Intermodal Growth Accelerates in 2010 as Truck Capacity Tightens, IANA Says

This story appears in the Feb. 14 print edition of Transport Topics.

Intermodal traffic grew at the fastest pace in nearly three decades during 2010, and the combination of a strengthening economy and tightening truck capacity will spark further growth this year, the Intermodal Association of North America reported.

IANA said total rail/truck shipments rose to 3.45 million in the fourth quarter, as international freight gained 17% and domestic intermodal climbed 8.4%.

The growth rate for the fourth quarter was 13%, and the total growth for all of 2010 was 15%, the fastest pace since 1983.

Intermodal shipments rebounded after a drop of more than 20% from the pre-recession peak to the lowest point in the economic downturn, driven by a combination of retail business growth and rebuilding inventories. Volumes haven’t yet returned to 2008 levels.

“While 2010’s outsized gains reflect, in part, the depth of the recent recession, they also confirm the place intermodal will play in a broadening economic recovery,” IANA’s report said, adding, “2011 is likely to be year two of a new intermodal winning streak.”

Illustrating that fact, the Association of American Railroads said on Feb. 8 that rail intermodal volume rose 7.4% in January.

Fourth-quarter international shipment growth to 1.84 million shipments was driven by several factors, IANA said.

“Renewed consumer spending, strong inventory building and surging overseas demand for U.S. export products fueled container imports and exports,” IANA said. The group estimates that about 50% of international cargo moves by rail on land in North America.

On the domestic side, growth to 1.61 million revenue loads continued in container shipments that never declined year-over-year in any quarter during the recession.

“Conditions look promising for even more highway freight to shift to rail in 2011,” IANA said, basing that conclusion on the 2010 pattern and the belief that volume will grow again in 2011 as the domestic container fleet tops 210,000 units.

The domestic intermodal growth rate far outpaced the 0.9% increase in truckload traffic gauged by FTR Associates. However, truckload traffic totaled 140.6 million shipments, dwarfing the 1.61 million counted for domestic truck/rail freight.

“The North American truckload market is in a calm before a great storm,” the report concluded, adding that current market conditions are placid for several reasons.

Among the reasons are the orderly growth patterns in freight volumes that have soaked up available capacity over the past 18 months without market disruptions.

That pattern continued in January and February, two of the weakest volume months of any year.

Truckload fleets also have been cautious in raising rates and adding capacity, preferring to raise productivity for their fleets before adding equipment.

IANA’s report predicted that conditions will change rapidly next month.

“The normal swing in seasonal growth factors is strongest from February to March,” the report said. “The market will screech from just below equilibrium to tight capacity in March. Further freight growth will require more equipment.”

Year-over-year growth rates could top 5% per quarter this year, the report suggested.

Regulatory changes will put added pressure on truckload markets this year, raising the prospect of midsummer and peak season capacity shortages for truckload that can only help intermodal, the report said.

Rail/truck shipments finished last year at 13.4 million, a total of 1.72 million more than the total for 2009.