Intermodal infrastructure development in the United States is at a juncture that could lead to the development of a third generation of intermodal systems and services. 3G intermodal will come in response to the widening of the Panama Canal and will offer a triple-play of intermodal services: truck, rail and barge. The following examines the need for a 3G intermodal system in the United States.
Since the development of the international shipping container, thanks to Malcom McLean and other innovators, intermodal infrastructure has, broadly speaking, evolved through two generations of systems and services. These systems were designed in response to international shipping trends and shippers’ demand for intermodal services.
-- First Generation Intermodal — A Response to the Standardized Container Box. The first generation of intermodal infrastructure development was a response to McLean’s container box introduced in the 1950s, and had a heavy focus on the truck’s role. From McLean’s initial product in 1956, which had an initial focus on roll-on, roll-off transportation, and for several decades thereafter, the truck played a dominant role in intermodal transport.
Even with the rapid adoption of the rail intermodal function at ports, the truck still played a strong role in draying containers between ports and rail intermodal yards. Markets within an eight- to 12-hour drive were conveniently served by truck, and more distant markets were served by rail intermodal, with trucking playing a key drayage role at either end of the trip. As a result, the intermodal infrastructure at and around the port is characteristically truck-oriented, with the role of rail geared to off- or near-dock.
-- Second Generation Intermodal — A Response to Asian Trade Growth. The second generation of intermodal infrastructure was influenced heavily by the growth in Asia-related trade. Demand for intermodal landbridge services across North America, between the East and West coasts as well as the industrial heartland, brought on a new generation of intermodal infrastructure systems and services that were heavily focused on the rail intermodal system. The long distances between the West Coast ports and markets in the heartland and along the Eastern Seaboard made rail intermodal service very competitive.
In addition, the rail intermodal industry became more service-oriented and introduced innovations such as double-stack and time-definite scheduled services. And they worked with the respective ports to build on-dock rail terminals as well as inland ports to improve efficiencies.
As a result, port-related intermodal infrastructure development placed a heavy emphasis on moving the containers through the port as quickly and efficiently as possible, relying on trucks and rail.
The Intermodal Policy Dilemma
The demand for Asia trade has made publicly driven intermodal policies a success. The significance of Asian trade densities and the operational dynamics of long-haul intermodal trips across North America have largely been responsible for the dominant and profitable role of intermodal in the rail industry’s business model. With the widening of the Panama Canal, however, the economics of all-water services to the East Coast are likely to become more viable. As a result, a portion of existing ships calling at West Coast ports, as well as a share of future trade growth, may be diverted to the East Coast.
This will deal a blow to current intermodal policy in the sense that ports predominantly served by truck will handle an increasing share of Asia trade. While West Coast ports have a strong rail intermodal mode share, East Coast ports do not. East Coast ports are largely truck ports. Their markets are in close proximity and are ideal for truck service. Distances to market are too short to make rail intermodal viable, at least to date.
The result is that intermodal policy is likely to take a step back, unless it shifts into a third generational mode.
3G Intermodal Development
Driven by the widening of the Panama Canal, 3G intermodal infrastructure will evolve from the growth in triple-play intermodal services — containers on trucks, rail and barge — at gateway container ports. The outcome of 3G intermodal development is largely dependent on the success of two aspects: container-on-barge development, including short-sea-shipping, and short-haul intermodal rail. The former functions as marine highways serving the nation’s interior from Gulf ports and the latter serves as “reverse mini-landbridges” from East Coast ports to inland markets.
- Marine Highways. Now more than ever, inland rivers and waterways offer an opportunity to support a third generation of intermodal terminals and services. They present a unique opportunity for developing container load centers that can offer the triple play of truck, rail and barge intermodal services.
- Reverse Mini Rail Landbridges. They serve the reverse role of the current transcontinental landbridge for containers to and from Asia, but on a smaller scale. Instead of arriving at West Coast ports, containers are shipped through the Panama Canal to the East Coast and then shipped by rail or truck to points west. The challenge is in the cost competitiveness of the rail reverse mini-landbridge, given the close proximity of the markets to the ports.
Without a 3G intermodal system focusing on introducing these two key initiatives, intermodal mode share likely will shift back toward trucks.
The Panama Canal Window
The widening of the Panama Canal presents a unique window within which to target a 3G intermodal development strategy. The likely repositioning of trade lanes and load centers resulting from the canal’s widening presents that best case for developing 3G intermodal systems that offer a triple play of intermodal services. Moreover, the intermodal strategies and investments being put in place will remain for decades, so the cost of missing this window of opportunity is significant. There will not be as major a development in the industry for the foreseeable future. The time to put 3G intermodal into place is now.
The Third Generation of Intermodal Policy
To date, there are few coastal container load centers that will support the development of 3G intermodal. The public policy debate around the success of container-on-barge and short-haul rail has focused largely on the obvious cost and environmental benefits of the modes, with the skeptics focusing on the cost and operational challenges of the respective services.
It is critical, however, that the debate be viewed from a broader public policy viewpoint, focused on the evolution of intermodal transportation as opposed to the feasibility of the services themselves. The public policy debate should focus instead on the development of the third generation of infrastructure critical to the success of the services.
Policies Toward Marine Highways. The intermodal policy debate should focus on policies and funding options that will result in:
- The design and development of coastal load centers that are connected to major waterways serving the nation’s heartland, specifically container load centers along the Gulf Coast, in close proximity to the base of the Mobile and Mississippi rivers.
- Increased focus on new vessel technologies more suited for a cargo that cubes out before it weighs out, with a hull design focused less on maximizing displacement and more on speed and agility, and alternative energy configurations including diesel-electric and LNG-electric power plants.
- Policies Toward Reverse Mini Rail Landbridges. Policies and investments should be directed at the development of express rail services between selected Atlantic ports and the largest inland markets. In addition, innovations should be introduced that are aimed at reducing the cost impediments of short-haul rail intermodal.
The transportation geography of intermodal development has been distinct and unique within each of the generations. Again, speaking broadly, the truck-focused container gateway ports have been a largely East Coast practice, although on-dock rail is a far more common practice of late at East Coast ports. The truck focus is largely a result of market dynamics. East Coast ports predominantly serve their local markets within an 8- to 12-hour drive, and hence the heavy role for truck. This is not a rule, and there are exceptions, of course.
Second generation intermodal development has had a much larger influence on the West Coast because of the role of Asian trade and the need to serve markets east. As a result, the mode share ratio between West Coast ports and East Coast ports is markedly different.
3G intermodal development also will have a distinct geographic footprint. The Maritime Administration’s marine highway corridor is a good indication of the potential marine highway geographic footprint. For reverse mini-landbridges, the geographic footprint will focus on major East Coast container load centers with rapid and direct rail access to major inland markets. Norfolk Southern’s Heartland and Crescent corridors and CSX Transportation’s Southeast Triangle are core examples.
A Strategic Blueprint
In summary, the public policy path toward 3G intermodal development should concentrate on five core areas:
- The development of international container load centers within proximity of major inland waterway systems, specifically waterways that lead to large interior markets.
- The development of terminal infrastructure designed to accommodate a triple play of intermodal services: intermodal barge, rail and truck.
- Enhanced mode share policies and incentives that encourage port terminal operators and third-party service providers to offer a balanced range of intermodal services.
- The revision of policies that prevent the development of agile vessel technologies more suited for the higher service demands of the global supply chain.
- Investment in rail operations and systems that accelerate the transfer of containers from ship to rail and reduce the cost of handling.
Arno Hart is president of consulting firm RNO Group in Columbia, S.C. Contact him at email@example.com, and follow his 3G Intermodal blog at www.3gintermodal.com/blo. This report was adapted from the RNO white paper “Toward a 3rd Generation Intermodal Transportation Blueprint for the Nation.”