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Intermodal Growth Signals Upturn

This year the domestic intermodal freight business is enjoying a resurgence after experiencing a tough time in 2016, but is this the precursor to another period of growth, or just a blip in a downward slide?

This question arose at the Intermodal Association of North America’s Operations & Maintenance Meeting held two weeks ago in suburban Chicago.

In the First Quarter of this year North American intermodal freight volumes saw real growth following declines in 2016, according to IANA’s Intermodal Market Trends and Statistics report.

International and domestic container traffic rose 2.9% and 1.3% respectively, although intermodal trailers posted only minimal gains of 0.3%.

“All intermodal market segments showed improvement in the first quarter,” observed IANA President Joni Casey.

“What’s notable about this is that it comes on the heels of 2.0% growth in the same quarter of last year, suggesting real gains, not just a weak comparison,” she said.

Our assumption is that there will be fairly soft growth for some time to come,” said Pat Casey, vice president of fleet management for TTX Co., a monopsony (a seller monopoly) organized to purchase and provide railcars to major railroads throughout North America.
In addition to more than 25,000 boxcars and gondolas, TTX supplies over 230,000 flatcars and intermodal doublestack well cars to the industry.

“We had pretty low usage of our equipment last year,” Pat Casey added. He said growth was suppressed in large part by low fuel prices, which made over-the-road trucking more competitive with rail intermodal.

He also noted that inventories rose and remained high, another factor that can impact freight patterns.

TTX’s Casey also stressed the outsized contribution made by intermodal traffic from Canada to the United States. He pointed out that half of the industry’s 2% growth in the First Quarter can be traced to shipments to and from Canada.

Also helping intermodal is the fact that very little longhaul freight goes by truck anymore, he said. However, he also observed that one of the most difficult areas for intermodal to compete with trucks is in containerized imports in parts of the country.

The longshoremen’s union labor action at West Coast ports in 2014-15 and the opening of the new, wider Panama Canal has led to an increase in imports to Southeastern ports, which is the most difficult geographic area for rail intermodal to compete with trucks in moving this freight to the interior, according to Casey.

In addition, with the relaxation on regulations by the Trump Administration, rail coal export shipments are diverting railroads’ attention away from intermodal. According to news reports, new CSX Chief Executive Officer Hunter Harrison also is expected to de-emphasize intermodal as part of reorganizing his company’s rail operations.

Intermodal by the Numbers

About 17 million intermodal loads are moved by rail in the U.S. annually, and the railroads derive 25% of their revenues from intermodal freight.

According to IANA, the size of the North American intermodal market is $40 billion, and $11 billion of those revenues are generated annually by more than 10,000 third-party logistics providers. Their number includes the 3PLs who arrange six million shipments that take place each year in the U.S.

The seven highest-density trade corridors, accounting for 63.4% of total intermodal volume, collectively were up 2.1% in the quarter.

Gains were varied, ranging from a 7.4% increase between Eastern and Western Canada, to a 1.3% loss in the South Central-Southwest corridor. The Midwest-Southwest corridor showed the highest volume growth at 1.7%.

In a new feature, IANA said the IMTS report will highlight additional information on specific corridors. For the First Quarter report, this feature focused on international container growth.

Of the top five corridors contributing to international growth, shipment gains were in the East to West lanes. Midwest-Southwest moves increased 19%, the highest share of international volume growth, followed by the Northeast-Midwest at 13%. At the same time, Eastbound Western Canada-Eastern Canada traffic saw 13% in gains.

IANA also points out that data reported by intermodal marketing companies (IMCs) offers a view of rail-haul quarterly performance side by side with highway results.

Participating IMCs showed gains of 7.5% in total quarterly loads, reflecting the continued strength of highway shipments. These increased 11.6% over the same quarter the previous year. Intermodal loads also gained 3.6% after a double-digit drop for the full 2016 year.

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