Despite sluggish volumes, IANA’s Casey makes case for future intermodal growth at RailTrends

Even in trying economic times, intermodal transportation has sometimes been viewed as a bedrock of sorts as a calm amid the storm when it comes to a mode that has been able to hold its own at times when other modal volume progressions have been more bumpy or jagged.

In recent years, intermodal has been largely paced by gains in domestic containers, and while this segment is still mostly showing growth, it is no longer the rising tide that lifts all boats, so to speak, when it comes to steady intermodal growth. That has been made clear with data issued in recent quarters in the Intermodal Association of North America’s (IANA) Market Trends & Statistics Report.

In its most recent edition, which covered the third quarter of this year, IANA reported that the third quarter marked the second consecutive quarter that intermodal volumes saw an annual decline, following 25 straight quarters of growth, with total third quarter intermodal volume movements at 4,348,634 for a 4.6 percent annual decline.

Like the second quarter, domestic containers were up, but trailers continued their steep declines, and ISO, or international, were also off, too. IANA explained that the Q3 ISO decline is somewhat difficult to explain, as international intermodal volume tends to move in tandem with container import growth, with a large gap having opened up between the growth of container imports and international traffic over the last two quarters.

And based on data recently provided to LM by IANA, it does not appear that October snapped the middling growth pattern intermodal volumes remain in either, with:

• total volume down 5.0 percent at 1,472,365 and down 3.2 percent year-to-date 14,249,160;
• trailers down 22.8 percent at 104,707 and down 26.3 percent year-to-date at 1,001,022;
• domestic containers down 0.5 percent at 653,795 and down 1.9 percent at 7,117,901 year-to-date; and
• ISO down 5.6 percent at 713,863 and down 4.6 percent at 7,131,259 year-to-date

According to IANA, is initial analysis based on the October data suggested that the decline in domestic containers is primarily a result of Hurricane Matthew in the East that overshadowed gains coming out of the West Coast.

In describing the current state of intermodal volumes, IANA President and CEO Joni Casey said at the RailTrends Conference, which was held earlier this month in New York by Progressive Railroading magazine and independent railroad analyst Tony Hatch, that decreases in ISO volumes have hit all North American markets, while most of those same regions continue to see domestic volume growth.

She described the current ISO outlook as a “mystery and a challenge” to industry stakeholders.

“One trend we are seeing is the emerging disparity between intact international inland point intermodal shipments and import volumes relative to basically handling a lower direct share of imports,” she said. “The main reasons for this are continued increases in transloading, particularly out of the Pacific Southwest and Pacific Northwest, more all-water share of Asian imports to East Coast ports, and heavy over-the-road truck competition.”

And another unknown, she cited, is the impact of the three major steamship alliances that will be launched in 2017, including The Ocean Alliance, The Alliance, and the 2M Alliance, which she said will change the landscape in terms of ship calls and container discharges.

As for the trucking and over-the-road environment, she echoed how capacity is expected to tighten, especially in late 2017/early 2018 as the full impact of motor carrier regulations, specifically ELD (electronic logging devices) kick in.

“This is viewed as an opportunity for domestic container growth, which is expected to accelerate, when over-the-road capacity tightens up,” she noted. “But this really might be a double-edged sword, because the same regulations that impact the trucking community could spill over into intermodal drayage operations.”

Another shift to increased intermodal growth is the ongoing challenge related to truck driver retention, which is what the industry is expecting, with the caveat, she said, that the industry needs to maintain an adequate supply of owner-operators and drivers to service that to meet increases in volumes, coupled with multiple regulatory factors like CSA, speed limiters, HOS, and ELD.

Even with the various challenges in the intermodal sector at this time, Casey made the case that the pros outweigh the cons, with international volumes continuing to be impacted by the strong dollar, high than normal inventories, and the potential for protectionism trade policies by the incoming Trump Administration.

She also noted that manufacturing-based markets need to kick into a higher gear, with some signs of that happening, while other things like consumer spending, housing, and employment data showing signs of trending up.  

“Given the pro-business environment of the new Administration, these are factors to be considered and could lead back to intermodal growth at some point during the second-to-third quarter of 2017,” she said.