This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
In 2018, railroads carried record-breaking intermodal volumes as shippers raced to beat impending tariffs and new regulations mandating use of electronic logging devices (ELDs) crimped trucking ­productivity. In 2019, multiple headwinds have stalled the railroads’ intermodal growth — for both domestic and international traffic.
For the first time since 2009, North American international container volumes were negative (down 0.5 percent as of October 2019) on slowing international trade combined with continued share shift from West Coast ports to the East, where rail earns a lower share of the subsequent inland move. Some of that lost volume may never return, as the current trade situation may shift production permanently away from US exporters.
Domestic intermodal volumes in 2019 were even further below expectations. In an unprecedented shift, intermodal volume has converted off rail and back to truck even as rail service has been improving. Excess trucking capacity is pushing rates lower, to the point where some intermodal lanes are no longer price-competitive. When hiring a truck is cheaper than using intermodal, the decision becomes easy: use the truck.
In the short term, truck prices may return to “normal” levels and bring some domestic freight back from trucks. International may grow again if the trade problems are resolved favorably. But electrification of truck power, digital freight matching, ELD improvements, and asset productivity will help push down trucking costs and continue to make trucks more competitive.
How can intermodal capture more of and hold share of the longhaul truck market? Deliver greater service consistency, create closer ­integration between intermodal operating partners, and build more agile pricing processes that better address truck competition. With latent capacity in the system and ample room to drive efficiency across the total door-to-door process, healthy intermodal growth in 2020 is well within reach.