A slowing U.S. economy and the possibility of a coming freight slowdown has key U.S. intermodal providers turning to aggressive pricing to keep freight on the rails in 2023. Competition is heating up between the trucking industry offering competitive rates on shorter hauls, and asset-owning intermodal marketing companies (IMCs) with a glut of new containers jockeying for market share with non-asset IMCs.
According to the Intermodal Association of North America (IANA), domestic intermodal demand is slipping, with volumes down -10% between March and September. Norfolk Southern Railway reported its domestic loads fell -4% year-over-year in the third quarter, while Union Pacific said its domestic volume fell -3% and parcel shipments on intermodal trains plunged -16% in the same period.
Trucking is providing tough rate competition in a way it hasn’t in years and there are several lanes where the competition is heated. From Atlanta to Elizabeth, New Jersey, for example, an average intermodal contract is saving shippers about $375 per container today, according to the JOC Intermodal Savings Index. If truckload contract rates fall -8% and intermodal providers attempt to raise rates 3%, then the rail option saves less than $100 per container. Other lanes with the stiff truck competition are between Atlanta and Dallas, Chicago and Charlotte, Chicago and Dallas, and Los Angeles and Seattle.
For longer hauls, intermodal shippers should still find significant discounts using intermodal. The JOC Intermodal Savings Index finds most long-haul lanes save at least 25 to 30% compared with trucking, and some save more than 40%.
Source: Journal of Commerce
