There are plenty of signs suggesting shippers and transportation providers should expect a mediocre peak shipping season, but international intermodal isn’t one of them.
International intermodal volume in the second quarter rose 3.9 percent year-over-year, the best rate of growth in a year, according to the Intermodal Association of North America. International volume of 1.95 million units was the most shipped in any second quarter since 2008, when a bustling economy drove consumer spending to new heights.
The strong international intermodal traffic parallels the steady increase of imports during the same period. Containerized import volume rose roughly 3 percent year-over-year on the West Coast, while East Coast ports saw a 5 percent jump in inbound shipments.
The U.S. rail networks haven’t seen the historical peaks in intermodal volume, and instead are experiencing steady growth in volume through the year, IANA CEO and President Joni Casey said. “I would characterize the state of the industry as ‘steady as she goes,’ ” she said.
Total intermodal traffic increased 5.2 percent in the second quarter and is up 5.5 percent in the first half of 2012. The volume accounts for approximately 10 to 15 percent of all U.S. surface transportation moves, and intermodal volume makes up about a quarter of rail traffic.
That steady growth comes as shippers and carriers try to discern how the slowing economy and high unemployment will impact the buying habits of holiday shoppers and businesses.
The signs of a decelerating economy abound. U.S. economic growth slowed to 1.5 percent in the second quarter from the previous quarter, and factory orders in June slipped 0.5 percent from May, according to the Commerce Department. However, recent solid July sales reports from major retailers, including Gap and Target, suggest consumers aren’t letting the barrage of lukewarm economic data affect their back-to-school shopping.
Likely because of slowing manufacturing growth, domestic intermodal expansion has hit some headwinds, but the sector is still tracking strong expansion. Domestic intermodal volume jumped 12.5 percent year-over-year in the second quarter, a slight slip from the 14.9 percent growth in traffic seen in the first quarter. Intermodal volume growth will likely hit double-digit growth for the fourth straight quarter in the July-August period, as intermodal drivers — tightening truck capacity and fuel price volatility — offset slow patches in the economy.
Still, intermodal growth isn’t likely to provide much relief to shippers looking for more trucking space, as the sector has eliminated the need for only about 25,000 trucks in the last 12 years, said Noel Perry, a senior consultant with research group FTR Associates.
With international volumes building, IANA expects total intermodal volume to grow 5 to 6 percent in 2012. Larry Gross, a senior consultant with FTR Associates, expects international intermodal traffic to tick up 2.9 percent this year, and domestic moves to jump 6.4 percent in the same period. He expects intermodal traffic, which has outpaced truck freight and U.S. economic growth, to hit monthly records between now and the end of October.
U.S. intermodal traffic has continually hit monthly records this year, most recently in July, when volume spiked 6.5 percent year-over-year. Intermodal volume hauled by the major railroads in the U.S. is up about 3.6 percent in the first seven months of this year, compared to carload traffic being down 2.6 percent.
Intermodal also is making up a larger share of short-line railroad traffic, partly because of the slump in coal and grain volumes. Volume on the 377 small North American railroads tracked by RMI, a GE transportation company, is up about 19 percent this year compared to 2011.
Intermodal traffic accounts for approximately 9 percent of the carriers’ hauls this year. The American Short Line and Regional Railroad Association estimates intermodal traffic accounted for about 2 percent of the loads hauled by the 550 U.S. short-line and regional railroads last year.
The overall intermodal growth comes after the industry invested hundreds of millions of dollars in its network in recent years. That investment is helping major railroads convince shippers they can haul their goods, even if the distance is less than 125 miles. That length of haul has seen the highest rate of volume growth in 2012, expanding 4.8 percent year-over-year, according to IANA.
The growth for shorter hauls isn’t limited to the domestic intermodal sector. Intermodal volume for the Port of New York and New Jersey’s ExpressRail service to marine terminals jumped 10 percent in the first half of 2012. The port authority said some of the growth came through a New York-Chicago express rail service that began earlier this year.
The healthiest intermodal growth in the second quarter came in the Southeast-Midwest and Midwest-Northwest corridors, where volumes rose 10.5 and 13.5 percent, respectively, according to IANA. The former enjoyed a surge in domestic containers, accounting for about two-thirds of big-box traffic, while intermodal rail appears to have gained market share in the latter as imports at Northwest ports expanded just 4 percent.
In contrast, shipments gained only 0.7 percent in the Southwest-Midwest corridor, the largest U.S. intermodal lane, as international traffic plunged 13.3 percent. The pace on the lane could pick up quickly if dock activity increases at the ports of Los Angeles and Long Beach, particularly if shippers anxious about potential labor disruption by the International Longshoremen’s Association divert cargo from the East Coast before the ILA contract expires.