Can Truckload Reclaim Volumes From Intermodal?

In its just-released Freight Pulse 11 survey, Morgan Stanley analysts indicate truck capacity is “abundant” and demand is softening. The easing of truckload capacity constraints will affect intermodal volumes going forward, the equity analyst firm concludes.

As rail service levels continued to improve, according to the semi-annual shipper survey, shippers indicated for the first time that intermodal service was a reason for shifting from truckload. Based on a 10-point scale where 5.0 is the center point between “strongly agree” and “strongly disagree,” shippers gave rail intermodal service improvements a 5.1—just above neutral—for the first time. Strong import growth, however, continues to be the driver for shippers selecting intermodal. But, in both the areas of fuel surcharges and rates, more shippers reported increases on the truckload side have kept intermodal competitive despite similar, faster increases from railroads.

As the price gap between truckload and intermodal narrows in some cases, service remains a critical factor for shippers and shows up in comments that range from considering intermodal only on longer-haul lanes or with shipments that are less time sensitive. With some slowing in volumes and increased truckload capacity available, shippers appear to be caught between cost and service. “If [railroads] do not improve their service or cost, we will need to move to more truckload,” said one shipper. Another says, “Our volume could decline if rail transit times continue to lengthen.” Coupled with comments about a wait-and-see attitude on economic growth, the trend line for intermodal growth may begin to flatten.

Shippers confide that domestic intermodal service appears to be a low priority for railroads, with some shippers declaring it dead. Meanwhile, led by an 8.6% rise in international traffic spurred by imports, intermodal traffic logged its 18th consecutive quarter of growth, according to the Intermodal Association of North America (IANA). At 3.7 million loads in the third quarter, this was a 4.9% increase over the previous quarter.

Domestic intermodal paints a different picture. Trailers on flatcar (TOFC) dropped by 5% over the prior-year quarter. Coupled with a moderate rise in domestic container traffic year-to-year, domestic equipment volumes were off 0.5% overall. Meanwhile, international container traffic was up 8.6%.

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