FTR’s Intermodal Conditions Index highlights sluggish volumes

A downward trending month for the intermodal sector was fully reflected in the most recent edition of the Intermodal Conditions Index (ICI) issued by freight transportation forecasting firm FTR this week.

FTR said the objective of the ICI is to provide its viewers with an assessment of the competitive posture of domestic intermodal transport versus over-the-road truck transport, adding that it is a compendium of different factors, including relative rates vs. truck, industry capacity vs. demand, fuel prices and intermodal service levels.

As for how the ICI is gauged in terms of metrics, FTR said figures above 0 indicate favorable conditions for intermodal to compete with truck, and figures above ten show extremely favorable conditions that would result in substantial truck to intermodal conversion. Conversely, negative numbers indicate less aggressive modal share gains for intermodal - and potentially reduced share.

The ICI for July, the most recent month for which data is available, saw a decline of more than 3 points to 0.6, swinging it in close proximity to negative territory. FTR said this was primarily due to intermodal volumes for the month being “unexpectedly weak across the board,” coupled with international ISO container movements lagging import trends and a difficult month on the domestic intermodal side, too, as well as still low diesel prices.

“Intermodal definitely is traversing a rough patch at the moment, with issues on both the international and domestic sides of the house,” said FTR Partner Larry Gross in a statement. Nevertheless, there is reason to believe that July’s numbers may have somewhat overstated the problem, since July 2016 had two fewer working days than July 2015 – a 9% difference.  We, therefore, expect to see a bit of a rebound to modestly positive territory for the balance of the year, but significant improvement will await 2017 when truck capacity starts to tighten up as the effective date of the Electronic Logging Device mandate in December approaches.”

In a recent interview, Gross said the impetus for the ICI in a way was a “hole that needed to be filled” to compliment the firm’s Trucking Conditions Index (TCI) and Shippers Conditions Index (SCI).

“What is measuring is how effectively intermodal is positioned vis-à-vis trucking, so it is going to be measure of intermodals’s ability to convert volume off the highways,” he said. “When you talk about intermodal, half of it is international, but this is focused on the domestic piece.” 

At the FTR Transportation Conference this week, Gross noted that intermodal over all has been experiencing a challenging 2016, with second quarter international volumes down by 9.3 percent and domestic off 2.6 percent, with a second quarter decline of 6.1 percent. Year-to-date, he said that international and domestic are off 4.5 percent and 2.0 percent, respectively, with total volume off 3.3 percent.

Gross added that 2016 intermodal growth has in a sense ground to a halt in 2016, with domestic intermodal facing various headwinds, while the import peak season is unfolding normally.

But even with this current grim prognosis, the outlook for intermodal looks to improve, due to: slowly tightening truck capacity that should begin to work in intermodal’s favor next year; fuel prices likely to be stable or rising; and port routings stabilizing.