KSU
#I would say, the most important piece about Lazaro is that the facility will operationally be ready in Q4.
They plan to open operations in Q1 of 2017.
So the facility is ready to go.
There is continued volume that comes in there that we move on a daily basis.
I wouldn't say that there is congestion there right now.
I would just say that it's continued operations.
It's the surge time of the year.
It's the holiday and high retail time of the year, so there's a lot of freight moving into that right now.
But that is the area that we talked about the Lazaro inter-Mexico and Lazaro cross-border piece of the business that has been off this year primarily due to the decision of one of our customers to move that freight completely by vessel up into the Houston area, and so that volume is not moving at all through the port.
So if it were to move back, obviously, that would be beneficial to us, but again, they will decide that in the coming months and years, how they want to move that freight on an overall long-term basis.
But right now, the concession is done.
The operations will be ready to move in Q4, and we expect to move volume out of the new APMT terminal in Q1 of 2017.
Yes.
That's a view at this point.
If there are no further disruptions.
(Laughter)
The Port of Veracruz is ---+ we believe that all of the construction and the bypasses will be completed by the end of 2017.
So we are seeing more and more business into Veracruz.
We are selling specifically into the automotive space.
And we feel very comfortable that we have a good product there right now.
We have to hand that over to a partner railroad as we get closer to the port, very close inside the port.
But we feel that once that bypass is completed at the end of 2017, we will have a great product for our customers to move into the Atlantic as well.
So very comfortable with the way that's proceeding right now, and right now, all signs are that will be completed in December 2017.
Yes.
I think that's a fair assessment there on a flattish dollar perspective.
We've got Sasol continuing.
You've got PTC, as I mentioned there, one more heavy year, and then it will start winding down a bit after that.
So I think the flattish is a good expectation.
<UNK>, that was pretty slick how you sneaked in three questions there.
(Laughter)
I think you will continue to see the auto the volumes move as they have been, as we laid it out.
Obviously, the Kia facility will be coming on full swing at the end of the year, so they are already producing, but those will continue to ramp up.
And then we will see another facility come on in November.
Obviously, that's a slow ramp up, but we've described the other facilities.
But right now, we feel like our automotive business is doing very well.
We are very comfortable that we have the security and the right type of fluidity and capacity to support them.
As <UNK> mentioned, we're going to continue to invest in that space.
But not only Q4, but into 2017 and over the next few years, we feel very good about the way the automotive volume is coming forward.
This is <UNK>.
No.
You shouldn't see any carryover impact on either those events.
Those are behind us.
I think we gave some guidance around fourth quarter that you should expect to see about a $7-million increase over what we had in 4Q of 2015.
And again, we were accrued at 50% levels in third quarter and fourth quarter a year ago, and obviously, stepped those accruals up this year.
We're not giving any EPS guidance, so I think we'll stick with the commentary we gave about fourth quarter.
I'd just go back to looking at the year-to-date results as opposed to the quarter because the quarter did include some things, some catch-up things, some unusual things that going back to your comment about normal seasonality, that you wouldn't expect to see in a normal third quarter.
No.
We're not going to really get into all those details, and we'll leave the commentary as we provided it on the slides.
Wow.
Snuck that one in there.
He's just seeing if we're paying attention here.
(Laughter)
It is really going to depend on when we see volume recover.
We keep thinking that we are lapping and going through the cycle on some of the coal and crude oil movements and they should start to look better, and that just hasn't happened.
But I think we are not going to give guidance about timing of when we expect volume growth to return, but we think it's going to happen.
When you see the investment, new plants, the market share opportunity that we have an intermodal, the new terminal at Lazaro, the petrochemicals, autos, all the things you have heard us talk about, we will see volume growth return.
And when that happens, I think you'll see the benefit of the cost and efficiency work that we are doing right now.
But is that going to happen in 2017.
I don't know.
Not a very satisfying answer, but that's our answer.
This is <UNK>, <UNK>.
I think the most important piece when you think about the competitive dynamics of Manzanillo and Lazaro, Lazaro was the only port that has a direct rail connection into the US and into the rest of North America.
So the addition of the APMT terminal is going to be pretty significant.
If you look at what the government has said, they are looking to double the initial size of the facility.
They want to double the capacity of the port.
We feel very, very comfortable that port is going to continue to grow.
Now, when you think about competitiveness into the inter-Mexico area, that's where we see the competition right now, the truckers and the low price.
When you think about the difference between rail and truck, there's about 60% of the volume goes truck, about 40% goes rail.
We're hoping that continues to improve as people look at the security of the rail, the number of places we can get to on the fluidity.
Obviously, <UNK> talked about the big investments that we are making.
It is important when you have an intermodal product to be fluid and consistent.
And that's where we as a Management Team are spending all of our time because we realize that the growth opportunity there is significant, not only out of Lazaro, but into the US.
So from a competitive perspective, we know the value that we bring.
We understand how to price it.
We believe that it's going to continue to ---+ tailwinds are going to go our way as we continue to improve our fluidity.
But right now, we feel like we are very, very competitive in the space that we are at.
But there is also this dynamic of the vessel operators that we are still dealing with.
And it's a global issue.
It's not just Mexico; it's not just North America.
And so as the vessel operators sort out probably over the next 12 to 18 months, I think we will continue to see that port grow at Lazaro.
You're welcome.
Hi, <UNK>.
You're absolutely right, <UNK>.
Land acquisition was the key.
There was a particular piece of property, but we knew that this would probably be a question that would be asked, and so we did some research just prior to the call over the last week and a half just to make sure we understood how it is progressing, and we continue to feel very comfortable that will be completed and we will have access to that line at the end of next year.
So you know everything that we know.
But we feel very comfortable that the land acquisition issue that was there on that last four kilometers has been cured.
Yes, I would agree with that.
What I would tell you is the steel industry continues to be under a global pressure.
There is inventory in a number of areas, not only within Mexico, but also in the US and the rest of North America.
We do see one ray of light is that the amount of high-grade steel necessary in Mexico and the plants able to support that could potentially help us maybe into the last part of next year.
But again, people are looking at that industry, and it is extremely competitive, and we just haven't seen the fallout that you would potentially expect seeing all the court cases that are out there.
But I think we're going to hold our own.
Our customers seem to be investing, and so we think it's going to end up being a very positive space.
But right now we just don't see any relief over the next little while.
Potentially, and also potentially coming inside of Mexico.
So both sides.
Good morning.
It's certainly a great opportunity.
As <UNK> mentioned in his comments, we are in the design phase of that facility.
Those small cars are good for us.
We are able to move them both south and north because they export them not only into the US and Canada, but also around the globe.
So you will see those cars go both into the Atlantic Pacific.
We feel that is a very positively are heavily engaged in that facility and its construction there in San Luis Potosi.
No.
We are just continuing to see other opportunities for ourselves and our customers out of Mexico, and also into Mexico, primarily driven by the manufacturing and the retail environment in Mexico, which seems to be doing very well.
So we feel very comfortable with both north and south and out of the Port of Lazaro that we're going to continue to see growth, and we're looking at providing different services for those customers.
But they would be normal intermodal services, nothing exceptional.
Thank you, <UNK>, for the question.
We do not believe that the impact of those particular facilities ---+ we don't services facilities right now, so we don't think it's going to have an impact on us.
But we do see Ford as a continuing customer over the next few years, as I just said, that they will continue to grow.
As to whether the volumes from a North America perspective are going to stay where they are at or if we're going to see some of the other automotive companies tail off production in Mexico, we use the publicly available data and the data that our customers give to us, and right now we feel very comfortable that we are still on the [projected] trajectory that we laid out over the last couple of quarters.
And by the end of 2020 ---+ we see the facilities coming on next year in (inaudible), the facilities coming on next year with Ford, and BMW the next year, so right now, we continue to see all of those facilities coming on at the same pace that they have said ---+that they have announced.
And we are spending our capital dollars and preparing for that as we've said in the past.
That was an ongoing environmental remediation cleanup that we had ---+ we continue to work on and have over the past few years.
With the work we've done, we discovered a little incremental remediation work needed.
So we're booking to that anticipated remediation charge.
Just a couple of quick comments.
I realize this is a bit of a noisy quarter, but you guys will write the headlines, but I think the headline that we have in mind is this fuel excise tax situation is a good thing for us.
It accelerates the benefits of deregulation, and it makes us I think more competitive long term with truck particularly in intermodal.
The focus on cost control and efficiency is ---+ we are very, very pleased with that, and that is producing real productivity improvements that we're seeing today, and when volume growth returns, I think that will put us in great position.
And have to close with the long-term growth drivers are still very much intact.
And finally, I know Tony Hatch is out there.
I really like Jake Arrieta against Rich Hill tonight, so we will close with go Cubs.
We will talk to you in 90 days.
