While speculating at specific financial targets still appears premature, a
one-time charge in that range or even slightly higher for CSX once again
would not surprise us, while the impact appears to be significantly smaller
for other carriers," Hoexter wrote Thursday.
David Goode, chief executive of Norfolk Southern Corp. (NSC) (NSC), said in
a prepared statement that the railroad's Gulf operations are back to normal,
with the exception of the immediate New Orleans area. The company expects
repairs on tracks to New Orleans to get under way within a few days.
"Railroads are outdoor sports," said James Valentine, an analyst with Morgan
Stanley. Railroad crews typically can repair hurricane and flood damage in
days, or at most, weeks, he said.
In the port of New Orleans, most cargo is bulk-shipped, rather than shipped
in more complex cargo containers. Broughton said it won't be long before
tankers can enter the port with bulk shipments - funneled with a hose - of
commodities such as grain or coal.
Fuel Cost Not A Problem For Truckers
When it comes to shipping, "People are getting fuel costs out of
proportion," Broughton said. "It can't get any worse than it got this week."
Prices will come down when refineries are up and running again, he said.
In the trucking industry, fuel surcharges, in place since 1997, are adjusted
weekly, according to the price of diesel fuel around the country.
"The fuel surcharge has worked incredibly well, and has allowed us to not
have any impact from fuel," William Zollars, chief executive of trucking
company Yellow Roadway Corp. (YELL) (YELL), said this week. He said the
havoc wreaked by Hurricane Katrina will likely cause a "speed bump" for the
U.S. economy. Zollars said that could have a short-term impact on shippers,
which are considered a bellwether of economic activity. But Zollars said he
still expects continued strong growth for his company this year.
Cost Not A Deterrent To Air Shipping
Air cargo companies this week are working with volunteer agencies to deliver
supplies to hurricane victims. Commercial air service at New Orleans Louis
Armstrong International Airport is expected to resume during the week after
Labor Day. Air cargo companies, too, have added surcharges to help offset
the skyrocketing price of jet fuel. Currently, United Parcel Service (UPS),
FedEx Corp. (FDX) (FDX), and DHL have imposed air surcharges of 9.5% to 14%.
Although jet fuel prices have risen even higher than that, the companies can
continue to raise prices as needed, analysts said.
A UPS spokeswoman said the companies don't comment on fuel surcharges.
If air parcel shippers were to add a surcharge now, it wouldn't take effect
for two months, Valentine said. Broughten said that, although the surcharges
for air shipping have been much higher than the 3% charge for trucking,
there hasn't been a notable shift away from shipping by air to ground. "For
customers who ship by air, cost isn't the issue," the A.G. Edwards analyst
said. They'll continue to pay higher rates to meet their needs."
-By Ann Keeton, Dow Jones Newswires; 312-750-4120; ann.keeton@xxxxxxxxxxxx
LG
--
"The battle, sir, is not to the strong alone; it is to the vigilant, the
active, the brave." - Patrick Henry, speech to the Virginia Convention,
March 23, 1775
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