A3 Freight Payment Blog


Intermodal Freight on Pace to Break all Records in 2012

As mentioned in a previous blog post, the American Association of Railroads (AAR) publishes a monthly compendium of railroad activity statistics for the U.S. and Canada. The previous post mentioned this monthly report as a potential source for observing economic activity at the top of the supply chain.

However, the July, 2012 edition of Rail Time Indicators highlights an exciting trend within rail traffic which is of relevance to the vast majority of shippers. Intermodal freight in 2012 is surging and on pace for setting an all-time record for volume in 2012.

Through June, year-to-date 2012 U.S. intermodal originations were slightly ahead of 2006, setting up the very real possibility that 2012 will be the highest-volume intermodal year ever for U.S. railroads. The recovery since 2009 has been remarkable. In the first six months of 2009, average weekly intermodal loadings were 185,075 containers and trailers. In the first six months of 2012, the average was up to 232,682 containers and trailers, a 25.7% increase. Assuming 240 intermodal units per train, the improvement in 2012 over 2009 is equal to nearly 200 additional full-size intermodal trains per week. (Policy & Economics Department, American Association of Railroads, 2012)

Naturally, this is exciting news for supply chain activity and the economy as a whole. A logical question would be, “What are the drivers for this increase in intermodal traffic?” Could it be the effect of rising fuel costs? Rail is at least four times more fuel efficient than truck, thus allowing for lower costs to cover the same mileage.

Whatever the reasons, there is indirect evidence of a trade-off between truck and rail in the AAR statistics. It can be seen in the rising proportion of domestic intermodal traffic as compared to international intermodal.

Today, U.S. rail intermodal traffic is roughly 55% international traffic (exports and imports) and 45% domestic traffic. The share of total U.S. rail intermodal movements accounted for by domestic movements has been rising in recent years, with much of the increase consisting of traffic that used to move solely by truck but which has been converted to rail movements (though usually with truck on one or both ends). In other words, rail’s market share has probably been rising. (Policy & Economics Department, American Association of Railroads, 2012)

Of course, the “dark cloud to the silver lining” of a rise in demand must be a potential rise in price. Shippers should be concerned that as intermodal traffic continues to increase, this can and will eventually translate into increases in intermodal rates.

Reliable freight payment data can allow shippers to manage and anticipate the effect of increases in their intermodal rates. Inaccurate or incomplete freight payment data will leave shippers without the adequate tools to manage such increases, and their budgets could be blindsided.

Reference:

Policy & Economics Department, American Association of Railroads. (2012). Rail Time Indicators. Washington, DC: American Association of Railroads. http://www.aar.org/NewsAndEvents/~/media/aar/railtimeindicators/2012-07-rti.ashx

Posted by Ross Harris at 3:16 PM
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