JOC Research Note: US intermodal savings lowest in five years

JOC Research Note: US intermodal savings lowest in five years

The JOC Domestic Intermodal Savings Index shows that shippers have saved 6.7 percent on spot intermodal this year, much less than a year ago and well below the five-year average. Photo credit: Wikicommons.

Shippers use intermodal because while slower, it’s cheaper than truck, although those savings are tighter than at any point in the last five years, according to a JOC analysis.

The proprietary US Domestic Intermodal Savings Index (ISI), based on analysis of 115 lanes, shows that an average shipper saved only 3 percent on a spot intermodal transaction between July 2018 and June 2019. Railroads priced spot rates so high last autumn that the index fell below 100, which is the base level indicating truckload rates are equal to rail.

Values below 100 in JOC’s Spot Market ISI indicate trucking is cheaper than intermodal, whereas values above 100 mean intermodal is cheaper. The index is calculated in percentage, so the 3 percent savings over the last 12 months equals 103. The low point in September 2018 when the national ISI spot was 95 means trucking was 5 percent cheaper. 

Although JOC hasn’t launched a contract intermodal index, the preliminary data shows contract rates were about 20 to 25 percent cheaper in 2018 and only 10 to 15 percent this year. The majority of intermodal loads travel under contract.

JOC’s new quarterly research note, available by clicking here, should facilitate deeper discussions between shippers and third-party logistics providers into modal choices in your networks.

The Spot Market ISI climbed over 100 this year, averaging 106.7 (6.7 percent savings) between January and June. However, that is down from an average of 109.8 (9.8 percent savings) during the same period of 2018.

Spot intermodal shippers are saving less over time. Shippers saved 20.1 percent (120.1) in 2015, 18.9 percent (118.9) in 2016, 16.9 percent (116.9) in 2017, and 4.6 percent (104.6) last year.

The Los Angeles to Chicago lane is an example of how the market has shifted. The Intermodal Association of North America (IANA) reports more than 50,000 loads move in this lane per month. Truck rates, though, were cheaper than rail rates between January and April 2019, which made it difficult for intermodal marketing companies to sell a slower service. 

There are many other lanes in our research report where shippers will find intermodal is not saving them any money.

Class I railroads acknowledge trucking rates are more competitive but argue that traditional intermodal savings will return once the freight recession ends.

Watch for JOC’s next ISI research report in three months.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.