Intermodal a Study in Contrasts

The story of intermodal freight shipments these days is one of contrasts.

At a time when the trucking industry has surplus capacity, truckers are cutting their rates in an effort to chase business.

Railroads, though, generally are increasing their rates.

The Association of American Railroads reports that in 2019 intermodal enjoyed its second highest volume year on record but the Intermodal Association of North America reported that domestic intermodal volume fell 6.1 percent last year.

J.B. Hunt, a trucking company working with railroads to offer intermodal service, reported that in 2019 its intermodal volume fell for the first time.

Yet Hunt executives remain optimistic that there is business to be had that can be diverted from trucks, including in the eastern United States where the market for intermodal is most challenging.

“In today’s environment, there is a challenge to grow in the east because the customers are able to secure truckload capacity at rates equal to or better than intermodal,” said Darren Field, J.B. Hunt’s executive vice president of intermodal, during a company earnings call this month.

Field said those challenges will continue until Hunt and its railroad partners can offer economics and service that outperform what trucking companies offer.

Some analysts question whether intermodal is any longer a growth industry.

They note that Hunt’s intermodal profits grew 2 percent during the past six years. During a six-year period prior to that intermodal profits enjoyed 11 percent growth.

One source of the loss of intermodal volume has been a decision by CSX to drop intermodal service from hundreds of what it termed low-volume lanes in 2017 and 2018.

Norfolk Southern is taking similar steps with its “yield-up” pricing intermodal strategy.

Both railroads contend that these changes will result in improved and more consistent service.

Field said Hunt has noticed that NS and CSX did improve their service in the second half of last year.

Nonetheless, Hunt reported that its intermodal volume declined by 3.4 percent last year, to 1.9 million loads.

Loads in the eastern region of the country fell in all four quarters of 2019.

A bright spot for Hunt was that transcontinental loads rose in the third and fourth quarters.

Field said Hunt managers believe there are 8 million to 10 million loads it can convert from highway to intermodal.

“The reality is we have to produce the combination of economics and service that convince that customer base that intermodal is the right solution for them,” he said.

Intermodal traffic is about half of all rail freight volume and is split about 50-50 between international and domestic loads.

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