U.S. intermodal rates rose 1.2 percent or $24 during the week of April 8, according to data on all-inclusive 53-foot door-to-door spot pricing quoted by railroads and provided by the 3PL IDS.
This increase follows five weeks of declines due in part to falling diesel prices. this week, extending their slump to six weeks. However, increased volume and capacity in a few key lanes resulted in this week’s overall increase, IDS Executive Vice President Rick LaGore said. “If it weren’t for these lane increases, we would have remained relatively flat to down against the prior week,” he said.
East-west rates jumped 3.5 percent or $61.11 this week to $1,792 thanks to increases in a few lanes. The largest increase was in the Atlanta-Los Angeles lane, which rose 11 percent or $200 to $2,025. Some lanes out of Chicago also showed steep increases. Chicago-Denver rose by 8.2 percent or $215 to $2,825 and Chicago-Los Angeles is up 8.1 percent or $125 to $1,660. Another east-west lane, Atlanta-Dallas, fell 2.1 percent or $35 to $1,655. The current east-west index is up 0.7 percent from where it stood at the beginning of 2013.
North-south rates were also up this week, rising 3.4 percent or $65.71 to $2,026. The current index for this trade lane is 1.7 percent higher than it was at the beginning of the year. One trade lane, in particular, resulted in an increased north-south index. Chicago-Dallas skyrocketed to $2,550 this week, up almost 23 percent or $475. Other lanes showed smaller shifts. New Jersey-Atlanta remained at $965 for the third straight week.
Despite the overall increase, spot rates in west-east and south-north trade lanes in this direction fell this week. Chicago-New Jersey showed the largest drop in this index, falling 4.2 percent or $65 to $$1,495. Los Angeles-Chicago slipped 0.2 percent or $5 to $2,300; Los Angeles-New Jersey declined 0.3 percent or $10 to $3,470; Los Angeles-Dallas slid 0.2 percent or $5 to $2,470; Los Angeles-Atlanta inched down 0.4 percent or $10 to $2,800. Seattle-Chicago showed an increase of 2.4 percent or $45 to $1,955.declined. West-east spot rates edged down 0.5 percent or $11.25 to $2,411 this week, and are 3.8 percent lower than at the beginning of the year. Rates in most of the major
South-north spot rates were also down this week. They fell 0.7 percent or $11.43 to $1,731, which is just over 1 percent lower than where it stood at the beginning of 2013. The major northbound trade lanes showed mixed shifts. The steepest drop was from Atlanta to New Jersey, which fell by 3.8 percent or $65 to $1,655 this week. Dallas-New Jersey also declined this week to $2,245, down 2 percent or $45. Rates from Atlanta to Seattle increased 1.4 percent or $40 this week to $2,865.
Ron Sucik, principal at RSE Consulting in Naperville, Ill., said the trend of drops in intermodal traffic is a result of the rail capacity problem. He mentioned that one possible factor could be “some of the traffic has already shifted to all-water to the East Coast via the Suez Canal making for some of the excess capacity on the West to East lanes on the railroads.” He also explains that the weak market is keeping demand, and as a result intermodal traffic, down. He feels that once some of the small obstacles, such as declines in the housing market and car sales, are overcome and market confidence increases, “we will see the consumer goods flow in at greater numbers and then the capacity will be used up and the rates will go up. For now, it is a slow ride.”
Rates have remained low because railroads are attempting to attract more traffic. “The weak recovery is not strong enough to utilize all the capacity these railroads have, and it only makes good sense to try to maximize the potential of their assets. There isn't much they can do about the decline in coal business, but they may be able to stimulate more traffic with the lower rates. The rails have the infrastructure to handle more traffic. They hope by keeping these rates, especially the western carriers and the west to east rates acceptable, they can attract the traffic to use the capacity they have available,” Sucik explains.
“If diesel prices decline, it allows for the motor carriers to be more competitive. So that may have an influence on keeping the intermodal rates down as a means to keep market share,” he said in response to the relationship between intermodal rates and the recent drop in diesel prices.