Last week at our annual Transportation Dinner and Debate, we were pleased to welcome industry experts and executives from all segments of the transportation and logistics industry. Hosting this event in late June gave us the opportunity to take stock of the year to date and exchange viewpoints about how we expect the remainder to unfold. As in previous years, the debate was lively and insightful. Some of the highlights of our dinner discourse follow. We also invite you to read our recent observations in our 2023 Halftime Logistics Report for more in-depth coverage of each transportation segment.
There are niche opportunities to "win" in the marketplace for transportation companies that still exist. Companies serving the automotive, pharmaceutical, and A&D segments are seeing robust demand this year. With uneven demand across industries, diversification of portfolios will be critical to de-risking operations for transportation operators.
M&A is not dead. It is just not as fun and exciting as it has been over the last few years. However, those with strong stomachs, the willingness to invest in distress, and some dry powder will find some very attractive opportunities over the next few quarters.
There was absolutely no consensus in the room on where we think pricing is going as the group seemed legitimately split 50/50. There may be some wishful thinking that rates for trucking and ocean freight have already bottomed out. Also, many can agree that rates may be near a bottom, but the expectation for the timing of a reversal is all over the place.
ESG – what it means to the industry and how to move forward
- ESG continues to be a very hot topic in the transportation sector, and there is not a clear standard (yet) for companies to follow. The consensus is that the process of incorporating sustainability is underway, and it is incumbent on leading firms to pave the way by listening to what their most important customers want and expect and then delivering on those expectations.
- Attendees agreed that ESG has different definitions and priorities depending on the cultural context of various countries and regions. Europe has taken the lead by continuing to push for carbon neutrality. In Canada, the “E” (for environmental) is very important, as illustrated by single-use plastics being limited to shipping parcels with more regulations on carbon emission on the horizon. Within the U.S., The “S” (for social) is seen more so within organizations focused on diversity and inclusion initiatives within their workforce. ESG can mean many things depending on the context, and putting initiatives into one category of action may not be the correct course of action.
- Where we found the most consensus related to ESG is that there is definitely momentum building toward the use of alternative energy across many applications, from infrastructure to road transport and sea transport. But despite the early momentum, it may be better to be a second mover as industry standards emerge versus being the early adopter of the wrong strategy or technology.
Other issues in the news
The challenges around the physical water level at the Panama Canal haven’t gotten much general publicity, but the low level is a concern on the minds of this cohort. Drought-related capacity constraints may change the dynamics of east/west port operations.
There was less concern over some of the upcoming labor negotiations than expected, as firms view these negotiations as business-as-usual. The recently-concluded ILWU labor negotiation may have caused widespread relief, but long-term worries remain about the cargo mix shift of the West Coast versus the East.