JOC | New Index Helps Shippers Gauge When to Convert Truck Loads to Rail

05.14.16 | Reynolds Hutchins, JOC

A new North American intermodal index that can help shippers determine when it’s best to move truck loads to intermodal rail indicates “mildly favorable” market conditions.

Research firm FTR Transportation Intelligence’s new Intermodal Competitive Index, which was  unveiled Wednesday, is a compendium of different factors including relative rates in both modes, industry capacity and demand, fuel prices and intermodal service levels as measured in train velocity. The rail industry in recent years has found it harder to convince shippers to convert loads from the highway to the rails, largely because low fuel prices and flush truckload capacity have made over-the-road rates highly competitive. The incremental gains in intermodal service recovery, following a harsh 2013 to 2014 winter, have also dampened conversion growth.

“It’s a useful one shot to give you an idea of what’s happening out there,” Larry Gross, an FTR senior consultant, said in a Wednesday webinar on the index.

According to the index, figures above zero indicate favorable conditions for the intermodal industry as opposed to trucking. Figures above 10 show extremely favorable conditions that would result in substantial truck-to-intermodal conversion. Figures below zero indicate less aggressive modal share gains for intermodal and potentially lost market share.

Of course, the index is new, Gross added. “This is going to be a work in progress. We’ll continue to refine this as we go.”

Gross said intermodal growth should be “tepid” - a word being used more and more industry-wide - for the remainder of 2016. Domestic intermodal volume has been performing strongly and should continue to do so throughout the year. International traffic, however, has failed to live up to expectations and overall intermodal volume has been dragged down by declining trailer volume.

Echoing commentary in the Intermodal Association of North America’s recent first-quarter analysis, Gross pegged a “big decline in trailer volume” on the restructuring of Norfolk Southern Railway’s Triple Crown operations, which was announced late last year.

There are many other factors that could be contributing to the decline in trailers, both IANA and Gross said.

Fuel prices remain low so intermodal trailer shipping may be facing competition from trucking. Similarly, changing logistics trends, spurred by rising online sales, may be pushing more freight towards trucks and away from intermodal trailers. There has also been a long-term trend to move freight away from trailers. In the first quarter of 2016, there were less than half as many trailer shipments than at the start of the new millennium. In contrast, there were over twice as many container shipments in the first quarter of 2016 than in the first quarter of 2000.

“The Intermodal Competitive Index will allow readers to assess the trend of where intermodal stands versus truck transport at a glance,” Gross said in a statement.

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