Trucks Gain Market Share From Intermodal
This story appears in the March 2 print edition of Transport Topics.
Motor carriers, locked in a fight for freight in an imploding market, are taking some business away from rail intermodal with help from lower fuel prices, an industry analyst said.
The shift occurred during the fourth quarter of 2008, and reversed four straight quarters of intermodal share growth that accelerated as diesel prices rose to a peak of $4.764 a gallon in July but fell more than 50% before the year ended, said Larry Gross, a senior consultant for FTR Associates, Nashville, Ind.
“Intermodal volume dropped faster than truck in the fourth quarter” as fleets tried to keep as many drivers and tractors deployed as possible, Gross told Transport Topics on Feb. 24. “Trucks are chasing the volume down. Rates are very low.”
Fleet executives and analysts agreed at an investor conference last month in Florida that rates fell in the fourth quarter and are dropping even faster in the first two months this year. Spot truckload rates measured by Internet Truck Stop slid about 10% in the final three months of 2008.
Gross said the shift to truck from intermodal is limited so far. The drop was 0.1 percentage point last quarter, leaving intermodal with 5.8% of freight shipments over 550 miles, compared with 5.9% in the third quarter. In comparison, domestic rail intermodal shipments rose to 5.9% from 5.3% of that market between the fourth quarter of 2007 and the third quarter of last year.
Despite the fourth-quarter decline, total domestic intermodal shipments were 2% higher last year than in 2007 and reached a four-year high, according to the Intermodal Association of North America.
For all of 2008, domestic intermodal volume rose 2.9%, while international traffic declined 7%, translating into an overall 3% decline to 14.1 million shipments, IANA said in its Intermodal Market Trends & Statistics report released Feb. 19.
“Domestic intermodal was the savior of total volumes last year,” said IANA Vice President Tom Malloy. “Intermodal has leaned heavily on international growth for a long time.
“Exports were the optimistic side of international intermodal for some of last year, but that waned as the third quarter ended,” he said.
“Domestic intermodal had been increasing before, because of its greater fuel efficiency,” FTR’s Gross said. “It won’t be possible for intermodal to increase share, in my view, until capacity tightens up.”
The trucking market is being influenced by many factors beyond fleets’ desire to keep their assets producing, he added.
“Shippers are concerned that when the business does turn around, there is going to be a real capacity crunch,” he said. “They are cutting deals with motor carriers for long-term rate and capacity purposes to assure future access to capacity.
“When the economy eventually does begin to recover, there will be a significant shortage of truck capacity and intermodal will then be well- positioned to benefit,” Gross said.
Even though intermodal volume declined, IANA’s report found that 2008 was the third-strongest year ever.
“Some more tough times and more negative numbers are likely ahead,” IANA said.
Malloy said 2009 has not been good so far in the intermodal sector, with volumes slipping about 15% behind 2008, a result he attributed to the general U.S. economic malaise.
Gross said it’s too soon to tell when the economy will hit bottom and how long it will remain there before demand picks up again.
One fourth-quarter bright spot for intermodal was a 7% increase in shipments between Chicago and the New York region during the quarter.
J.B. Hunt Transport Services Inc. and other carriers moved last year to start shorter-haul domestic services on such routes.
