Q1 intermodal volume has best quarter in nearly four years, says IANA

Saying intermodal volume growth for the first quarter was decent would be an understatement. The reason for that, based on data released today in the Intermodal Association of North America’s (IANA) “Intermodal Market Trends & Statistics Report,” is that the first quarter was the best quarter for intermodal in nearly four years, going back to the second quarter of 2014.

Total first quarter intermodal volume movements-at 4,547,247-were up 7.2% annually, which was ahead of the fourth quarter’s 5.8% annual spread and the third quarter’s 6.3% difference.

International, or ISO, containers led all intermodal categories for the quarter, rising 7% to 2,292,274. Domestic containers turned in a strong performance, rising 6.2% to 1,899,448, and trailers were up an impressive 14.5% to 355,525.

IANA noted that the pairing of decent economic conditions and “specific freight conditions” were key in the strong quarterly performance, adding that container imports were again solid. And it also said that high energy prices and tightness in the trucking market translated into more freight moving via domestic intermodal.

IANA President and CEO Joni Casey told LM that there were several reasons for the strong Q1 performance, including:  overall strong economy; continued import growth; higher fuel prices; tight OTR capacity; and weak comparisons to lower 2017 volumes in some markets.

While intermodal trailer growth was strong, IANA said the gain should be viewed with a watchful eye, considering that trailer volumes were very low in 2016, explaining that recent upticks in trailer volumes reverse less than half of the volume that was lost. Rather than recent trailer gains being viewed as a “rebound from 2016 losses,” IANA said it is an indication that tight intermodal conditions are pushing more freight to trailers.

“Trailer growth is a byproduct of heavy e-commerce demand, but it is also a factor of tighter over-the-road capacity,” said Casey. “It remains to be seen if this is ‘the new normal,’ though. We will have a better idea after we see second quarter volumes.”

While domestic containers accounted for the largest segment by volume for the quarter, it also represented the lowest annual volume percentage gain.

IANA observed in the report that 2017 was a sluggish year for domestic containers, rising 2.7% over 2016, with the first quarter of 2017 only up 1.3%, leading IANA to speculate that the first quarter gain may be due to the weak annual comparison in 2017. And it also noted that first quarter domestic container volume is consistent with two years of 3.7% growth.

“The domestic container volume was expected, given the monthly numbers and increasing capacity issues for highway transport and rise in fuel prices,” Casey said.

Looking ahead, IANA said that intermodal’s share of freight in the first quarter benefitted from the Electronic Logging Device (ELD) mandate for motor carriers, with an ongoing shortage of drivers paired with increasing shipment levels and demand. This has led to an estimated 5%-to-6% gain in 2018 domestic containers, which would double up 2017’s annual growth for the segment.

On the ISO side, IANA explained that rising container import volumes are the main reason for segment growth in the first quarter, adding that barring any sort of change to trade policy, that growth should remain intact in 2018, paced by solid economic fundamentals. But should large tariffs be applied to Chinese imports, IANA said it could have a “significant impact on ISO container volume,” which would be a cause for concern, as 47% of U.S. container volume originates in China.

Casey said that if the economy remains strong, the solid first quarter volume trends are expected to continue into the second quarter.