A consultant on intermodal traffic recently told the Rail Equipment Finance conference that he sees growth in railroad intermodal traffic as having reached a plateau.
Ron Sucik, principle of RSE consulting, expects continued rail intermodal growth in the United States, but is not sure how much that will be.
He also said an electronic logging device mandate for the trucking industry has changed the nature of the motor carrier market although it remains to be seen what this means for railroads.
Sucik expects occasional surges of growth, but rail intermodal growth has exceeded the U.S. gross domestic product by two and sometimes three times only six times in the past 12 years.
The American Trucking Association has predicted that rail share will not likely divert many trucks from the highway to rail even if rail intermodal growth doubles.
Truckers believe that during the next decade or more they and not rail will continue to grow market share because there is that much potential freight.
Sucik said his sources have indicated that trucking companies such as JB Hunt, Schneider and Swift move less than 20 percent of containerized freight, excluding dimensional, flatbed and liquid, whereas railroads move less than 10 percent.
Seventy percent of container traffic is moved by the rest of the trucking industry, particularly by independent truckers moving freight that doesn’t lend itself to hub-and-spoke movements between larger consumption centers.
In the meantime, trailer on flat car loadings have been declining at a rate of 5 to 6 percent due to the emergence of double-stacked containers.
However, TOFC traffic increased 7.6 percent in 2017 while container traffic was up 3.5 percent.
Sucik said one possible explanation is a “four corner” distribution system whereby traffic is was more dispersed.
Although some observers say that the opening of a third set of locks in the Panama Canal and Panamax ships carrying more containers has diminished West Coast intermodal traffic, Sucik expressed doubt that this has had the adverse effect that some say.
He said the industry has been talking about “all-water diversion” for years and has watched most of it already happen.
However, traffic originating at the ports of Prince Rupert and Vancouver in British Columbia experienced growing traffic last year.
Railroad economist Jim Blaze believes that intermodal rail is concentrated into relatively few corridors with two-thirds of the freight moving in seven corridors. “Intermodal rail doesn’t go everywhere. Trucks do.” he said.
The only double-digit growth lane in North America, Blaze said, is the west-to-east Canadian corridor led by Prince Rupert’s rapid growth, which grew by 17.7 percent last year, exceeding all other rail intermodal lanes by a wide margin.
Sucik said that intermodal marketing people looking for new business don’t think like operating or financial people.
The marketing department might see short-haul traffic as a potential growth market, but the finance department replies why make the time and effort to move traffic with such a low margin of profit.
As the financial people see it, double-stacked container trains traveling longer distances can more easily pay for terminal infrastructure costs and for operations. So that traffic gets favored.
Shareholders are demanding lower operating ratios and low-margin traffic won’t help a railroad get there.
One wild card in the deck is that truck rates have posted the highest increases in years, hitting double digits in the past 12 months.
Shippers are paying 17 percent to 25 percent more on average than they did a year ago. Sucik sees in that some potential profit for railroads.
However, it might take an iron highway-type engineered rail platform to get it.
CSX and Canadian Pacific tried but have given up on the iron highway model.
Reviving the iron highway might require new trailer handling equipment that has yet to be developed.
Sucik said there is potential to gain additional intermodal rail market share in the short-haul range, but it would require a different approach that has thus far proven to be elusive.