North America Intermodal Service Demand Falling

Demand for intermodal transportation is falling amid lower container volumes in North American.

Moody’s Investors Service said the transportation sector faces increasing pressure due to the coronavirus outbreak.

In a report issued last week Moody’s said all transportation companies will face lower demand because of disrupted supply chains and slower economic activity.

“As the coronavirus spreads to more countries, the likelihood of longer lasting economic and financial effects has increased, the impact of which may weigh on the North American transportation sector’s financial and credit profile,” said Rene Lipsch, a Moody’s vice president and senior credit officer, in a news release release.

Container traffic at the Port of Los Angeles is down about 25 percent compared with at this time in 2019.

Moody’s noted that freight railroads already were contending with strong competition from trucking companies for container traffic.

But it said that historically railroads have been able to adapt their cost base fairly quickly in the face of weakening demand for transportation services.

The Moody’s analysis, though, said that longer term trucking companies are at risk from lower demand due to more prevalent supply chain disruptions, a broader slowdown in economic activity and potential restrictions on freight routes.

The Association of American Railroads in a report for traffic volumes in the week ending March 7 said the falloff in intermodal loadings was more noticeable than the norm over the past year.

Railroads handled 232,561 intermodal containers and trailers during the first week of the month, a 14.1 percent decrease compared with the same week a year ago.

With the number of ships arriving at West Coast ports from Asia down sharply due to the coronavirus, it stands to reason that railroads are beginning to feel an impact too, at least in terms of intermodal. It’s impossible to quantify that impact with precision,” said AAR Senior VP John Gray.

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