The national average intermodal spot rate of $2.45 per mile fell 4.3% last week. However, the drop came off of an all-time high in our data series of $2.66 on Dec. 20, 2020. Fundamentals such as strong containerized imports (on both coasts) and tight capacity on the rails are intact.
Operational issues like widespread bottlenecks caused by high volumes, lack of space, imbalanced container flows and labor shortages have no easy fix and will take time to solve. The tight intermodal capacity was signified by national intermodal tender rejections of 2.9% this week, down 178 basis points week-over-week but still up 130 basis points year-over-year. Intermodal tender rejections across major markets were mixed as they fell sharply from historic levels in Los Angeles, Memphis, Tennessee, and Savannah, Georgia, this week, which was countered by sharply higher rejections in the Midwest as capacity issues geographically ripple through the system.
As Bascome Majors pointed out in his weekly rail update Wednesday, consistently rising and robust expectations for truckload contract pricing (with the majority yet to come) is a positive catalyst for intermodal in 2021. As Majors noted, “For rails and IMCs? Given the expectations for consistent positive [truckload] rates into the near future, intermodal volumes, pricing and margins seem increasingly likely to recover through 2021.” This factor may be what Citigroup saw on the horizon for intermodal when it upgraded J.B. Hunt to “buy” Wednesday.
Week 53 Class I intermodal volumes decelerated to 10.7% y/y growth (below the four-week moving average 12.5% and last week’s 20.8%). Average dwell times continue to slowly come down from their July 2020 peak.
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