The national average intermodal spot rate of $1.86 per mile fell sharply by 12.3% last week, continuing the multi-week slide off of highs as congestion issues began to improve and Union Pacific dropped surcharges. Spot rates are not falling due to demand as Week 2 Class I intermodal volumes accelerated to 12.8% y/y growth (above the four-week moving average 12.5% and last week’s 10.4%).
However, J.B. Hunt (JBHT) made it very clear on its earnings call that operational issues such as widespread bottlenecks caused by high volumes, lack of space, imbalanced container flows and labor shortages wreaked havoc on its intermodal division’s performance in Q4. As a result, JBHT was not able to grow its intermodal volumes in Q4 despite extremely heightened demand. These issues have no easy fix and will take time to solve, but there are green shoots starting to appear. One example is the fact that JBHT volumes improved sequentially each month through the quarter and it plans to add intermodal container capacity in 2021.
We have included a detailed breakdown of JBHT’s Q4 intermodal results and associated read throughs for the industry. JBHT is reviewing its long-term intermodal margin targets as it faces rapidly rising input costs (drayage, driver costs, rail costs, insurance, etc.) that it will have to try to claw back in forthcoming customer negotiations for 2021.
Intermodal capacity remains extremely tight by historical standards and jumped 148 bps this week to 4.16% nationally.
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