IANA reports first intermodal volume decline in 25 quarters

For the first time in a very long time something unusual happened in the intermodal sector: total quarterly volume dropped for the first time after 25 quarters of consecutive growth.

That is the word from the Intermodal Association of North America (IANA) in its Intermodal Market Trends & Statistics Report that was released yesterday.

Total intermodal volume movements—at 4,271,162—were down 6.1 percent annually and failed to keep up the momentum from the first quarter of 2016, which looked good by comparison with a 2.0 percent annual gain.

The lone bright spot in terms of growth for second quarter intermodal volumes were domestic containers, which were up 3.4 percent at 1,827,851. Trailers continued its ongoing pace of steep declines, falling 28.6 percent to 291,065, and international, or ISO, containers, fell 9.3 percent annually to 2,152,246. IANA said that when trailer volumes are removed from the cumulative tally, total quarterly volume was still down 3.9 percent.

As IANA noted in its first quarter report, declines in trailers were expected due to the restructuring of Norfolk Southern’s Triple Crown operations in which it highway trailers that were specifically fitted for intermodal usage, known as RoadRailers, were discontinued in all lanes outside of its Detroit-Kansas City lane. And it added that because RoadRailer traffic is not coming back continued trailer declines are expected in the third quarter but should be “noticeably smaller” in the fourth quarter due primarily to easier annual comparisons at that point.

On the ISO side, IANA pointed out that the 9.3 percent quarterly decline was a bit of a surprise, with the segment being more uneven than total intermodal growth, considering that the second quarter’s decline was much steeper than any quarter going back to the fourth quarter of 2009.

What’s more, IANA labeled the ISO declines as “confusing,” as international intermodal typically tends to track with over all container import growth, which did not fare as poorly at second quarter international loadings, with IANA estimates for U.S. container imports for the quarter at 0.2 percent.

IANA President and CEO Joni Casey said that the import decline was not expected, especially given the recent increase in import trends. 

“It could be due to more imports being consumed in local markets, as well as [the] tendency to temporarily warehouse imports until demand picks up, and longer haul trucking from ports, which would impact international intermodal volumes,” she explained.

But Casey said IANA expects ISO volumes to see gains for all of 2016, due to acceleration in consumer spending and draw down of excess inventories, as well as very weak comparisons in the second half, especially the fourth quarter.

On the domestic container side IANA said that nearly every region posted annual growth, save for the Northeast and South Central, with containers faring better in the West compared to the East, explaining that the reason for this may be that Eastern domestic containers are facing competition from trucking with distances shorter in the East.

Intermodal Marketing Companies (IMC) saw strong gains on the highway side, with highway loads up 17.0 percent to 432,239, and highway revenue up 3.8 percent to $599,722,060, although average highway revenue per load was down 11.3 percent to $1,369. Conversely, intermodal loads dropped 18.1 percent to 408,868, and revenue was down 8.9 percent to $1,044,624,006, while average per intermodal load was up 11.3 percent to $2,555. 

IMC highway gains continue to benefit from excess trucking capacity and low fuel prices. When asked if this trend has staying power for the coming quarters, Casey said that may not necessarily be the case, as over-the-road capacity pressures are expected to increase due to regulations, through 2017 and fuel prices have started to move upward, albeit slightly, with both of these factors point to increased opportunities for domestic intermodal services.

Looking ahead, in order for intermodal volumes to shift back into its typical growth mode, Casey said it requires continued improvement in economy, which should yield increased consumer spending, requiring additional inventories, as well as an upswing in the housing market, tightening of highway capacity, and a continued strong dollar.