Rail Executives See Intermodal Boom Lasting Into Next Spring

Executives of CSX and Canadian National told a conference this week they are optimistic that the robust intermodal volumes that railroads have seen in recent weeks will continue through early next spring.

Speaking to the Baird Industrials Conference, the executives said this was due to North American retailers continuing to rebuild inventories depleted during the COVID-19 pandemic-induced economic slowdown.

For the past few months intermodal growth has outpaced that of other rail freight commodities, which have continued to lag behind 2019 levels although intermodal traffic fell sharply in the early months of the pandemic.

Mark Wallace, the CSX executive vice president of sales and marketing, told conference attendees that intermodal growth is expected to continue deep into the first quarter of 2021.

“This e-commerce phenomenon is continuing, and we’re seeing some great volumes in this replenishment of inventories, and restocking is going extremely well,” he said.

CSX’s intermodal volumes has been up 10 percent since Oct. 1, with trailer volume increased by 26 percent compared with a year ago.

The growth in trailers is significant because those often carry parcels and less than truckload shipments related to e-commerce.

Keith Reardon, CN’s senior vice president of consumer product supply chain, said his company’s sales personnel based in Asia are predicting international trade coming from that continent will continuing deep into February and maybe into March as North American inventories are rebuilt.

Although CN-served ports in Western Canada will be a primary beneficiary of this trade, the Danish shipping line Maersk recently made its first call at the CN-served Port of Mobile, Alabama, with Asian cargo routed through the Panama Canal.

In a related matter, CN Chief Financial Officer Ghislain Houle told the same conference that if trucks evolve to become autonomous, that could hurt railroad intermodal business that travels in the 500- 700-mile radius.

However, he said autonomous trucks would pose less of a threat to long-haul intermodal volume, at least in the short term.

Although autonomous trucks are still in the testing stage, Houle expects them to become reality eventually.

When that happens, railroads will need to respond by shifting to one-person locomotive crews and eventually autonomous operation in which there is no one in the locomotive cab.

“Now obviously the driverless truck will get there,” Houle said. “And obviously that may represent a threat to railroads.”

Positive train control will enable railroads to respond by operating one-person crews and, within a couple of years, driverless trains.

“If you believe that a truck can be driverless on publicly-funded roads, you will believe that at one point trains could be driverless on a privately-funded network,” Houle said. “So the technology will advance on trains as well.”

Driverless trains are already operating on the Rio Tinto railroad in Australia.

Houle acknowledged that it will take more than technological advances to make driverless trains a reality.

Government regulators in the United States and Canada will need to be persuaded to allow them and the arguments in favor of autonomous trains will need to be rooted in safety and not economics.

“You will make the case that having a driverless truck or you will make the case that having a driverless train is safer than having people in the cab,” Houle said.

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