You’d be hard pressed to find a better barometer than intermodal traffic of the road ahead for U.S. shippers and transportation providers.
The 14.9 percent year-over-year jump in first quarter domestic intermodal container volume reflects the tightening of truck capacity, an uptick in retail sales and steady U.S. manufacturing growth, according to the Intermodal Association of North America.
The domestic intermodal expansion dwarfed the 2.9 percent growth in international intermodal volume in the same period, but even those moderate gains signal an increasing U.S. consumer appetite. International intermodal volume in the quarter grew 9.6 percent from the previous quarter, as shippers restocked after a better-than-expected holiday season.
The 5.8 percent year-over-year jump in total intermodal volume in the quarter reflects the overall shift of truckloads to the rails. Rail network improvements and fuel price volatility, along with generally higher diesel costs, have made that shift increasingly attractive to shippers already squeezed by higher transportation costs.
FTR Associates President Eric Starks expects total intermodal volume to expand 5.9 percent year-over-year in 2012. He said intermodal domestic growth for the rest of the year likely would continue at a similar clip as the first three months of the year.
“Domestic container gains may slow in coming months as comparisons to the previous year become more competitive,” IANA said in its first quarter report. “However, international growth will likely accelerate. In total, container shipments should maintain their strong growth rate through this year.”
Between 2005 and 2011, domestic intermodal expanded its share of the total intermodal market from 42 percent to 47 percent, Starks said. How far domestic intermodal has come is even more impressive, considering first quarter volume was nearly double that of the first quarter of 2001, according to IANA.
Despite these positive forces, intermodal marketing companies in the quarter appear to have reined in their pricing from the previous quarter. The average revenue per intermodal load slipped 1.2 percent quarter-to-quarter but grew 6.9 percent year-over-year, according to statistics from 10 intermodal marketing companies, including APL Logistics, Hub Group and Pacer Transportation Solutions.
The recent extension of multiyear agreements between BNSF Railway and Schneider National, whose statistics weren’t included in the composite, and CSX Transportation and Pacer International bode well for future growth.
Still, there are signs domestic intermodal’s momentum might slow, as U.S. manufacturing appears to be easing, he said. Retail sales also registered their slowest growth of the year in April, and the country added just 115,000 jobs, indicating a slackening of U.S. economic growth after a quick start to the year.
“Over the last several months, the growth trend has eased back, but that doesn’t suggest any decline,” Starks told attendees of the National Industrial Transportation League’s Policy Forum on May 8.
Manufacturing output is still expanding, with the sector growing for the 33rd straight month in April, according to the ISM Manufacturing Index. But the pace of growth is slower than in early 2011, Starks said. Several ISM index respondents warned the boost resulted from the unusually warm winter, and they expect Europe’s economic malaise to squeeze demand.
The diminished pace of factory expansion doesn’t guarantee a dip in domestic intermodal traffic growth. The inventory-to-sales ratio in February was a record low of 1.32, suggesting shippers will have to restock on even moderate gains in demand whether for domestic products or imports.
Shippers and transportation providers continue to favor 58- and 53-foot containers, with the usage of the two equipment types last quarter expanding 15.2 percent year-over-year to make up 37 percent of the market. The use of 20-, 40- and 45-foot containers grew 2.9 percent in the same period to account for more than half of the intermodal equipment market.
The use of all types of trailer equipment fell, and trailer shipments dropped 6.9 percent year-over-year. Part of the decline in trailer volume resulted from stronger year-over-year comparisons, according to the IANA report.
“However, many shippers will probably flip freight from trailers to domestic containers, and trailer volume will most likely continue to slip in coming months, although at a slower pace,” the report stated.
That push for greater loading equipment efficiency fits into the overall attraction of cutting costs through intermodal transportation. In a larger sense, those efficiencies are seen in the bustling but leaner manufacturing sector and shippers’ adversity to transportation cost volatility. Although it’s no GDP report or manufacturing index, intermodal volume appears be on the pulse of the cost-conscious shipper.