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It was good news for the intermodal rail industry when the Intermodal Association of North America (IANA) published its November 2010 report informing that overall intermodal volumes increased 20.3 percent year-over-year during the third quarter of 2010. International intermodal volumes led with a 28.1 percent upsurge, while domestic intermodal volumes hit a new, all-time peak at 11.7 percent year-over-year. The report further stated that “with the resurgence in international intermodal and continued gains in domestic containers, intermodal shipments are well on their way to regaining the ground lost during the recession.”
A resurgence underway?
So, does this mean a real resurgence is underway in intermodal, and can the industry finally begin to breathe a sigh of relief? Some say ‘yes’ enthusiastically, while others like Steve Branscum caution taking a longer view of industry trends.
“I wouldn’t say that this indicates a resurgence,” says Branscum, Group Vice President of Consumer Products for BNSF Railway in Fort Worth, Texas. “Over the last 30 years, intermodal has been growing steadily, with periodic ups and downs. I think the recent IANA report simply indicates how intermodal is recovering from the recent recession and how it is continuing its long-term trend of growth.”
While this is true, the volumes reported are being met with enthusiasm. “It absolutely looks like a resurgence,” believes Mark Yeager, President and COO of Hub Group in Downers Grove, Illinois. He notes that the industry began to gain momentum as early as the end of 2009. “And, that momentum was ahead of the trucking market, which is quite unusual. Normally, intermodal trends trail trucking trends, and the positive momentum we saw in November and December of 2009 continued throughout 2010. International grew faster than domestic, but domestic nonetheless was posting very strong high single, low double-digit growth, which is a very positive sign for the industry.”
Yeager adds that this unusual momentum for intermodal-ahead of the trucking industry-is an indication that shippers are attempting to develop a real intermodal product as a part of their overall supply chain strategy.
“I think if you talked to 10 shippers, you would find that eight of them would tell you they have a conscious program in place to convert freight from truck to intermodal.” He adds that there is still a lot of room left for conversion, as most shippers are not yet at a point where they feel they are using the rails as much as they might.
“But when they look at long-term trends in terms of cost as they plan their supply chains for a three- to five-year horizon, most believe trucking costs-relative to intermodal costs-will rise faster and that the current truck pricing environment is not sustainable. They believe they are likely to find a more stable pricing environment on the intermodal side; and right now everyone is looking for stability.”
Shippers are also looking for reliable, efficient, and ‘green’ solutions, and intermodal has increasingly been demonstrating itself as a credible option able to provide these demanding transportation solutions. Yeager points out that maintaining intermodal’s current strength will depend heavily on the industry’s ability to continue offering reliable rail service.
“We’ve seen good, solid rail improvement recently and this is absolutely critical for people who are considering conversion from truck to intermodal,” he acknowledges.
In fact, for shippers who are considering that conversion, Pacer International, Inc. (www.pacer.com) recently launched a Smoother Moves Calculator that enables shippers to estimate the value of switching from truckload to Pacer intermodal services. The interactive Web-based tool allows users to choose their origin and destination city pairs, commodity type, and shipment quantities for their current truckload lanes. The calculator then provides immediate feedback on the estimated dollar savings, carbon emission reductions, and transit time differences associated with switching to Pacer’s intermodal services.
Shippers will not risk using rail if they aren’t completely confident in intermodal’s underlying service, Yeager states. “And, right now they have good reason to believe in its reliability because of intermodal’s ever-expanding footprint through the development of new terminals and new services offering door-to-door, on-time performance in the high 90s. The industry’s positive trend is creating a lot of believers in the shipping community.” In addition, the value proposition is contributing to the growing number of believers.
Let’s take a look at some of the underlying causes contributing to intermodal’s strong and sustained momentum over the past year. Certainly, service interruptions that had long plagued the industry are pretty much a thing of the past. Today’s service levels are on a par with truck service, and some railroads tout their intermodal product offers single-driver, truck-competitive service. Shorter-haul lengths and difficulties facing the trucking industry are also contributing to intermodal’s attraction.
One major factor contributing to intermodal rail’s growth is what Branscum refers to as the maturing of the national intermodal network. “By this I mean that the railroads have become more sophisticated about where they offer their services. The rail industry has created a network of high-density lanes-allowing for more capacity and faster, more consistent service and proven economic benefits. Because of these benefits, there is a force among shippers to get railroads to expand their intermodal networks into markets with shorter lanes. But this is at the risk of the density that is fundamental to an efficient intermodal network.”
Union Pacific Railroad (UP) reported an all-time record of 9 percent growth in domestic shipments in 2009. “This was despite operating in an economy that, arguably, was the worst in a long time,” says Tom Lange, Director of Corporate Communications for the Omaha-based company. He adds that in 2010, UP’s domestic intermodal business is up about 23 percent. “About 70 percent of that growth came from lanes where we offer single-driver, truck-competitive service.”
In years past, the traditional length of haul was between 800 miles to 1,000 miles, notes Lange. “At those lengths, we were able to provide intermodal service at a value that our customers recognized. But more and more we are bringing that number down to around 600 miles, which opens up a lot more opportunities for us to compete with single-driver trucking.”
The trucking industry certainly has a full plate these days, and some of its woes translate to intermodal’s gains. “The number of issues facing the trucking industry is making it more and more difficult for as many goods to be moved exclusively by truck,” notes Branscum at BNSF. Stricter regulations, including hours of service and CSA-2010, the cost of insurance, rising fuel prices, and the scarcity of capital for purchasing new equipment are all making it more difficult for trucks alone to be the sole option, he adds. “The solution is more intermodal. It benefits shippers, railroads, and on BNSF it also benefits motor carriers.”
One area BNSF is watching closely is its refrigerated and perishable food products segment. “This portion of our business is the fastest-growing in our intermodal business in terms of percentage growth year-over-year,” Branscum reports. “Although it is still relatively small compared to our non-perishable goods business, it is growing very quickly.”
Hub is experiencing a lot of growth in local east freight-that is, intermodal movements traveling strictly on an eastern network. “In our case, it’s mostly on Norfolk Southern (NS) lanes connecting the Midwest to the Northeast and Southeast,” explains Yeager, adding this market is still in its infancy. “Market penetration for long-haul transcontinental and traditional intermodal is much higher by a multiplier of three or four.” So there is still a lot more room for growth in this market, as about 95 percent of freight moving in this region continues to be transported by truck. “Once you see NS implementing its Crescent Corridor strategy, you will see a higher incidence of truck-competitive intermodal service in the East.”
Furthermore, the availability of critical information using advanced IT systems is helping to improve the credibility of the intermodal rail product, continues Yeager. “Rails are getting a lot better at being able to communicate ETAs, which improves the pickup and delivery process for door-to-door reliability.”
Intermodal 2.0
All of these activities creating reliable and efficient intermodal rail service are being played out against the backdrop of what Gil Carmichael calls Intermodal 2.0. Carmichael’s contagious enthusiasm over intermodal rail is nourished by his deep knowledge of and long tenure in the railroad industry. He is the founding chairman of the board of directors of the Intermodal Transportation Institute at the University of Denver, a former Federal Railroad Administrator, and a former chairman of the Amtrak Reform Council.
If Intermodal 1.0 was about the development of the interstate highway network, Intermodal 2.0 is all about a unified and holistic high-speed, grade-separated passenger and freight intermodal transportation network that connects rail to cities, ports, and airports. It proposes using current rights-of-way (ROW) to construct an additional 30,000 miles of grade-separated track on these existing (and paid-for) federally designated ROWs, which would enable high-speed freight and passenger service. Carmichael says the average freight train now has a difficult time achieving 15 mph to 20 mph. “By building 30,000 miles of grade-separated track on the current ROW network, we can see freight trains move at 90 mph and passenger trains at 120 mph. We could make the trains longer while increasing their speed considerably. We have the technology now to operate these faster trains safely.”
He points to the safety record of overseas applications of high-speed passenger trains. For example, Japan has been operating high-speed passenger trains for over 44 years, carrying over 9 billion passengers without a single train-related fatality. France’s high-speed trains have operated for more than 27 years, carrying over 100 million passengers annually without any train-related passenger fatalities.
During the last century, explains Carmichael, the transportation system was built in modal silos that included a highway system, a railway system, and an airway system. “Now in this century, we will build a horizontal transportation system that seamlessly connects all modes of transportation.” The high-speed, multiple-track passenger and freight rail network would link ports, highways, and airports throughout North America.
Carmichael is encouraging Congress to allow railroads a 25 percent investment tax credit to expand their operations using their current ROWs. “By allowing the railroads such a tax credit, they will be able to double their investments in upgrading their systems, which means that we can have a beautiful intermodal freight and passenger system in about 15 years.”
Work is progressing throughout the country on various links in this massive network, explains Carmichael. “Currently we don’t have any rail access in our airports and the Federal Railroad Administration is now studying a national rail plan to determine which airports will have rail stations in them,” he says. “Imagine having a system like the one in Europe, where when a passenger train pulls into Charles de Gaulle Airport it has about 600 people onboard who then load onto the big new airplanes. Without that ‘plane-to-train’ intermodal network operating in the US, it would take many commuter plane slots to do the same job.”
Carmichael reports that many more people are beginning to view intermodal as a new transportation science, whose goal it is transportation systems that will enable the seamless movement of freight and passengers from one mode of transportation to another. “Just about every company involved with freight transportation now has an intermodal vice president onboard,” he says.
Ongoing infrastructure investments
Here’s a peek at just a few of the investment-intensive projects currently ongoing to strengthen the national intermodal rail network. The three areas in intermodal rail requiring ongoing capital investments include facility, track, and equipment, notes Branscum at BNSF. “We have invested significantly in facilities primarily on the east end of our network, which is basically a line that runs north-south along the Mississippi River. Since 1995, we have spent over $30 billion in capital to build new facilities and new track infrastructure, and to purchase new equipment including locomotives and railcars.”
BNSF’s newest terminal-capable of handling 1 million loads annually-opened earlier this year in Memphis, Tennessee. Its Logistics Park-Chicago terminal opened about eight years ago and is one of the largest intermodal facilities in the country, according to Branscum. “One of the key corridors within our network is our Transcon Corridor that traverses from southern California to Chicago. Over the past 10 years we have been in the process of building capacity by double-tracking and triple-tracking that entire route.”
Over the past six years, UP has invested about $17 billion in its rail network supporting intermodal rail, says Lange. Just this past August, the railway opened its brand-new $370 million, 785-acre intermodal terminal in Joliet, Illinois. “This state-of-the-art terminal is in a great location to support east-west and north-south moves. Its ten lanes and automated gate system keeps trucks moving more efficiently than ever before.” Four 8,000-foot-long loading tracks have the capacity to handle 104 intermodal double-stack rail cars at a time. Six 8,000-foot-long tracks stage rail cars for loading. The six-track classification yard enables train crews to sort rail cars by destination. Four cranes-equipped with GPS steering for enhanced productivity and performance-straddle rail cars to lift trailers and containers on and off the rail cars. The terminal is capable of handling 500,000 trailers annually.
Meanwhile, CSX will open its new 500-acre Northwest Ohio Terminal Facility in 2011. The terminal will operate on 24,000 feet of working track, maintain an additional 100,000 feet of block-swapping track, and include wheeled parking for about 280 units. The terminal will handle 25 trains daily, moving 630,000 containers and trailers annually. Five wide-span cranes will service eight tracks, two straddle lanes, one truck lane and five container stacks-four high. These cranes are highly efficient and will reduce energy consumption, improve efficiency, and reduce emissions.
Future perspective
For its part, Hub Group does not perceive the IANA report on intermodal volume increases as a temporary blip, says Yeager. “Not by any means, as long as the underlying rail service is there to support the volumes. If the railroads viewed this as a temporary uptick, they would not be making the significant investments they are making in their intermodal networks.”
Yeager believes intermodal rail has a positive outlook. “We think it will outpace the growth of GDP, certainly. We should see high single-digit to low double-digit growth over the course of the next five years, provided we have some sort of a normalized economy-this is a critical element. We see that the most sophisticated purchasers of transportation in the U.S. are using intermodal rail as part of their overall supply chain strategy.”
As a backbone to intermodal service, the railroads have really honed their intermodal networks and they are learning how to develop these systems to create a large national network of key intermodal corridors, notes Branscum at BNSF. “The ongoing collaboration between the trucking industry and the rail industry will drive more and more freight to intermodal. If you look at the list of the top 100 trucking companies in the country, virtually all of them use our network. So I think the future looks very, very bright for intermodal rail.”
It is encouraging that the rail industry received about $8 billion from the recent stimulus program, indicating a federal government commitment to a solid future for rail intermodal, Carmichael says. “The old, traditional transportation systems of the last century are morphing into a completely new holistic transportation system called intermodal,” he says. “If the interstate highways were the big achievement during the last century, the railroads will be the greater achievement for this century. They truly represent the new technology for the 21st century.” wt
Contributing writer April Terreri writes frequently on a variety of transportation and logistics issues.
Sidebar: Raildecks Offers Intermodal Option for Heavy Industrial Freight
Before now, if you were a shipper needing to move very heavy, awkward industrial freight, you were limited to using over-the-road truck transportation. Commodities such as steel pipe, beams, rods, and wood products traditionally relied on flatbed as their primarily transportation mode. This type of freight just didn’t fit well into a standard domestic intermodal container. But, that has all changed and shippers now have an intermodal option that moves at truck-like speeds.
Canadian-based Raildecks provides a dual-purpose 53-foot collapsible, stackable, multi-access container that operates as a double-stacking intermodal container for open-deck freight transportation, explains Dennis Hedlund, director of U.S. operations. “Raildeck containers are capable of carrying up to 60,000 pounds in payload, and offer loading access from the top, sides, and rear of the container,” he says.
The product is a container without sides or a roof, continues Hedlund. Two sets of posts on the deck provide structural support. Since the Raildecks solution is designed for double-stacking intermodal transport, the posts were engineered to absorb the weight of the second containers. “The problem in the past were that these posts that had been in the way for loading bulky freight, which means there was a large portion of the deck space that could not be loaded,” he says. Specially designed controls now move those posts out of the way for loading. The rear bulkhead is equipped with swing freight doors to facilitate loading and unloading, similar to dry-van loading.
The equipment arrives at the shipper looking like any other container in the sense that it uses a standard chassis and that you load it like a regular flatbed truck. “We spend a lot of time working with draymen to assure everything is secured properly,” says Hedlund. “Then the container moves to the railroad ramp just like any other container and a crane lifts it and places it on the intermodal train. It arrives at its destination and is then delivered like a regular flatbed shipment.”
After an eight-month pilot test with Class I railroads, shippers, and motor carriers, Raildecks plans to launch the first commercial version of the equipment by the second quarter of 2011.
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