Driver Shortage, Tight Fleet Capacity Fuel Growth of Intermodal Shipping

The truck driver shortage and related fleet capacity constraints are driving strong growth in domestic intermodal hauling as carriers and shippers try to ensure they have freight-moving options in the months ahead, industry experts said.

Intermodal’s rising profile is spotlighted in railroad reports of double-digit volume growth, comments from trucking executives and a comparison of truckload and intermodal loads.

Largest intermodal rail carrier BNSF Railway boosted domestic intermodal shipments 11% in the first 10 months of this year, while Norfolk Southern Corp. and CSX Corp. also reported double-digit domestic volume growth.

“Almost every shipper I’ve talked to is looking at how they can increase intermodal,” said trucker Ike Brown, vice chairman of NFI Industries, Vineland, N.J., which ranks No. 24 on Transport Topics Top 100 for-hire carriers in the United States and Canada. “That is being driven mostly by the demographics of the driver situation,” Brown said, referring to the aging of the commercial truck-driver corps.

Intermodal’s growth also is visible in comparisons of volume during the third quarter of 2011 with the same quarter of 2005, another period of driver shortage.

Intermodal Association of North America statistics show domestic volume has increased more than 12% in the third quarter this year compared with the 2005 period. On the other hand, American Trucking Associations’ index of truckload shipments dropped about 5% during the six-year interval from September 2005 to September 2011.

“There just isn’t much excess capacity,” said Jason Seidl, a transport analyst at Dahlman Rose & Co. “Truckload carriers have been saying, ‘We’re having difficulty hiring drivers.’ Shippers are looking six to 12 months out, and they are asking themselves, ‘Are we going to be in trouble in terms of supply?’ ”

“The capacity situation is almost going to force some shippers who have been pushing off intermodal to try it,” Seidl said. “There is pretty solid demand on the domestic intermodal front, and it is going to be sustainable unless you can make the argument that we are somehow going to find thousands of truck drivers somewhere.”

One motor carrier that increased intermodal this year is refrigerated carrier Marten Transport, which boosted truck/rail loads by 22% in the first three quarters of 2011.

“Our good people in house have been focusing on offering customers options and making sure the customers know they can call us for intermodal, over-the-road or regional service,” Chad Thompson, Marten’s director of intermodal operations, told TT.

Other factors that have prompted customers to examine intermodal include shippers’ sustainability initiatives, higher fuel prices and improved rail service quality and terminal capacity growth, Brown said.

Some customers are looking at intermodal as an option they barely used before, Brown added, citing a shipper who’s ready to do more intermodal after moving less than 1% of its annual 250,000 loads by truck/rail service in the past.

“All of a sudden, more freight is coming off the highway,” said Steve Branscum, group vice president consumer products at BNSF Railway. He said domestic intermodal loads have increased by 175,000 this year through October.

“A very significant portion of that came off the highway,” Branscum said. BNSF’s domestic intermodal volume also includes package shipments and freight arranged by third-party logistics operators.

“The shipping community has only converted about one-third of inbound freight [to distribution centers] to intermodal,” Branscum added. “There is evidence more and more trucking companies are looking at intermodal.”

One sign of that growth is the fact that BNSF has added 25 over-the-road motor carriers to its intermodal service this year.

“Shippers traditionally used intermodal for freight that didn’t need fast transit times,” Branscum said. “In the last few years, fuel prices have jumped up pretty significantly and regulations such as CSA and hours of service have made it more difficult for trucking companies to recruit drivers.”

Other U.S. railroads are reporting similar growth.

Norfolk Southern’s domestic intermodal freight rose 13% this third quarter over the same 2010 period, and the company attributed that growth to tightening truck capacity in its third-quarter earnings presentation to analysts.

“CSX experienced double-digit growth each year for the past five years across all truckload segments as part of its long-term strategy to develop this market,” railroad spokesman Gary Sease told TT.  “CSX continues to make solid gains as truckload carriers are seeking to diversify.”

“We set a new seven-day domestic [intermodal] volume record of 29,500 units during the last week of September,” said Thomas Lange, a spokesman for Union Pacific Railroad, where third-quarter domestic intermodal volume rose 2%.

“Trucking companies are increasingly coordinating with us to have Union Pacific make the longer portion of their moves,” Lange said.

“Shippers are broadening how they think about intermodal. They are doing more outbound from distribution centers to store deliveries via intermodal,” Branscum added. “Previously that was done by truck.”