Intermodal shipping: IANA report says domestic container loadings are up 8.1 percent 

Jeff Berman, Group News Editor -- Logistics Management, 8/7/2008

CALVERTON, Md.—Although domestic economic growth is still sputtering to a large degree, it has proven to be a boon for domestic intermodal loadings, according to Intermodal Market Trends & Statistics, a quarterly report published by the Intermodal Association of North America (IANA).

The report noted that domestic container loadings for the second quarter came in at 960,950, representing an 8.1 percent gain from the second quarter of 2007’s 889,305. This increase represents the highest growth rate for domestic intermodal loadings since the second quarter of 2004, said IANA.

Another factor pointing to increased domestic intermodal usage was that trailers were up 1.0 percent to 528,836 for the quarter, compared to 523,818 for the same timeframe last year. IANA said this was the first trailer gain in more than three years. IANA said this gain was attributed to an 11 percent uptick in 53-foot trailers and a 5 percent gain in 48-foot trailers.

Despite domestic’s strong performance, international intermodal loadings are still declining, down 5.9 percent to 1,991,078 for the second quarter. This contributed to overall intermodal loadings being down 1.4 percent for the quarter at 3,480,864 and 1.9 percent for the year at 6,808,609.

IANA Vice President of Member Services Tom Malloy told LM in an interview that the surge in domestic intermodal is almost unequivocally driven by energy prices, specifically diesel fuel prices. He added that fuel surcharges—even though they are applicable in intermodal traffic to a certain degree—are still more palatable to the bottom line budget of shippers when utilizing rail service.

The surge in domestic intermodal has been occurring throughout this year, with the Association of American Railroads reporting that intermodal trailer volumes were up year-over-year for five consecutive weeks from May 10-June 7, prior to the Midwest flooding. IANA reported that it was up 1.7 percent in the first quarter, and FTR Associates and Gross Transportation Consulting said April 2008 domestic intermodal revenue movements were up 9.6 percent.

“It is important to know that it [using intermodal] is not always the shippers’ decision although it is certainly within their knowledge,” said Malloy. “But it is not exactly the shipper that is driving that domestic growth as much as it could be, because the railroads don’t release what specific lines of business are growing. An educated guess is that the motor carrier lines’ business within the intermodal industry is mostly responsible for driving up domestic trailer and container growth.”

And the 1.0 percent quarterly rise in trailers was somewhat surprising, said Malloy, given the shift toward containers being the prominent piece of equipment used for intermodal service.

The decline in international loadings: Even though international containers were down nearly six percent, it is not a huge surprise due to the declining dollar and is more of a continuation of a trend as international intermodal loadings were off by 5.2 percent in the first quarter.

“We have seen that shift on the international container side since 2000,” said Malloy. “And since July 2007 it has been a methodical and steady contraction…which has been driven primarily by reduced consumer demand and the economy’s impact on that.”

IMC performance: Following a solid first quarter that saw intermodal revenue up 8.3 percent, the second quarter fared even better with intermodal revenue for the quarter up 15.7 percent year-over-year at $730,724,414. IMC highway revenue was up 15.4 percent at $364,017,877. The Market Trends report said that the gain in total revenue represents the highest-ever quarterly gain for IMCs, despite the fact that total IMC quarterly loads were down 1.1 percent year-over-year at 510,836. IANA added that these gains are partially due to “soaring costs in the face of rising fuel prices.”

What’s next? With peak season being muted for the last two years and the benefit of the economic stimulus checks having run their course, intermodal volumes for July are likely to see some impact from back-to-school shopping, which IANA is currently gathering.

And the next two months, said Malloy are the “keys” as to how the remainder of 2008 will pan out.

“I think there is going to be a moderate decline in July with international numbers, but I don’t know if it will be off-set by domestic increases although it looks like it is trending that way,” explained Malloy. “It is a strong possibility, which means we can see fairly consistent third quarter compared to the second quarter. But October is still October, and August and October will be the key months for looking at how the volumes shape up for the year, and I think it is going to be key to see what these August numbers are.”