One of US intermodal’s big surprises this year has been the strong growth in trailers, but what does it mean? Are trailers acting as a safety valve for lack of domestic container capacity? Is increasing e-commerce driving the trend? Both of these factors are contributing, but analysis indicates there may be a strong temperature-controlled component.
Trailer-on-flat-car (TOFC) revenue moves were up more than 16 percent year to date through August based on Intermodal Association of North America equipment, type, size, and ownership data. This far exceeds, in percentage growth terms, domestic containers’ gain of 6.1 percent. Even keeping in mind that domestic containers handle almost 85 percent of domestic volume, that differential in growth rates is large. What’s driving it?
Increased use of intermodal by less-than-truckload and parcel carriers is one possibility. E-commerce is driving growth, and intermodal offers a ready tool to handle the incremental volume. These carriers tend to favor short 28-foot trailers for operational reasons. Year to date, revenue moves of “short” trailers (less than 53 feet in length, including 28-foot pups) were up 8.3 percent through July. This is marginally better than the gain for domestic containers but the difference is not that compelling.
53-foot trailers — where the action is
In terms of growth, 53-foot trailers seem to be where the action is. Further, 53-foot TOFC revenue moves were up almost 20 percent year to date through July. Just fewer than 98,000 more 53-foot trailers moved this year than last. In fact, that figure understates the gain, because it includes a drop of almost 9,000 units in intra-Eastern Canada moves stemming from the discontinuance of the Canadian Pacific Expressway service between Montreal and Toronto on June 1. Setting that special situation aside, the gain was almost 23 percent. That is impressive, but where’s it coming from?
TOFC is, by definition, a US story these days. TOFC volume is negligible or non-existent in any lanes involving Canada or Mexico, with the aforementioned exception of the now-defunct CP Expressway. That 53-foot TOFC volume is significantly more concentrated than that of domestic container or short trailers. Just two region-pairs, Midwest-Southwest and Northeast-Midwest, accounted for about 46 percent of all 53-foot trailer volume year to date. These also happen to be the two most important domestic container lanes, but their role is less prominent. They account for less than 30 percent of all domestic container revenue moves and a similar percentage of short trailer moves.
The growth picture is even more stark. Midwest-Southwest and Northeast-Midwest generated more than half of all the growth in 53-foot trailer volume thus far this year. Next in line was Midwest-Northwest. The No. 4 lane in terms of absolute increase in 53-foot trailer volume was a surprise — Midwest-Mountain Central. The Mountain Central region is usually a minor player in terms of intermodal, encompassing the hinterland states of Colorado, Utah, Idaho, Montana, Nebraska, and the Dakotas. In percentage increase terms, Midwest-Mountain Central was the champion — up more than 82 percent year to date. There were other lanes involving the Mountain Central region that also turned in similar outsized percentage gains, albeit on rather small volume bases. Another growth star was the true transcontinental, Northeast-Southwest, with a gain of over 35 percent.
Temperature-controlled transport: in demand
Looking at the particular lanes that have been producing the most impressive year-over-year gains suggests that there is a strong temperature-controlled component to the growth. While the data do not distinguish between dry and reefer trailers, the lanes that are showing the strongest growth all serve strong temperature-controlled markets in the form of perishables and/or protein products. A good portion of this volume is in the long hauls that have most acutely felt the sting of the driver shortage and electronic logging device mandate. For those temperature-controlled motor carriers that have contracts with the railroads, an easy solution is to put the trailers up on flatcars.
Unlike domestic dry containers, there has been minimal, if any, growth in the 53-foot reefer domestic container fleet thus far this year. Therefore, any volume increase in reefer domestic containers would have to come from more intensive utilization of the relatively small reefer domestic container fleet. The heavy lifting in terms of growth must lie in the TOFC segment.
This conclusion makes the use of 53-foot TOFC volume as a leading indicator of overall domestic intermodal demand a bit more questionable. While 53-foot trailers are undoubtedly acting as a safety valve, the results may have been turbo-charged by a larger shift of temperature-controlled freight to the rail.