BLOOMINGTON, Ind.–According to the latest FTR State of Freight Intermodal Outlook webinar, presented by Larry Gross , FTR Transportation Intelligence’s Intermodal and Rail Expert, truck capacity will be tight but “adequate” in 2015, while intermodal may have to “earn its way”.
The Intermodal outlook webinar highlighted the latest issues and trends in US domestic and international traffic.
Truck capacity will be a little looser than it was 12 months ago, and “at the moment, and we think for the balance of the year, we think it will be tight but manageable,” Gross said.
The hours of service rollback by US Congress also created a 2% bump in truck capacity, which went from “critically” tight to “normally” tight, creating some short term relief. Domestic intermodal moves have also been stronger, he said.
While the recovery from the long-term West Coast port disruption has begun, Gross anticipates a good three months before the backlog is cleared.
The Association of American Railroads’ weekly intermodal loadings indicated the four week moving average growth at 2.5% over January and February this year.
The February to March seasonal jumps will create a tight situation, Gross said, with jumping spot rates for all types of transport.
“This situation will persist for some time. The Lunar New Year was late this year-all else being equal, this slack period will take several weeks to work its way back,” he said.
Canada came out stronger than the US in terms of year over year growth because of the US West Coast diversions, with a 5.6% 4 week moving average, vs. 4.7% in the US.
Stronger Canadian volumes will persist, Gross said.
He said that the US West Coast will lose market share because of the West Coast port fiasco, and that we can expect market growth at Canadian and Mexican ports. But this also reflects a longer term trend and is not uniquely the result of labour issues.
Some diversion on the US West Coast will be permanent and will affect intermodal, he said.
“Certainly the West Coast Canadian ports have been tremendous beneficiaries of the chaos that occurred at US West Coast. Probably some of that is going to be permanent. The terminals have a belief in the permanent advantage there,” Gross said, commenting on the recent announcement from the Port of Prince Rupert that Maher Terminals is expanding its Fairview container terminal over the next two years.
Most of the TEUs hitting California ports are coming out on rail, Gross said, and he suggested that if there is a 1% diversion out of these ports, that will shift about 100,000 TEUs per year that would have been intermodal traffic.
Currently, roughly 15% of East Coast imports leave the port on rail. Assuming this figure would be as much as 25% for diverted cargo, net loss to intermodal would be 75,000 loads per year.
Length of haul in trucking is also revealing, he said, with the average length of haul increasing, and intermodal facing a tougher time in the shorter hauls.
Lower fuel prices could also make intermodal economics more difficult.
Intermodal service has improved but is now slipping, and remains well below the levels of two years ago, Gross added.
“This was being attributed to weather (the polar vortex effect of the 2013-2014 winter). But now train speed numbers should be turning around. It’s getting to be a bit concerning,” he said.
Four week intermodal train speeds are falling. Intermodal market share dropped two quarters in a row.
There have been declines, both on the domestic and international front, for different reasons.
“I think we will see more decline because of service issues,” Gross said.
He pointed out that another issue on the horizon is the US’ anti-dumping duty of 110% that could be placed on domestic dry van containers (imported from China). The tentative ruling will not be finalized until May but if you buy a domestic container today you have to put that money in escrow and potentially pay that duty, which will raise the container price to over $20,000 per unit.
With current forecasts anticipating a need for some 17,000 incremental units to be added to the fleet, “If the ruling stands there may be a crunch in domestic container capacity,” Gross said.
The only other outlet is greater equipment velocity, he added.
While intermodal service remains a work in progress, he said, some developments could create improvements.
The creation of a universal chassis pool at LA Long beach will dramatically help the chassis situation, Gross said.
With regard to tank car upgrades for crude trains, he suggested that if it is not possible to build a tank car that can withstand the tremendous forces of derailment, these trains may have to run slower-which could have adverse effects on service.
Julia Kuzeljevich is Editor of Canadian Shipper. She has been writing about transportation and logistics issues since 1999. All posts by Julia Kuzeljevich