U.S. Class I railroads have largely arrested declines in average intermodal train velocity and lengthening terminal dwell times, but they’re doing so by punishing shippers for tendering surge and spot volumes.
Union Pacific has imposed surcharges of $5,000 on spot intermodal containers outbound from California because previous rate hikes were not enough to dissuade shippers who desperately need transportation from West Coast ports to the middle of the country.
Our sense continues to be that intermodal volumes could be much higher on a year-over-year basis, but the rails are managing for yield, not volume growth. The West Coast will be a mess for the foreseeable future: The real question is whether equipment misallocation and rate volatility will spread to other markets. Surging spot rates on the backhaul lane from Chicago to Los Angeles suggests this may already be happening.
In our view, pressure on intermodal providers will ease before trucking slows down. Intermodal volumes are typically soft in December, after most new inventory has been on-shored and ingested into distribution networks.
Members Only
You have selected content that's only available to members of FreightWaves Passport. As a member, you gain immediate access to the most in-depth and informative freight research available. It's your gateway to continuing education.
Members also get:
- Access to exclusive community dedicated to discussing the most important challenges facing freight.
- Monthly and Quarterly Freight Market reports keeping you informed of industry trends.
- Much, much more!
Click below to learn more and sign up today!
Subscribe
Existing Passport subscribers may log in using the form below.