Domestic Intermodal Cargo Reaches Milestone, Surpasses International Shipments in 3rd Quarter

This story appears in the Nov. 17 print edition of Transport Topics.

Fast-growing domestic intermodal reached a milestone in the third quarter by exceeding international intermodal cargo for the first time on a seasonally adjusted basis, the Intermodal Association of North America reported last week.

“With domestic intermodal volumes reaching parity with international loads, we have seen what is likely to be a permanent shift in market share,” IANA?President Joni Casey told Transport Topics on Nov. 13. “That reflects the increased use of intermodal service and the continued diversions of highway movements.”

The shift has been propelled by growth in domestic container freight that has increased in every quarter for nine years, in spite of an intervening recession, Casey noted.

“Growth in international intermodal will be largely dependent on the economy, but for domestic intermodal, we think there is a significant long-term opportunity for continued conversion of highway freight to rail,” said Robert Knight, chief financial officer at Union Pacific Corp., during a Nov. 11 investor conference.

Domestic intermodal freight has been gaining ground in recent years because of the driver shortage, a long-term rise in diesel prices and tight highway capacity.

A report last month by Larry Gross, intermodal specialist at consulting firm FTR, said that domestic intermodal set a record for market share for all shipments more than 550 miles in length in the third quarter. That mark was 18.7% of all freight last month, an improvement of 1.5 percentage points over the 2013 quarter.

While intermodal market share is gaining on those longer hauls, freight moving more than 550 miles is less than 15% of all highway cargo, according to FTR.

The Association of American Railroads earlier this month said October was the record month for intermodal shipments, following on the heels of three individual records set during September.

Between last year and 2006, when international intermodal freight peaked, domestic truck-rail freight rose 30% to 7.64 million shipments from 5.75 million.

On the other hand, international intermodal freight actually declined to 7.82 million shipments from 8.5 million in the record year. International cargo plunged during the recession, though that freight has shown year-over-year growth in recent years.

IANA’s latest report on the 2014 third quarter showed a 5.1% overall increase in shipments on a not seasonally adjusted basis, including 5.5% more domestic truck-rail freight. Domestic intermodal numbers reached 2.08 million in the third quarter, compared with 2.14 million for international.

The seasonal-adjustment factor excludes normal variations while identifying the underlying quarter-to-quarter growth trends, IANA’s report said.

“The seasonally adjusted numbers still speak to the improved importance of domestic intermodal,” the report said.

In fact, the report noted that the actual increase in domestic container freight likely was greater than the 7% listed in the report.

The reason, IANA said, is that some international cargo is counted as domestic freight when it is transloaded near ports into 53-foot domestic containers from 40-foot ocean containers.

“Both domestic and international intermodal volumes remain strong through the midpoint of this seasonal shipping peak,” said Casey.

In spite of Southern California congestion, international intermodal gained 4.7% in the third quarter and is ahead 5.2% for the first three quarters of 2014.

The third-quarter results reversed the second quarter 2014 pattern when international cargo rose faster than domestic intermodal freight.

Part of the reason, a Nov. 10 IANA report said, was shipping in advance of the June 30 expiration of the West Coast port labor agreement. In addition, second- quarter intermodal results were inflated by shipments that were delayed because of a harsh winter, IANA said.

On a regional basis, eight of nine IANA areas showed increased traffic, led by 10.4% growth in the South Central region that includes Texas and adjacent states. The only decline was in the Northwest, where intermodal freight dropped 9.5%.

The latest trade association report also dramatized the long-term shift toward domestic containers and away from trailers for truck-rail freight.

Domestic container shipments increased 90% between 2006 and 2014, while trailer intermodal slipped by 33%.

So far in 2014, both the latest IANA and AAR statistics signal truck-rail freight growth is more than 5% this year compared with 2013, when records were set as measured by both trade groups.