Business & Investment

Is the intermodal out of orbit?

This Week’s Chart: Intermodal Outbound Bid Refusal Index, Outbound Rail Loading Container Volume – US Sonar: IMOTRI.USA, ORAILL.USA

Intermodal rejection peaked near record highs in the past month as volumes declined. Over the past few months, the amount measured by the FreightWaves Outbound Loaded Container Volume Index (ORAILL) actually increased in March and April, but the rejection rate was below 2%. Are intermodal providers losing market share because of their very tight trucking capacity?

It’s counterintuitive that demand (quantity) is declining and capacity seems to be shrinking. This is indicated by an increase in bid denials. Intermodal carriers seem to be reducing the capacity available to contract customers. Due to the nature of the business, intermodal bids are rarely rejected. Many providers automatically accept load requests because they resemble almost guaranteed capacity, but services do not.

When asked about this phenomenon, rail and intermodal market experts Mike Bodendistal said: highway. ”

Basically, rail transport cost savings are not enough to offset the decline in service. This explains to some extent the volume decline over the past few months, but the refusal to bid indicates that carriers may be struggling to meet demand anyway. The timing is abnormal.

Looking at the intermodal rejection rate at the market level, most of the rejections can be explained by the significant increase from the load that occurred in Southern California. The largest lane for intermodal transportation in the United States is from Los Angeles to Chicago. This lane has been struggling to keep up with demand for months.

Although not the traditional peak season for rail freight, this spring there was an additional charge for the peak season.Union Pacific Railroad has announced a temporary suspension of eastward movement from the West Coast Terminal To Chicago — This is due to the congestion in Chicago due to lack of drag capacity.

Volume is also declining from LA and we need to increase capacity, but the rejection rate does not seem to be the case. Chicago congestion may have contributed to the increase in rejection.

International container and domestic container

Looking at the volume of domestic and international loading containers, most of the degradation is due to the international container segment, which consists mainly of 20-foot and 40-foot containers originating from abroad.

These containers have become rare items and are not owned by Rail. As the shortage of containers is becoming an increasingly problematic, shipping companies that own these containers are making more efforts to get them back where they are needed and maximize their bottom line.

This means that these containers need to be emptied into the warehouse or preferably transshipped near the port. Due to the many delays and congestion around the harbor and rail facilities, much of this cargo is palletized and trucked, but not as premium as it used to be after significant price increases and additional charges.

Rails have historically sacrificed service for operational efficiency, not due to poor service (drage capacity / container shortage), but now they are paying more for less (service). I am billing. Truck compliance rates are starting to improve from record lows. This could mean that intermodals may have missed peak growth opportunities.

About this week’s chart

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Is the intermodal out of orbit? Is the intermodal out of orbit?

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