Intermodal shipping: domestic intermodal on an upswing while international declines

Rising oil and gas prices continue to make intermodal an attractive option for domestic shippers

Jeff Berman, Group News Editor -- Logistics Management, 6/10/2008

NASHVILLE, Ind.—Intermodal revenue movements in April 2008 were sharply divided, with international shipments down 0.1 percent year-year-year, and domestic volumes up 9.6 percent for the same timeframe, according to The Monthly Intermodal Update, a report published by FTR Associates and Gross Transportation Consulting.

The ongoing trend of declining intermodal and rising domestic intermodal shipments was also reflected in the report’s year-to-date totals, with international volumes down 3.9 percent and domestic volumes up 3.7 percent. These figures match up with findings released by the Intermodal Association of North America, which noted that domestic international loadings for the first quarter of 2008 were up 1.7 percent, and international intermodal loadings were down 5.2 percent.

Eric Starks, president of FTR Associates told LM in an interview that there is clear evidence that rising oil and prices are driving shippers to increased intermodal usage.

“We were skeptical at first, thinking that was not going to happen, but by the end of the fourth quarter, middle of the first quarter timeframe, it was pretty clear that is happening,” said Starks. “High prices are pushing a lot of freight to the intermodal side domestically.”

But even though high energy prices are serving as a driver for increase domestic intermodal usage, Starks said that without these high prices the domestic intermodal market would be struggling. And the major push for domestic intermodal, he said, is the convergence from truck to rail in 53-foot containers and trailers, as well as some 48-fooot trailers and containers. This convergence resulted in a 12 percent year-over-year spike in intermodal trucking output, with a 6.8 percent boost year-to-date, the report noted.

Another factor at play for the current increase in domestic intermodal is a higher amount of transloading activity from the West Coast that is adding to the domestic totals, according to Starks. The report defines transloading as the percentage of import TEU (twenty-foot equivalent units) entering certain regions of the country and exit those regions are intermodal intact international movements.

The report’s findings on transcon—or intermodal revenue movements—found that April’s total of 1,158,286 was 3.8 percent of April 2007 and 7.0 percent of March’s output. In terms of volume, the Midwest to Southwest lane paced the ten lanes the report tracks, with a lane total of 228,889 up 8.2 percent compared to March 2008 and 3.1 percent compared to April 2007. 

Forward thinking: As for future intermodal growth, the report called for domestic intermodal revenue movements to grow 2.4 percent in 2008, with 2009 expected to be flat. But international equipment demand is the opposite side of things, with a projected 2.8 percent decline in 2008 and 4.3 percent growth in 2009.

Starks explained there are a few reasons for these projections. The chief reason being that if oil drops to closer to $100 per barrel, the incremental freight that went to intermodal due to today’s current high prices will have the potential to go back to over the road trucking. But if oil prices do not drop, it is likely to put pressure on the domestic intermodal market in 2009.

“If fuel stays high and shippers continue to use intermodal [at this present rate] it will slow the domestic market from an economic standpoint,” Starks said, “so there are some tradeoffs there and there will not be an equilibrium until 2010 when we see prices retreat some and the economy starts to grow.”

Data for this report is based on industry metrics from various industry organizations, according to FTR and Gross. It is comprised of several intermodal-related findings, including: a three-year forecast for North American intermodal revenue loading by equipment type and segmented by international equipment and domestic equipment—domestic equipment includes data broken down by LTL/parcel/mail, truckload, container and trailers. It also uses its sourced data to identify trends pertaining to intermodal business, such as intermodal performance for various market segments like international, truckload, and LTL/parcel, region-to-region traffic flow analysis, and the future outlook for intermodal growth, among others.