US intermodal peak delayed, tariffs could be to blame

US intermodal peak delayed, tariffs could be to blame

An intermodal train in Kansas, United States.

Data suggest shippers moved up their September cargo movements to stock up before US tariffs were enacted on $50 million in goods on July 6 and Aug. 23, and on $200 billion of goods on Sept. 24. (Above: An intermodal train travels in Kansas, United States.) Photo credit: Shutterstock.com.

In most years, rail shippers are frantically moving freight by late September, but that isn’t true this year, surprising those who thought the peak season would actually start earlier than normal.

Data suggest shippers moved up their September cargo movements before tariffs were enacted on $50 million in goods on July 6 and Aug. 23, and on $200 billion of goods on Sept. 24. By shifting the calendar, this has been a quiet month on intermodal even though conditions in Southern California are heating up in the last few days.

US import growth slowed considerably year over year in August, increasing 1.2 percent compared with July’s 9.1 percent increase, and import volume fell 1.5 percent from July to August. In comparison, volume jumped 6.2 percent between July and August 2017, according to data from PIERS, a sister product of JOC.com. The early surge, along with carriers trimming capacity to the United States, has caused shippers to stockpile goods. The US Census Bureau reports inventories rose 0.6 percent in July after a 0.1 percent increase in June. Retail inventories rose 0.5 percent in July after declining 0.1 percent in June.

Freight moved in September was instead done in July.

Intermodal data also confirm typical seasonal patterns have been upended this year. On a year-over-year basis, international container traffic rose 4.9 percent in June, 6.9 percent in July, and 4.2 percent in August, according to the Intermodal Association of North America (IANA). Last year there was more typical ramp up with volume growing 5.6 percent in June, 8.3 percent in July, and 9.5 percent in August. International cargo represents about 56 percent of volume.

But even domestic intermodal, 44 percent of volume, follows the same trend, according to IANA’s data. Domestic equipment volume grew 6 percent in June, 7.5 percent in July, and only 5.3 percent in August. By comparison, volume grew 3 percent, 5 percent, and 6.7 percent in those three months, respectively, in 2017.

This could explain why LoadMatch and Drayage.com — an intermodal directory connecting shippers and intermodal marketing companies to trucking companies — recorded a spike in web clicks in June. Shippers were preparing for a deluge of cargo in July.

Throw out the book, 2018 is an odd year

There was a belief that the intermodal peak season would start earlier this year than 2017 for several reasons. First, intermodal volume rose more than 6 percent in the first four months of this year, an unprecedented situation prompting shippers to scramble for equipment in a typically slow season. Second, domestic container providers were tapped out on peak-season contracts in July, whereas usually it doesn’t happen until August or September. Third, Union Pacific Railroad declared Southern California, Northern California, Seattle, and Texas cities El Paso, Laredo, and San Antonio as constrained on July 29, triggering contractual limits on cargo being tendered by shippers.

However, the motto so far this year is expect the unexpected.

“I wish I had tea leaves to look for, but there are so many anomalies happening this year. There are no tea leaves this year. If you asked me earlier this year, I would have thought peak would be here already. This has been one of the most unusual years I can ever recall,” said Shelli Austin, president of Intek Freight and Logistics.

Intermodal marketing companies tell JOC.com there have been spurts and stops by the day. For a few days it will be difficult to find containers and draymen, then all of a sudden capacity will be available again.

“I’m not seeing any major metro areas really hurting right now in the eastern US. Chicago is in decent shape, the Northeast is in decent shape, Atlanta is OK, Dallas is OK,” said Drew Roy, director of intermodal operations with Scott Logistics Corp.

He said there has been some drayage tightness in New Jersey, and difficulty finding 40-foot and 53-foot containers in Dallas, but conditions are manageable.

“In a typical year, you will see it get worse and worse each week in September. You’ll feel drayage getting really tight in Chicago, Cincinnati, and the Northeast. But I just haven’t seen it yet this year,” Roy said.

Equipment fluctuates between tight and loose based on when trains move containers. UP, for example, has been reallocating boxes as much as possible, according to Ron MacDonald, senior vice president of Cornerstone Systems.

“Back in July, UP stopped taking new [mutual commitment program] accounts. Anything new had to be transactional. They are also policing the current MCPs [annual shipper contracts] and if you aren’t meeting your committed volume, they’re cancelling the agreements. This allows UP to have available equipment for its [core] customers,” he said.

California is heating up

Three of the major intermodal trucking providers — J.B. Hunt Transportation, Schneider National, and Hub Group — have declared Southern and Northern California as constrained. Smaller drayage providers, both serving the ports of Los Angeles and Long Beach and hauling 53-foot domestic boxes, continue to be available. Conditions are rapidly changing, however, according to Jason Hilsenbeck, founder of LoadMatch and Drayage.com.

“If you had asked me a few days ago, I would have said things were not busy. But [LoadMatch’s] activity has picked up within the last 48 hours. I feel like things are starting to turn,” he said. “I don’t know whether this is end-of-quarter business or whether this will be a month-long trend. Everywhere else [outside of California] things are still loose.”

If activity is truly heating up in California, expect drayage, chassis, and container availability to dwindle in the Midwest, Southeast, and Northeast next week as those trains arrive and cargo is delivered to shippers.

“I would say the push started in mid-September [the week of the 17th] and now it’s starting to really heat up this week in Los Angeles. I think October is going to be really crazy. The boxes are here in L.A. and Lathrop, so UP is ready to go,” said Robb Johnson, an agency owner with Re-Trans in Brentwood, California.

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