Mhlnews 11404 Railroad
Mhlnews 11404 Railroad
Mhlnews 11404 Railroad
Mhlnews 11404 Railroad
Mhlnews 11404 Railroad

Railroads Losing Price Advantage Over Trucking

Aug. 14, 2019
The dwindling pricing advantage means that there is less financial incentive for shippers to transport cargo “intermodal” rather than just utilizing trucking for the entire length of the trip.

U.S. railroads experienced a further deterioration of their price advantage for domestic intermodal shipping compared to trucking in the second quarter, according to a new index by HIS Markit.

This latest contraction in the domestic intermodal pricing edge continues a trend that began in the first quarter of 2018. 

The dwindling pricing advantage means that there is less financial incentive for shippers to transport cargo “intermodal”—that is via rail, where it is onloaded and offloaded by trucks—rather than just utilizing trucking for the entire length of the trip. Shippers compare transit times, on-time performance, and total cost between intermodal (truck and rail) and just trucks when deciding how to move their freight.

The new U.S. Domestic Intermodal Savings Index produced by IHS Markit’s JOC shows that U.S. domestic intermodal shippers do not save as much by converting loads from the highway to the rails as in recent years. Trucking services have been more competitive on lanes under 2,000 miles, the index shows.

The release of the quarterly index comes as U.S. railroads face slowing freight growth and U.S. trucking spare capacity increases, creating a new buying dynamic for U.S. shippers moving goods via 53-foot containers and trailers. 

 “The new data from the U.S. Domestic Intermodal Savings Index illustrates how shippers and brokers are becoming increasingly sensitive to whether intermodal or trucking is best for the various lanes they manage,” said Ari Ashe of JOC. “With C-Suite pressures to keep transportation costs down, shippers are looking to make the most informed decisions about modal choices to wisely spend down.” 

Through the first half of 2019 the index is 106.7. Spot intermodal rates have gradually declined since 2015. The index even dropped below 100 on a national basis between August 2018 and October 2018 as intermodal spot market rates shot up higher than trucks in major markets across the country. Although the index has recovered since October, intermodal savings were still lower in the first two quarters compared with one year ago.

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