Intermodal leads the way for June 2013 volumes, says AAR

The theme of mixed volumes remains intact based on data released by the Association of American Railroads (AAR) for the month of June.

June carloads—at 1,136,719—were down 0.3 percent—or 3,819 carloads annually, according to the AAR. And ten of the 20 commodity categories the AAR monitors saw annual gains, with petroleum and petroleum products up 31.7 percent—or 13,329 carloads—and crushed stone, gravel, and sand up 12 percent—or 9,293 carloads.

Intermodal loadings in June continued their strong momentum at 1,009,387 trailers and containers, which represent a 1.3 percent—or 13,393 units—increase.  The AAR said the weekly intermodal average of 252,347 in June now stands as the single highest weekly intermodal average for any month in history.

“Intermodal rose in June for the 43rd consecutive month, setting a new volume record in the process,” said John Gray, AAR’s Senior Vice President of Policy and Economics, in a statement.  “Generally, the fall is the peak period for intermodal, so it wouldn’t be surprising if further intermodal records were set in the months ahead.  Large declines in grain and coal held down June carloads, but some of the more economically-sensitive commodities like autos and crushed stone were up for the month.”

The surge in intermodal is not entirely surprising, given the years-long trend of domestic freight converting from truck trailers to containers on rail; truck trailers can be double-stacked, which makes them more cost-efficient and effective.

While it has been largely noted that domestic intermodal gains have occurred due to lower fuel costs, improving service, and major investments into rail networks, among others, it clear that intermodal is taking share from over the road trucking and will continue to be an area of secular growth for railroads.

But while the growth rates are impressive, industry experts maintain that these strong domestic container intermodal volumes are due in large part to freight coming out of intermodal trailers into trailers or from one box to another, coupled with the fact that the gross number of intermodal loadings—both domestic and container—were higher in 2006 than in 2012 as was gross GDP and industrial production.

What’s more, during that same period the number of truckloads moved and truck tonnage volume is larger than intermodal.

Brooks Bentz, a partner in Accenture’s supply chain practice, recently told LM that rail carload, coupled with intermodal, is a powerful alternative to over-the-road trucking, given the issues of congestion, infrastructure condition, capacity, as well as the cost of fuel.

And Tony Hatch, principal of ABH Consulting, explained that intermodal “is in the early-middle innings of a secular shift from truck to rail, as evidenced by domestic containers’ growth performance from the Great Recession through today.”