3Q Intermodal Freight Growth Slows to 3.4%; Fuel Prices, Capacity Stunt Domestic Business
Growth in truck-rail freight slowed to 3.4% in the third quarter, the Intermodal Association of North America reported, as domestic growth was stunted by truckers taking advantage of favorable fuel prices and capacity.
The domestic intermodal growth pace was 2.7% compared with the third quarter of 2014 and well below the 3.8% pace in the first half of 2015.
International intermodal posted year-over-year growth of 4% in the third quarter, just above the 3.9% rise in the first half of 2015.
Sequentially, the overall 3.4% improvement trailed the 4.5% year-over-year increase in the second quarter. Third-quarter shipments totaled 4.36 million, or 5,189 fewer than the second quarter.
“Soft manufacturing output, low fuel prices and more trucking capacity all weighed on that [domestic] sector,” IANA reported. “Domestic intermodal will continue to operate in a more competitive environment than that which has been generally in place over the last couple of years.”
The more competitive market will make it more difficult to convert highway freight to intermodal, the trade group’s report said. At the same time, IANA retained optimism that market trends will change with the onset of more federal regulations that will curb trucking capacity.
Other sources identified similar challenges.
“The decline of about 20 cents a mile in fuel surcharges collected by truckers in the last year [with most of that decline coming in the most recent four to five months] has to challenge demand and pricing power for domestic intermodal, especially in shorter lengths of haul,” said a report from Cass Information Systems, citing analysts at Avondale Partners.
Part of the reason for weaker domestic intermodal could have been weakness in the broader truck market for freight moving more than 550 miles, according to IANA’s report. The longhaul trucking market rose just 0.8% overall on a year-over-year basis compared with 5% growth for shorter-haul truck moves, IANA’s report said.
Rail service and cargo trends also are influencing intermodal.
“Intermodal service is improving as the railroads work to regain [market] share from the highway,” the trade group’s report said. “Railroads are even more sharply focused on intermodal as other commodities, especially coal, pull rail carload volume lower. This not only gives railroads the additional capacity to serve intermodal markets, it also highlights intermodal’s high potential to offset revenue drops in other market segments.”
The Association of American Railroads statistics for the third quarter showed a 5.3% decline in non-intermodal freight. And truck-rail freight accounted for about 48% of all cargo moved by railroads during the quarter.
IANA’s report said the slower growth pace overall “was to be expected” since the intermodal freight levels were affected by West Coast port strife that skewed cargo shipments in both the first and second quarters.
Another factor in the intermodal picture was the shift of some cargo to East Coast ports as imports to North America rose 7%. That shift intensified during labor-related West Coast dock delays in the first two months of 2015 and continued in the months afterward.
Inland intermodal shipments of international cargo in the East didn’t keep pace because they “were less likely to be moved to inland destinations by rail” due to shorter length of haul, the report said.
“Whether much of that shift is temporary or permanent will be a key factor going forward” in future movements of containerized international freight to U.S. markets, the report noted.
While domestic intermodal growth lagged overall, the trend shifted during the quarter, showing strength over the 2014 period in September. International trends were volatile in the quarter, rising 3.3% in July and 6.3% in August and dropping 1.6% in September.
