2011 intermodal container capacity may only see slight uptick

While intermodal, especially on the domestic side, enjoyed a strong 2010, there is some sentiment that volumes may not see the same type of growth in 2011.

By ·

While intermodal, especially on the domestic side, enjoyed a strong 2010, there is some sentiment that volumes may not see the same type of growth in 2011.

A research report by Stifel Nicolaus analyst John Larkin stated that future volume growth for intermodal marketing companies could be constrained by a general lack of domestic container capacity in the market.

“Relatively few containers will be added in 2011 which we expect should keep a lid on upside surprises, except those caused by price,” wrote Larkin. “We believe the railroads will likely capture much of the price increase that the intermodal providers capture from their customers.”

Talk of intermodal container shortages during the first half of 2010, in particular, was not uncommon, as many ocean carriers were employing so-called “slow steaming” practices to save on fuel, coupled with slow demand coming off of a very weak 2009.

But another major reason for these spot shortages was the fact that intermodal equipment not being in the right position at the right time, which abated throughout the year, according to Tom Malloy, vice president of member services at the Intermodal Association of North America (IANA).

“Domestic containers were plentiful [in the fourth quarter], and that is standard crunch time for demand,” said Malloy. “In anticipation of sustaining the year-over-year growth that domestic containers have enjoyed—even through the recent economic downturn—the industry has added or is adding (in early 2011) approximately 25 percent more containers to the 53-foot fleet.”

Malloy also pointed out that improving turn time velocity can optimize container owners’ fleets, and with increased demand the opportunity to do so is greatly improved.

Other factors playing into a potential 2011 lack of domestic container capacity include a slowed replacement cycle on containers due to the recession, “ said Brooks Bentz, a partner in Accenture’s Supply Chain Practice.

“There is a lot of ‘catch-up’ being played now, as order books are pretty full,” explained Bentz. “Volumes are recovering at a pretty healthy rate. Containers are not so much in short supply as being in the wrong places.”

What’s more, Bentz pointed out that the lower-value dollar has driven up exports, but while there are largely high-value consumer goods like apparel and electronics coming into the domestic market, there are lower value goods going out like waste, paper, scrap, lumber, and some chemicals. These types of things are typically not originating at the same locations that the consumer goods are terminating, so this is what Bentz labeled as ‘a repo gap’ that no one is anxious to pay to solve.

And while the domestic intermodal market is on solid footing, pricing for intermodal services is likely to play a role in how much and how quickly container capacity becomes available in the future.

“Many people are saying they are buying domestic containers now—and we are making a moderate investment, too,” said Steve Van Kirk, Vice President, Intermodal Commercial Management at Schneider National. “But the key thing for any asset-based provider to remember is how rates went down substantially in 2009. And many people maintain that investing into more equipment if not an appropriate choice until the over all pricing environment improves.”

This stance by Van Kirk, in turn, presents a sort of challenge to shippers.

The reason, he said, is that while shippers had no problems taking advantage of downward rates caused by the recession and subsequent lack of demand, it created a situation in which intermodal service providers largely lost access to capital.

“This prevented us in reinvesting in things like containers as we would like to until prices return to a point where we can deliver an appropriate level of return on capital. That is the dynamic of what is going on, in terms of how fast equipment comes back in and what happens to pricing; these two issues are always linked together.”

For more information on intermodal freight, click here.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Hub Group Resources
Not Your Grandfather's Intermodal
Transportation of freight in containers was first recorded around 1780 to move coal along England’s Bridgewater Canal. However, "modern" intermodal rail service by a major U.S. railroad only dates back to 1936. Malcom McLean’s Sea-Land Service significantly advanced intermodalism, showing how freight could be loaded into a “container” and moved by two or more modes economically and conveniently. As with all new technologies, there were problems that slowed the growth, which influenced many potential customers to shy away from moving intermodal.
Click here to download
Latest Whitepaper
The View from the New “Single Window”
The single window, officially known as the "International Trade Data System," operates via the Customs and Border Protection (CBP) agency's Automated Commercial Environment (ACE) platform, and serves as a single point of contact for all trade filings.
Download Today!
From the March 2017 Issue
WMS vendors are stepping up to the plate and developing functionalities and solutions that meet the complex needs of today’s companies. Our top analysts take a peek into these developments and discuss the DC of the future and the software that will support it.
5 Supply Chain Trends Happening Now
2017 Warehouse/DC Equipment Survey: Investment up as service pressures rise
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2017 Trucking Regulations & Infrastructure Update
In this session our panel brings shippers up to date on the state of transportation regulations. Discussion will revolve around regulatory reform, aspects of the federal highway bill and what the transportation landscape looks like in the early days of the Trump administration.
Register Today!
EDITORS' PICKS
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...

2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...