IPI data suggests East Coast migration in port routings

IPI data suggests East Coast migration in port routings

Intermodal had a tough year in 2016 and weakness in the business of moving containers inland was one reason. But the pain wasn’t uniform across the system. A review of where such volumes, known as inland point intermodal, rose and fell can tell us something about changes occurring in the system.

The 2016 headlines were pretty grim. Looking at data from the Intermodal Association of North America, IPI revenue movements of 20-, 40-, and 45-foot intermodal containers across North America dropped 3.3 percent from 2015. Meanwhile, containerized imports entering the United States and western Canada, measured in 20-foot-equivalent units (TEUs), rose 3.0 percent and total TEUs traversing the ports, including import and export volumes, rose 2.0 percent. Had IPI movements kept pace with the increase in total import-export activity rather than dropping, there would have been almost a half-million more revenue movements of intermodal containers in 2016 — more than 1,300 per day.

A more detailed look at which corridors gained and lost volume from 2015 to 2016 provides some insight. Total IPI volume dropped 288,000 units over that time. Those lanes that registered declining volumes accounted for a loss of 424,000 revenue moves. But these losses were partially offset by other corridors that showed gains of 136,000 revenue moves.

The accompanying chart displays the major winners and losers in terms of the IANA region-to-region flows. The biggest loser by far was the South Central-Southwest corridor, mainly California-Texas. This corridor alone accounted for 38 percent of all losses. It’s followed by other predominantly West Coast-oriented lanes.

 

Looking at the gainers, the heavy hitter is the corridor linking the Northeast with the Midwest, which accounted for 60 percent of all volume gains. The Northeast region encompasses all the East Coast ports from Portland, Maine, to Norfolk, while the Midwest region covers all the major Midwestern population centers including Detroit, Chicago, St. Louis, and Kansas City.

What clues does this data contain? First, it suggests there was a West Coast to East Coast migration from 2015 to 2016 in terms of port routings. Volume landing on the East Coast is less likely to go intermodal because of shorter length of haul. If it does go intermodal, however, the likelihood is that it will move intact rather than being transloaded.

That said, increased transloading off the West Coast is certainly another factor, suggesting that not all the IPI volume declines represent true intermodal losses. Some volume is simply appearing in a different form as transloaded freight in domestic containers and trailers. The possible causes for this trend are open to debate, and might include less enthusiasm for IPI on the part of ocean carriers, or a desire for more flexibility on the part of beneficial cargo owners.

A third potential culprit may be new Gulf Coast container services. The steamship lines are adding direct services to the Gulf in order to position for the outbound flow of plastic resins, which is expected to accelerate beginning later this year as new regional petrochemical facilities come on line. To serve these flows, a reliable source of empty containers is needed, hence the interest in increasing direct import volumes. The sharp drop in South Central-Southwest volume could be a result of this change in particular.

Finally, we shouldn’t discount the possibility that some of the lost volume simply migrated to the highway under the pressure of competitive trucking rates and ample truck capacity.

A key question is whether these trends have run their course. Will we return to “normal?” In other words, will this lost volume recover? That’s unlikely in my view, leaving two other options: Intermodal results will fall further behind or they will start to move again in parallel with import-export activity, representing in effect a “new normal.”

Preliminary January data is encouraging on this front. US-western Canadian containerized imports rose a solid 3.2 percent from January 2016. But revenue movements of intermodal containers rose even more — by 4.9 percent year-over-year — and that’s the first time in many months international intermodal growth has exceeded import volume growth.

2017 represents a pivotal year for intermodal in terms of domestic and international trends. The prospects for this year are better than in 2016. Whether this first “green shoot” of international improvement can be sustained will play a big role in intermodal’s prospects for this year.

Lawrence J. Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. He is a frequent speaker at industry events. Contact him at ljgross@optonline.net and follow him on Twitter: @intermodalist.