Intermodal investment is the key to lower emissions

The introduction of the emissions trading scheme should not be about fuel prices, but about making “fundamental changes” to establish greener supply chains, CEO of Australian Logistics Council (ALC) Hal Morris said.

The CSIRO has projected the most likely scenario for fuel prices under the carbon regime would be a 25-cent-per-litre increase, half the increase that the transport industry experienced over the last 12 months.

Mr Morris said while the estimated price rise would not significantly affect the sector, that would not solve the real problem in Australia’s supply chains.

“The cost increase will be passed on to customers and wouldn’t have much effect on the industry. And that’s the problem,” he said.

“Because it’s about changing behaviours and changing how supply chains operate to get a better carbon outcome. We need to use the carrot as well as the stick. We need to invest in innovation and technology, and assist companies to make the changes needed to get greener supply chains.”

 

Mr Morris said that while the government is showing its commitment to upgrade the nation’s infrastructure, the freight industry is faced with a dilemma.  

“The Australian freight sector is experiencing this ongoing, compounding growth and that doesn’t seem to be slowing any time soon,” he said.

“While freight demand is expected to double by 2020, the massive challenge is to figure out how to handle the demand using far less fuel, with fewer vehicle movements and less carbon produced.” 

Mr Morris will chair the 8th Annual AusIntermodal Summit, which will be held on September 3 and 4 in Melbourne.

The summit will examine key agendas regarding Australian freight, bringing together government officials, CEOs of Australia’s major ports, freight operators, shipping lines, rail companies, stevedores and infrastructure companies.

Boeing sees a $3.2 trillion fuel-efficient aircraft market

boeing 787

Demand for new fuel-efficient airliners and fleet renewal will create a $3.2 trillion market over the next two decades, Boeing has projected.

Releasing the Current Market Outlook report, the aircraft builder said that the aviation sector will call for 29,400 new passenger and freighter aircraft by 2027, while also acknowledging the industry’s near-term challenges such as a slowing global economy, spiralling fuel prices and shrinking airlines to balance costs and revenues.

“We’re facing a very dynamic situation today in the commercial aviation industry,” said vice president of Boeing Commercial Airplanes Marketing, Randy Tinseth.

“This year’s forecast is roosted in today’s realities, but also recognises the nature of a long-term outlook.”

According to the report, replacement aircraft represented a greater share of demand of 43 per cent than a previous projection of 36 per cent, boosted by the loss of economic viability of older aircraft amidst soaring fuel costs.

The company also forecasts a fleet size of 35,800 at the end of the 20-year period, which represents an annual increase of 3.2 per cent compared with today’s world fleet of 19,000 units.

New aircraft are expected to accommodate a forecasted 5.8 per cent annual increase in air cargo traffic and a five per cent annual increase in international air travel.

Also projected is strong growth in the delivery of single-aisle jet planes, driven by rapid expansion of Asia-Pacific aviation markets along with continued growth of low-cost carriers worldwide.

“We’re seeing an increasing share of aircraft deliveries to the Asia-Pacific region, as well as the Middle East, Latin America and the Commonwealth of Independent States (CIS),” Tinseth said.

“The result is a much more geographically balanced and more stable long-term market, which is less vulnerable to swings in regional economies or other variations in demand.”

More bad news for business

D&B expected sales and profits indexes (yello line: profits; blue line: sales)

Australian executives predict business conditions will further deteriorate in the September quarter affected by a slowing economy, spiralling fuel prices and toughened credit conditions, a survey shows.
 
According to the latest Dun & Bradsheet (D&B) Business Expectations Survey, fuel prices have hit businesses hard with almost 90 per cent of participants indicating they have had a detrimental impact on operations, a 28% increase in three months. 32 per cent of firms have noticed a downturn in consumer spending in the past three months and 21 per cent have been negatively affected by the strong Australian dollar.
 
Credit market conditions represented another significant concern. Two-thirds of firms participated indicated that a tightening credit market will have a negative impact on operations, with 11% anticipating a very negative impact.
 
The September quarter is also expected to bring a steep decline in sales, profits, employment growth and capital investment, with all of these indexes now in negative territory.

Sales and profits growth expectations have fallen sharply, down 36 and 33 points respectively from December quarter highs. Capital investment expectations have dropped 13 points to an index of minus seven, with employment growth expectations at the lowest point since June 1991.

 

As an exception to the deteriorating conditions, selling price expectations have climbed six points to an index of 51.

 
D&B CEO Christine Christian said continually escalating costs are eating away the profit margins of Australian businesses.
 
“Fuel prices are continuing to soar, interest rates remain steady but high and consumer spending is dropping away – all of these factors are squeezing the profit margins of Australian businesses," she said.
 
“Executives face challenging decisions about how to manage these costs. Moves to increase prices will likely be met by customer backlash however as costs continue to rise and margins get thinner, failure to pass on these costs will have detrimental impacts on profitability.”
 
The company’s economic consultant Dr Duncan Ironmonger said the economic slowdown in Australia is happening quickly.
 
Bureau of Statistics data for May reveal very weak growth in retail sales and a further decline in the number of new dwelling approvals. The small boost from income tax cuts starting this month will do little to boost consumer sentiment and spending in an environment of high food and petrol prices and high interest rates," he said.
 
  • The D&B index for expected sales is down 31 points to -16, with 25% of executives expecting an increase in sales and 41% expecting a decrease.
  • The profits index is down 24 points to -21, with 22% of executives expecting profits to rise and 43% expecting a fall.
  • Employment expectations are down 15 points to an index of -11, with 10% of executives expecting an increase in staff and 21% expecting a reduction.
  • Capital investment expectations are down 13 points to an index of minus seven, with 8% of executives expecting an increase and 15% expecting to cut spending. Inventories expectations are down nine points to an index of minus nine.
  • The selling prices index is up six points to an index of 51, with 58% of firms expecting to raise prices and 7% expecting to decrease them.
 

Bleaker picture for the coming quarter

A latest business expectations survey has painted a bleaker outlook for the December quarter, with sales and profits growth expectations projected to fall further affected by the continuing high oil prices.

The survey, released by Dun & Bradstreet (D&B), indicates all indexes except selling prices will remain in negative territory for the second consecutive quarter, with 47 per cent of executives rate petrol prices as their primary concern, climbing to the highest level in 16 months.

In the June quarter, 43 per cent of businesses experienced declining sales and almost half of executives anticipate further decline in sales in the quarter ahead. The actual sales index for retailers has been hit the hardest, falling 52 points from the December 2007 to the June quarter.

The report also shows a similar picture illustrated by profits expectations, with 50 per cent of executives anticipating a decline in profits in the December quarter. 13 per cent of executives expect a decrease in capital investment, while just seven per cent anticipate an uplift.

D&B’s CEO Christine Christian said business confidence has fallen away dramatically as the economy continues to slow.

“The expectation of business executives have continued to fall, with sales and profits expectations particularly hard hit,” she said.

“These indices have fallen for two consecutive quarters, a trend driven largely by declining sales and profits results and continually escalating business costs.”

Meanwhile fuel prices continue to exert a detrimental impact on operations with nine in ten executives reporting that fuel costs are hurting their business, a 28 per cent increase since March.

The situation is expected to worsen, as 47 per cent of executives rate the cost of fuel as the most important influence on operations in the coming quarter.

“With the economy expected to slow further at least in the short term, businesses need to be particularly diligent about managing their operations to ensure they remain financially stable throughout the challenging conditions,” Ms Christian said.

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