Intermodal markets: Holiday noise doesn’t reverse uptrend

Year-over-year intermodal volume comps were soft last week due to noise from Labor Day, which fell in Week 36, not Week 37, last year. Industry observers shouldn’t miss the forest for the trees, though: Container imports into the West Coast were exceptionally strong in July and August, trucking capacity remains very tight, and consumer freight demand should strengthen into the fourth quarter.

Meanwhile, average intermodal train speeds are slowing: The blended average speed for Class I intermodal trains is just over 30 mph, its lowest level of 2020. At this point, we don’t expect meaningful improvements in capacity availability or network fluidity this year.

Last week at an investor presentation, Norfolk Southern Chief Marketing Officer Alan Shaw said that he believes retailers’ renewed emphasis on forward-deployed inventory will generate further demand for intermodal transportation. Because NSC has the largest intermodal network on the East Coast, he believes the railroad is in a good position to capitalize on those long-term growth trends.

Aside from Norfolk Southern’s recent comments, we’ve seen little evidence that railroads are seriously planning for robust intermodal growth. That may change, depending on how effectively the Western rails were able to manage revenue and margin on the West Coast.