FORT LAUDERDALE, Fla. — International intermodal freight once again has become the driving force for intermodal growth because factors such as lower diesel prices and suboptimal rail service have slowed the increases in domestic truck/rail freight, experts said.
“Domestic intermodal growth is very low by recent standards,” said Larry Gross, senior consultant at FTR, said at the Intermodal Expo here. He cited an increase last month of about 1% in domestic truck/rail freight, compared with a 6.3% increase in international intermodal.
The combination of a stronger dollar that has encouraged imports that has sustained international intermodal growth since a snapback in cargo flow in the months after the end of West Coast port disruptions, which trimmed cargo volumes earlier this year.
Those recent trends have reversed the pattern of faster domestic intermodal growth relative to international shipments that have been in place for more than six years.
Gross is forecasting faster growth in international cargo relative to domestic intermodal for the rest of the year, with import and export cargo improving two percentage points faster than domestic intermodal grows. That pattern could continue next year, but with a smaller gap between the categories of intermodal freight.
Until the recent turnabout, domestic intermodal over the past several years has growth about twice as fast as international cargo.
The combination of lower fuel prices that are helping truckers and steps by railroads to raise their intermodal rates are adding to the pressure on domestic intermodal, he said.
Rail service is another issue that is holding back intermodal, said analysts Thom Albrecht of BB&T Capital Markets and John Larkin of Stifel Nicolaus.
“It all boils down to service,” Larkin said. “That is the hurdle the railroads have to get over.”
Rail intermodal doesn’t have to match 99% on-time offered by truckers, he said, but it has to resemble truck service levels, in the 95% on-time range on a consistent basis. For the last 18 months, service hasn’t been at that level, though it has improved overall this year.
“The railroads are serious about improving their service,” Larkin added.
Albrecht emphasized the importance of improving rail service to 2016 domestic intermodal growth.
“There is slowing demand for longhaul dry van freight,” Gross said, referring to domestic cargo that could be hauled solely by truck or by intermodal. Domestic intermodal “will have to work harder to grow.”
Despite the domestic intermodal growth slowdown, Gross believes there will be a fall peak this year in that sector, though the international peak will be sharper.
Albrecht said trucking will face a later peak this year, with freight volumes hitting the highest level in late November or early December as retailers restock their shelves after in-store discounts to compete with growing Internet commerce that is increasing at the same time. That combination will put a squeeze on trucking capacity, even in a freight market that is not as strong as 2014, he said.
