Intermodal future’s so bright, I gotta wear shades #intermodal #freight

It seems that things have never looked this good for the intermodal industry, specifically the railroads and some of the truckload carriers. The tepid economic recovery has been everything but that for them. They’ve taken the recovery by the horns, while pushing it from the rear.

The industry has benefited from a double-punch of growing volumes and rate hikes. Norfolk Southern, Union Pacific, and CSX reported record years, thanks in significant part to their intermodal businesses. Norfolk Southern reported its fifth consecutive quarter of intermodal revenue growth. Even the trucking industry is benefiting, with JB Hunt and Schneider reporting big wins in this area.

However, the spike in demand and rates are shading the true story. What’s behind the recovery are structural changes in mode choices that have slowly manifest over the past half decade, specifically with the gradual increase in fuel prices. The conversion of truck to intermodal is a very real phenomenon, stemming from factors far beyond national policy motivations. Modal shift is here to stay, as long as fuel prices continue to grow. Getting a truck tuned-up and keeping its tires properly inflated is certainly not going to slow the trend, at least not until the Middle Eastern Spring finds it’s Summer.

Another key shift is the trend toward near-sourcing from suppliers in closer proximity to achieve leaner and tighter supply chains. “Kansas City Southern (KCS) is benefiting from a near-sourcing trend,” reports David Jacoby, President of Boston Strategies International Inc, referring loosely to an upswing in near-sourcing from Mexico in-lieu of China. This trend has also benefited the long haul-truckers like Schneider, setting up specific intermodal business units to tackle this area.

Intermodal is also showing strength in the short-haul business, an area long deemed unprofitable. Some of the major truckload carriers have partnered with the railroads to serve specific lanes in regions like the Midwest, California, and Florida. “Short-haul intermodal gives the truckers added capacity along key lanes, allowing them to reallocate precious resources and offer their customers a cheaper alternative where cost is more important than speed,” says Ken Asztalos with RNO. In essence, across certain lanes, the truckers let the railroads do the hauling, allowing them to pay more attention to customers’ needs.

The question is, will the intermodal genie rub-off on the barge industry. I’m leaving that question to Virginia.


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