Bulk dump

Bulk/dump loadings jump 1.3% in July

Despite the recent slide that started at the beginning of the year, volumes are still above year ago levels thanks to a surge in demand at the very end of 2011. Volumes rebounded slightly above expectation in July, rising 1.3% from the prior month. At 16.177 million loadings are just 1.5% above last year’s volumes. This is well below the 6%+ that we saw at the end of 2011 and into early 2012. Volatile monthly volumes over the last several years have created large swings in the year-over-year growth rates.

Recent history
Bulk/Dump had a near monumental collapse of 25% in volumes from peak to trough. After suffering such a huge decline it has yet to make up more than a quarter of that lost freight volume fully 2 years into the recovery. Bulk/Dump freight was the second hardest hit sector, faring only slightly better than Flatbed. With construction and housing both freezing up, Bulk/Dump loadings dropped 13.8% in 2009. Volumes had already declined 9.4% in 2008 and 4.2% in 2007. Volumes dropped throughout 2008 and 2009 with the biggest quarterly drop occurring in Q1 of 2009.

Loadings surged in early 2010, but then didn’t move much until the second half of 2011. Since Q1 of 2011 loadings have shown very solid, steady growth – on a quarterly basis. Monthly data has shown much more volatility. Loadings rose 2.6% in 2010 and 2.9% in 2011. Volumes increased 1.4% in Q1, continuing the recent trend, but then dropped 0.7% in Q2 – the first quarterly decline since the start of 2011.

Outlook
This segment remains well below its previous peak, and it won’t reach it for several years – probably not until after the next economic cycle – it would need a huge housing and government infrastructure boost for it to occur sooner. We expect to see very little change from current levels through the end of 2012 with strong gains returning in early 2013.

Aside from the relative weakness we expect to see through the end of this year, there is no significant change to our outlook. We are forecasting that loadings growth will accelerate slightly in 2012, up 3.9%. Growth should then be expected to stay in the 3-5% range, growing 3.5% in 2013 and 4.5% in 2014.

Analysis
Bulk movements will be helped by the gradual recovery in construction and drilling markets as more rock, sand, and gravel will be needed. Growth may be hurt some by the very weak grain harvest.

The continued signs of a housing recovery will help the bulk segment. However, while federal infrastructure spending is up modestly, state expenditures are not. Compared to most markets, this segment likely has very little downside exposure. While it would fall some during a recession it still remains near its trough and the housing and infrastructure segments are unlikely to contract in a significant way.

Both Flatbed and Bulk/Dump sectors have performed better than the industry as a whole. Bulk/Dump has been helped by export demand and relatively easy comparisons. It has shown a volatile path, affected by swings in nonresidential construction and infrastructure.

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