Off The Rails!

Let’s talk about what’s going on in the intermodal realm currently and what’s changed over the past year.

This chart represents a year-over-year percent change in outbound rail container volume in some of the most popular domestic lanes. As you can see volumes are down in all but 2 of some of the most popular lanes which are ATL to Dallas and Dallas to ATL, which together represent a small fraction of the overall market share represented here.

One would think that with volumes down year over year that the amount of containerized freight in the market has decreased in relation but according to monthly totals of TEUs imported into the US, that hypothesis couldn’t be further from the truth.

This treemap depicts imported TEU volumes on a year-over-year basis for the largest ports in the country. As you can see, all are experiencing explosive year-over-year growth. Mostly due to a prolonged increase in consumer spending & shift in buying habits over the past year.

This is another good data set to look at as it shows not only domestic rail container volumes but also International and overall US customs data year over year. As you can see shipments that have cleared customs (in green) are up 19% while outbound international rail volumes (in blue) are down 14%, and Domestic rail container volumes (in orange) are down 3% year over year. Typically, international rail volumes and shipments that have cleared customs to move in conjunction however since July there has been a significant trend in opposition. Which begs the question, how are rail providers not showing an increase in throughput with imports as strong as they are currently?

If you look at these same trends since the end of July when imports and international rail volumes started to significantly diverge you can see an increase in domestic container rail volumes (in orange) and long-haul truckload volumes (in purple). Based on expert feedback from individuals who are much smarter than me on this topic, there are several things causing this to happen.

First, it’s no secret that import volumes have been breaking record after record for the past 15 months. With extended record-breaking activity has come a massive amount of port congestion not just domestically but overseas as well. For example, the anchorages in Shanghai and Ningbo alone make the figures in San Pedro Bay currently look like rookie numbers. With demand remaining strong for imports, empty containers remain a critical factor in the supply chain process.

This has all led to an increase in international containers being transloaded to domestic modes of transportation as rail providers are trying to restrict the number of international containers moving inland. Longer train sizes have also led to slower origin and destination departure times which in turn has increased transit times in some of the most popular rail lanes, even with train speeds increasing.
Sequentially this has continued to make truckload a more desirable mode for shippers looking to replenish inventories, ease backlogs, and meet overall peak demand timelier.

Finally, factor in a chassis pool shortage, warehouse understaffing and congestion, a lack of gate reservations, draymen, shoreman, and a decreased competitive cost advantage in Intermodal versus truckload, and the rail container mystery really starts to unravel.