Idle domestic containers being stacked as intermodal volumes tumble

  • Idle domestic containers being stacked as intermodal volumes tumble

    Idle domestic containers being stacked as intermodal volumes tumble

    North American railroads are continuing to struggle to win domestic intermodal business from shippers, with volumes falling sequentially in eight out of the last 10 months, according to the Intermodal Association of North America (IANA). Preliminary data for February indicates this month will be more of the same.

    The volume declines are forcing intermodal providers to stack containers, unable to find cargo to fill the boxes because shippers have too much inventory and not enough sales, while trucking prices are so low on shorter routes that the freight is moving on highways.

    “We’ve stacked our containers quite a bit just because of the market demands and conditions,” said one intermodal executive who did not want to be identified. “I would guess that other companies have also stacked more in the first quarter this year versus previous years, and certainly we’re at a much higher number than we typically do right now. I obviously don’t want to ever have equipment stacked, but it is what it is at this point.”

    North American railroads moved 627,052 domestic containers last month, down 4.2 percent year over year and the lowest for a January since 2020, according to IANA. Nearly 1.92 million domestic containers were transported in North America between November and January, down 5.4 percent compared with the same period a year ago.

    The US box turn ratio, a measure of how many revenue-paying loads an average container handles per month, fell to 1.47 in January, down 13 percent year over year, according to a Journal of Commerce estimate.

    Even historical trends don’t paint a robust picture of the current domestic intermodal market.

    The industry moved 8.1 million domestic containers in 2022, according to IANA, for a five-year annual compound growth rate (CAGR) of 0.5 percent.

    J.B. Hunt Transport Services hauled 2.1 million intermodal loads last year for a five-year CAGR of 0.2 percent while simultaneously growing its container fleet at a 3.9 percent CAGR. Schneider hauled 453,218 intermodal loads last year for a five-year CAGR of 0.2 percent while simultaneously growing its container fleet at a 5.2 percent CAGR.

    “I expect the weakness in rail, domestic container, and trailers to remain in place unabated and I don’t yet see any catalyst for those to change,” Lawrence Gross, president and founder of Gross Transportation Consulting and a Journal of Commerce analyst, said during an IANA webinar Thursday. “I’m not sure exactly what’s causing the weakness, particularly for the rail-owned domestic container, whether that’s a decision that’s being made by the rail carriers to de-emphasize that area or a market share shift.”

    Southeast market particularly weak

    Business is drying up on both long-haul routes — considered “core” intermodal lanes — and short-haul routes in which trucking is likely winning share from the rails.

    From the Southwest to Midwest, for example, domestic container volumes moved on the rails dropped 10 percent year over year between November and January. The region covers the top North American intermodal lane — Los Angeles to Chicago — where the Journal of Commerce’s Intermodal Savings Index indicates an average shipper can save $800 to $1,500 per container using intermodal rail. While shippers have saved far more on this lane using rail in the past, it’s still a bargain off the trucking market.

    Other lanes likely have direct ties to the trucking market, which in several cases is not only faster but also cheaper than rail.

    Intermodal volumes from the Southeast to the Northeast fell 6 percent year over year during the same three-month period, according to IANA. From Atlanta to Elizabeth, New Jersey, the Journal of Commerce index shows that trucking, which is the faster mode of transportation, was up to $300 cheaper than rail on this lane as of Feb. 20.

    A second intermodal executive who also did not want to be identified cited the Southeast as one spot where his company is struggling to keep business on the rail.

    “We have yet to be competitive on loads that are staying, coming out of, or going into the Southeast,” the source told the Journal of Commerce. “The Midwest to the Northeast, we are still finding ourselves being competitive against trucking. But the Southeast is a lot harder, especially with shippers sending freight from the Midwest or the Northeast. We’re struggling to remain competitive on price.”

    By Ari Ashe at JOC

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