Intermodal gains ground in second quarter, paced by snapback in international volumes

Rail intermodal traffic increased in the second quarter by 4.5 percent over the 2014 period, paced by an outsized gain in international volumes as business snapped back once the disruptive 11-month labor fight at 29 West Coast ports ended in February, the Intermodal Association of North America (IANA) said today.

In releasing its quarterly report on the state of the industry, the intermodal trade group said international shipments rose 6.8 percent in the first full quarter of normal activity since the port dispute was settled. Those gains were partially offset by weaker-than-expected domestic trailer and container volumes, IANA said. Domestic container volumes rose 3.5 percent, its second smallest gain since late 2009. Only the first quarter of 2014, plagued by bad weather that paralyzed portions of the national rail system, has turned in a weaker performance over that multiyear period, IANA said.

Trailer traffic, which makes up a small part of the intermodal equipment mix, reported a 3.1-percent year-over-year decline. The continued decline in diesel fuel may have depressed intermodal trailer demand, as shippers may have kept their loads with trucks or switched back from rail to the highway. Fuel-efficient intermodal services generally offer a better cost-benefit option to users when prices are high. As of Monday, the average price for a gallon of on-highway diesel fuel stood at slightly under $2.67 a gallon, a $1.18- a-gallon decline from the same period in 2014, according to the Energy Information Administration, a unit of the U.S. Energy Department.

Through June, international container traffic was up 3.9 percent, while domestic container traffic rose 5.6 percent. Trailer traffic dropped 2.8 percent, bringing total domestic volumes to 3.8 percent, IANA said.

IANA acknowledged that a chunk of the second-quarter gains in international volumes was due to the end of the port dispute and the release of pent-up volumes that had been backlogged at key gateways since last fall and winter. However, the group said a post-dispute snapback might not be the only explanation for the gains. For example, shipments in June rose 8.9 percent from the 2014 period, the strongest month of the quarter and more than three months after the contract fight was resolved.

In addition, international shipments are closely correlated to container import volumes, which may have risen 6.5 percent in the second quarter, indicating solid import activity, IANA said. Imports may have benefitted from the decline in overseas currencies relative to the dollar, which make foreign imports more attractive to U.S. importers and consumers.

IANA said it could not explain the weakness in domestic volumes, which came in well below historical levels. The average year-over-year domestic container growth is 6.9 % dating to '01. It surmised that rail is losing market share to trucking, in part because of the drop in diesel fuel prices that makes truck transport more affordable. However, the intra-Southeast corridor, which happens to be a major region for truck service, reported a 23-percent year-over-gain in intermodal traffic in the second quarter, IANA said. Those results seem to counter the presumption that rail is losing significant share to truck, IANA said.

The intra-Southeast corridor is one of seven high-density lanes tracked by IANA; those seven lanes account for nearly two-thirds of all intermodal volume.