Intermodal Markets: Starting to look cheap again

Intermodal volumes and rates are weak compared to 2019, which was weak compared to 2018. That fundamental picture hasn’t changed, but it now appears that activity in trucking markets is providing some lift to intermodal. Intermodal volumes last week were down just 7.3% year-over-year (y/y), substantially better than the four-week moving average of -11.4%.

As further evidence that trucking tightness and pricing are affecting shipper mode selection, intermodal volumes and rates are strongest where trucking was strongest, namely Los Angeles. Truck-intermodal spreads opened up as truck rates out of Southern California surged. 

On a national basis, large, asset-based truckload carriers are rejecting 6.73% of tendered loads, a number that keeps going up; the rejection rate out of LA is 9.64%, and spot rates from LA to Dallas are $2.04 per mile, roughly the benchmark where intermodal can find some support.

The challenge of rebalancing container assets across rail networks will continue for the midterm as demand grows unsteadily and global trade continues to be choppy. Average train velocities have already started to slow and will likely slow further as volumes return. If dwell times become an issue, we have the ability to report on dwell at the terminal level and will do so if intermodal service levels become an issue.