Supply Chain Optimization

Trucks Upside Down And A Slow Boat From China

 
The lower value of their trucks is severely hurting many trucking companies’ earnings.  As demand declined, used class 8 trucks, which were worth about $60,000 in early 2015, are now worth only $49,000. This makes carriers “upside down” – i.e., the book value of the trucks is higher than their market price. Unless freight volume ticks up greatly, no recovery is predicted until 2020 or later.  The impact on profits is huge; for example, Celadon’s 11,000 truck lease fleet appears to be in trouble as its auditors have withdrawn opinions and short-sellers are circling.  
 
A new Chinese rail link has re-opened the ancient “silk road”.  Containers traveling to Europe that may take 7 weeks by sea can travel to the heart of Europe in just 21 days… far faster but at 5 times the price – rail costs around $5,000.   It will be interesting to see if, when China removes the subsidies, the route will survive.