Intermodal shipping: J.B. Hunt, Norfolk Southern ink intermodal deal
Jeff Berman, Group News Editor -- Logistics Management, 11/6/2009
At its investor day yesterday, J.B. Hunt Transport Service said it has reached an agreement with Class I railroad carrier Norfolk Southern to develop a new intermodal transportation contract.
The companies said this multi-year contract will provide both parties a platform to accelerate the conversion of traditional truck traffic to cost effective, environmentally friendly intermodal transportation with service that is competitive with truckload moves, as well as establish JBH and NS as the leading providers of transcontinental and local intermodal service in the eastern half of the United States.
In mid-October, a Reuters report indicated this deal was in the works, although both JBH and NS officials would not comment on it at the time.
Long known as one of the bellwethers in the intermodal sector, the Reuters report noted that JBH currently has intermodal partnerships in the east with NS and CSX. Intermodal has been one of JBH's core service offerings for 20 years, when it began collaborating with railroads to provide shippers with intermodal service. The company currently generates roughly 40 percent of its revenue and 50 percent of its profits from intermodal. JBH officials have stated that as its rail partners continue to make multi-year investments to improve service and network efficiency, and as shippers remain under economic and environmental pressure to find sustainable alternatives to truck, the long-term outlook for its intermodal business is very attractive.
"Given the enormous confidence we have in the Norfolk Southern's ability to provide the best intermodal service in the Eastern half of the U.S. and the obvious commitment NSC has made by the significant investments in their corridor development, we are delighted to have the opportunity to elevate our joint services into the future" said Kirk Thompson, CEO of JBHT, in a statement. "This new agreement will provide unparalleled intermodal service and value for U.S. shippers. The conversion of highway freight to the more efficient, cost effective, safer and more environmentally friendly services that we jointly provide, will not only benefit shippers and the general public, but JBHT and NSC shareholders alike."
Robert W. Baird & Co. analyst Jon Langenfeld wrote in a research note that this deal has significant meaning in terms of growing inter-modal business in the East.
"[This] transformational NSC contract is an important step in developing Eastern US intermodal market," he wrote. "JBHT described its NSC agreement as being as important to the future of its intermodal franchise as its groundbreaking 1989 agreement with BNI. A multi-billion dollar investment initiative by NSC in recent years has established the superior intermodal network in the east through six separate corridor projects (Crescent Corridor, Heartland Corridor, Meridian Speedway, MidAmerica Corridor, PanAm Southern Corridor, Titusville) and various terminal expansions. This new agreement provides a ‘shared incentive' arrangement between JBHT and NSC to pursue volume growth through the conversion of traditionally truckload freight to intermodal rail."
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