Larry Gross, president and founder, Gross Transportation Consulting, and JOC analyst | Apr 12, 2022 11:45AM EDT

Service meltdowns in various terminals have helped prevent the North American intermodal sector from regaining its footing, writes JOC analyst Larry Gross. 

We are fast approaching an important turning point for domestic intermodal. As I predicted back in November, it appears that the supply chain tightness is beginning to break, at least on the domestic side. Dry van spot rates are falling fast and will soon move below prior year, a clear signal of a changing supply/demand imbalance.

While the intermodal picture is dominated by import/export flows and ships are still accumulating in queues awaiting berths for unloading, keep in mind that this market is considerably smaller than the domestic truckload market. Competitive conditions for domestic intermodal are going to get more challenging, and soon.

This year was expected to be a year of rebuilding for domestic intermodal, with recovery of some of the significant share losses experienced during the supply chain disruptions in recent months. But so far it isn’t working out that way. One of the reasons may be the inability of the sector to regain its footing in terms of service.

The current available metrics covering intermodal service are of what I call the “candle in a dark room” variety. In other words, they are better than wandering around in the pitch black but not sufficiently bright to be particularly useful. The Surface Transportation Board average train speed numbers can provide a general indication of how well the rail network is performing and whether line-haul operations are melting down. But when you are flying, you are not particularly interested in whether your plane is going to average 540 mph or 550 mph. You are interested in whether it will take off on time, land on time, and whether you will be in the seat that you reserved when the plane leaves the gate. Existing intermodal service metrics don’t generally provide this info.

In particular, existing metrics don’t deal with the terminal, where most of the current problems lie. Will my container make it onto the intended train, or will it be rolled into a later departure? As a trucker, how long will it take me to get in and out, including not only the gate-to-gate time but also any time spent waiting in a queue to get in? When the train arrives at its destination, how long will it take for my container to be grounded and actually be available for pickup?

Metrics not reassuring

Despite their manifest shortcomings, these metrics can still serve a purpose, so let’s take a look. The news isn’t reassuring.

Normally, when volume goes down on the North American rail system, train speeds go up, but not in 2022. Although North American carloads and intermodal units originated were down 3.4 percent in the most recent four-week period, train speeds have been heading south, and most recently fell to the lowest point seen in the past five years. Meanwhile, the number of intermodal trains being held (for lack of power, crews, or other causes) has skyrocketed in the past 10 weeks and is also approaching record levels, far worse than the prior year and five-year average. Similarly, the number of loaded intermodal cars that have not moved in the previous 48 hours also reached a new record.

Meanwhile, the press continues to receive reports of service meltdowns in various terminals, with a multitude of causes being specified, including lack of manpower, chassis, lift machines, and so forth.

We are fast approaching the two-year mark since the pandemic lockdown trough, when the post-pandemic surge began, and the seeds of intermodal’s service crisis were planted. There has been plenty of blame to go around, but it’s time for the intermodal sector to look in the mirror. Other participants are making progress, but for the North American intermodal sector, service gains have been hard to come by and harder still to sustain.

Up until now, that hasn’t been an issue from a volume perspective, because shippers were desperate to get cargo moved by any means possible and the intermodal sector had access to all the business it could handle. But that is no longer the case. With alternatives becoming more available by the day, we can expect the current service situation, if it continues, to really start to bite.

Private container fleets have made significant bets on growth in the most concrete terms possible — with their wallets — in the form of perhaps 50,000 new boxes being added to the fleet between last year and this. The freight is certainly available to fill those boxes. Whether that happens will depend to a significant extent on whether the sector can get its service situation under control in the very near future.