Intermodal shipping: FTR says intermodal making its presence felt

Recent trends on the sustained emergence regarding an upswing in intermodal transportation continue to be confirmed. The latest sign is a report from freight transportation consultancy FTR Associates.

In its recently published “Intermodal Update,” FTR stated that intermodal transportation’s share of U.S. long-haul truck traffic hit record highs during the first quarter of this year. According to FTR, both total intermodal movements and movements of domestic intermodal equipment reached record levels in terms of market share.
And intermodal’s share of U.S. long-haul—550 miles or more—movements of international and domestic containerized freight was estimated to be 13.5 percent by FTR for the first quarter.

“There are really two pieces to the puzzle here—one is driving the domestic piece and one is driving the international piece,” said Larry Gross, senior consultant for FTR and principal author of the firm’s Intermodal Update. “When we look at intermodal, we are dividing intermodal movements into two sort of broad buckets; one is the movement of international containers and the other is domestic equipment, containers and trailers. And those two segments are blueprints for two different items that are responding to different pressures, and right now intermodal is clicking on all cylinders, and both of those pieces are going in the right direction for different reasons.”

On the international side, Gross explained that international volume overall is bouncing back faster than domestic volume. And with intermodal being prevalent on the international side with international coming back quicker than domestic, Gross said it is helping overall intermodal movements.

But he cautioned that should be misinterpreted as intermodal gaining a full share of international volumes. Instead, it means that because international has such a high percentage of international volume, it helps intermodal overall when that piece of the market moves faster.

Another driver for increased international gains, according to FTR, is that intermodal is no longer losing volume to the all water diversion from the Panama Canal, which was a factor in depressing international share, as well as a drag on the intermodal market share from 2006-2009. Gross said that this trend is now reversed and moving upward.

On the domestic side, Gross said it is a different story as domestic intermodal has seen a steady increase in total intermodal market share since 2007, which, he said unprecedented.

“[The momentum] continued right through the downturn, which says the intermodal value proposition is really gaining traction,” said Gross. “If you think of where intermodal used to be, it was a secondary mode of last resort. Shippers used it when they needed to save money or were not particular about when a shipment arrived or got damaged. There was a lot of baggage that came with intermodal, and shippers accepted it in order to gain the cost savings associated with it.”

Today, things are different, though, as intermodal is not viewed in the same negative light that it once was. Intermodal has begun to successfully convince shippers that it offers a value proposition without any negative compromises, said Gross.

And while it is always going to be slower than truck, Gross said intermodal still offers shippers with needed reliability that can help them to plan accordingly and allocate the proper freight mix for intermodal and truck, as well as remove uncertainty from the supply chain.

An intermodal executive recently noted that mode conversion—to intermodal—is garnering a lot of attention as a way to reduce costs and be more environmentally-conscious, among other drivers.

“Clearly mode conversion is a big opportunity for shippers out there, and there continues to be a big opportunity for shippers to look over the highway to consider rail and intermodal,” said Chad Thomas, director of intermodal at J.B. Hunt. “Price stability is an option when converting to rails and there may be some savings in lanes when converting.”

Thomas cited fuel costs and pending energy legislation as things that could have a future impact on sustainability, intermodalism, and containerization, which will be factors in the domestic transportation environment.

“For mode conversion, the service piece always lingers in people’s minds about making sacrifice on service. Maybe that was the case ten years ago but not anymore. All the Class I railroads have done a great job of building infrastructure, running trains smoothly, as well as doing an amazing job of bringing highway standards to the railroad system. Intermodal is more consumable today even than it was five years ago.”