International Intermodal Volumes to Rebound Slightly in 2024

The big picture: After one of the weakest years in recent history for international containerized freight moving through North America by rail — also known as inland point intermodal (IPI) — demand is expected to rebound in 2024, albeit only slightly. IPI growth could accelerate, however, if external events such as longshore contract negotiations on the East and Gulf coasts or further restrictions on vessels transiting the Panama Canal prompt a significant shift in import volumes to the West Coast.

A look back: North American IPI volumes continued to tumble last year amid a broad decline in containerized imports and a shift of discretionary cargo away from West Coast ports in response to contentious longshore labor talks. Class I railroads hauled 6.5 million ocean containers in the first 10 months of 2023, according to the Intermodal Association of North America (IANA), an 11.2% drop from the same 2022 period that put them on pace for the lowest IPI volumes in a calendar year since the Great Recession of 2008–09. International intermodal volumes fell on a year-over-year basis in 20 of the 24 months ending in October, including every month in 2023. A rebound in imports from Asia flowing through the West Coast following the completion of a new coastwide longshore contract in August resulted in a marginal increase in IPI, with October volumes down just 4.9% from October 2022. In general, IPI is more attractive to shippers moving cargo through the West Coast due to the longer distance containers must travel to reach major inland markets such as the US Midwest, as intermodal’s cost advantage over trucking increases in proportion with the length of hauls. When imports shift from the West Coast to the East or Gulf coasts, IPI volumes decrease, and the inverse also holds true.

A look ahead: With imports back at pre-pandemic levels and cargo owners expected to continue sending a higher percentage of those volumes through East and Gulf coast ports, international intermodal shipments will increase 2% to 3% year over year to approximately 8.1 million containers in 2024, according to a Journal of Commerce forecast. The accuracy of the forecast is largely dependent on the percentage of imports flowing through the West Coast. If, for example, business shifts back to the West Coast because of prolonged longshore labor negotiations on the East and Gulf coasts, then IPI volume growth could exceed the forecast. But if the coastal market share remains relatively unchanged in 2024, it would take a significant — and unexpected — increase in overall imports to move the intermodal growth needle. Shippers will also be paying close attention to intermodal service levels if volumes surprise to the upside. The railroads say they’ve made structural changes to prevent a repeat of the service meltdowns and cargo bottlenecks that occurred during the pandemic at inland intermodal ramps in busy hub cities such as Chicago, Kansas City and Memphis.

The next inflection: If there’s going to be a turning point for IPI this year, it will begin in the ports of Los Angeles and Long Beach. A sharp uptick in imports from Asia flowing through the Southern California port complex would translate to higher international intermodal volumes about 30 days later. However, any significant growth in the number of containers moving by rail will put additional pressure on railroads and chassis providers to efficiently move cargo in and out of marine terminals and inland ramps.

By: Ari Ashe / JOC