Intermodal Features

Intermodal’s Rising Star

March 3, 2014
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Intermodal traffic is a bright spot for the railroads. A recent report from the Association of American Railroads indicated that intermodal set a new record for traffic in August 2013. It totaled 1,031,179 containers and trailers, up 4.4 percent (43,398 units) compared with August 2012. For the first 35 weeks of 2013, U.S. railroads reported cumulative volume of 8,520,242 intermodal units, up 3.6 percent from last year.

Analyst John Larkin, managing director, Stifel Transportation & Logistics Research Group, notes there may be a change to the current intermodal container growth forecast as Union Pacific noted that they believe a three percent share shift is likely to result from the larger Panama Canal locks. This change would favor east coast ports. Larkin adds that he thinks any change would be in the one percent range.

Larkin also mentions that the 18,000 TEU ships cannot fit through the expanded Panama Canal but would travel the Suez Canal which does not have lock constraints. This would favor the East Coast ports. “International traffic is not growing at nearly the same rate as the domestic 53-foot container business, much of which is highway conversion or transloading container freight for the inland move,” notes Larkin.

“We have seen our port traffic fairly steady in the first quarter of the year but there has been a slow down since then,” say Ed Elkins, Norfolk Southern’s group vice president, international intermodal marketing. He adds, the Southeast is doing well with stronger West Coast volume as well.

The NS is always reviewing landside access at ports to insure that they are as efficient as possible and Elkins points to the fact that both the Charleston and the Virginia ports are served by double-stackcapable corridors. In addition, NS has on-dock rail in Virginia.

“Another international area where we are experiencing success is between the South East and Mexico as part our Crescent Corridor operated in connection with the Kansas City Southern over the Meridan Speedway,” says Elkins.

Over and above international traffic, Elkins clearly sees a trend to include intermodal in the mode plans of shippers. “We have found that shippers are now making intermodal a key piece of their load planning with wider use by more firms,” reports Elkins. He adds the NS has a team whose task it is to acquaint the “beneficial owners” with the advantages of intermodal which is paying off with more business.

As part of NS’ commitment to intermodal, Elkins notes that they have opened five new intermodal terminals in the past two years. In some cases, this was done to relive congestion at older facilities and the new terminal locations get the NS closer to the customer, reducing drayage costs. In addition to the Crescent Corridor, the NS also has two others, the Heartland and the PanAm corridors.

The Heartland Corridor is a $190 million public-private partnership with the NS, the Federal Highway Administration, and three states to allow double-stack trains between the Norfolk, Va., ports and Chicago.

The Patriot Corridor, a joint venture between Pan Am Railways and NS, created an improved rail route between Mechanicville (Albany), N.Y., and Ayer, Mass. C. Doniele Carlson, assistant vice president, corporate communications and community affairs, Kansas City Southern Railroad says that volume from Lazaro Cardenas has slowed year over year as Trans Pacific traffic has weakened and steamship lines have consolidated calls at Mexican ports.

“Traffic has leveled off and we are optimistic that volume will slowly return with the installation of five new waterfront cranes at HPH terminal. She adds that the railroad should initiate service at Veracruz utilizing the new direct access rail route once it is completed in 2014. Carlson adds that KCS is very excited about the work it has been doing to improve the speed and efficiency of the customs clearance process that will lead to same-day customs clearance. She thinks that once this is achieved, it will remove significant transit and equipment cost from each cross-border move.

The truckload market is service-sensitive, so the anticipated twoday improvement will have an impact on the size of the convertible market. “Overall, our intermodal business has been strong” says Carlson, “and cross-border franchise volume has been the shining star. But cross-border international volume from Lazaro Cardenas to the U.S. and auto part volumes have also been strong.

The KCS continues to expand its facility at Rosenberg Intermodal Terminal, a 100- acre site just outside Houston. The move will accommodate growing volume to and from Mexico. Recognizing the effect of drayage costs, Carlson also notes that the KCS owns real estate adjacent to most terminals in their intermodal network and plans to encourage companies that would benefit from adjacency to locate there. Including Inland Ports Gary Sease, CSX spokesman, points out that CSX serves more than 70 ocean, river and lake ports and container traffic is likely to be one of the major contributors to the company’s growth. The company is working with the ports on the East and Gulf Coasts.

On the Gulf, they expanded and improved their infrastructure in advance of the expansion of the Panama Canal, investing in on-dock terminals and ensuring efficient connectivity to key points. Sease notes CSX plans to invest $2.3 billion this year into its network, equipment and technology, on top of $8 billion invested in the past four years. Those investments to expand track and terminal capacity, purchase fuel-efficient locomotives and higher capacity rail cars, and technology that support safety, service and efficiencies, create the inland connectivity that ports need to be successful. Intermodal traffic currently represents 38 percent of CSX volume, says Sease. CSX affiliate CSX Intermodal Terminals, Inc. completed expansions of the Worcester, Mass. and Columbus, Ohio facilities this year, and expansions are under way in Atlanta and Louisville, Ky.

CSX Intermodal Terminals also is developing new facilities, including the Valleyfield Terminal in Montreal and a terminal in Winter Haven, Fla. CSX’s National Gateway has recently announced completion of the clearances in Phase One of the project, between existing terminals in Chambersburg, Pa., and its hub in Northwest Ohio which handles more than 30 trains per day.

Improving Results Katie Farmer, BNSF group vice president, consumer products, says BNSF, in its effort to grow its intermodal business, has had 110 different shippers analyze their “Over the Road” flows, looking for conversion opportunities by using its “Intermodal Advisor” tool. After reviewing five million moves and determining one million fit its existing intermodal network, they have converted over 110,000 shipments so far this year.

As part of this effort, BNSF has set up its Load and Ride Solutions (LARS) team to help its customers find cost-effective methods to ensure shipments move damage free. This can include Cargo Incident Prevention to minimize cargo damage and provide recommendations to prevent a reoccurrence; Loading Assistance to provide shippers the ability to facilitate safe movement of restricted commodities and Ride Quality Testing to monitor shipments during train and yard handling to promote safe and incident-free movement.

BNSF’s expansion and efficiency projects will be primarily focused on increasing capacity including its intermodal terminals such as the completion of BNSF’s Kansas City Intermodal Facility and at other terminal improvements as well. Farmer notes that they are using wide-span electric cranes in Memphis and Seattle which will also be used at the Kansas City Intermodal Facility. Not only are these cranes zero emissions, they also use regenerative systems to recharge their internal batteries and significantly reducing the number of trucks needed to move containers within the rail yard. BNSF was the first U.S. railroad to use these systems.

Automated gates are used at nine BNSF intermodal facilities with digital cameras recording images of containers, chassis, tractors and unit numbers as they enter those facilities. These new gates have increased facility throughput which has reduced truck-idling time and air emissions by 50 percent. BNSF offers international customers multiple levels of service, based on whether they want faster transit times or greater cost savings.

BNSF’s Intermodal On-Dock Expedited service has reduced transit times by 1 to 2 days over the standard intermodal service so that, for example, containers from the Ports of Los Angeles/Long Beach to Logistics Park Chicago can arrive in just 87 hours. Farmer points to BNSF’s “Match Back” program as one method they have developed to deal with the problem that U.S. imports outpace exports by a nearly 2-to-1 ratio. This is designed to help the marine carrier address that imbalance by finding more markets to offset container repositioning costs.

The “Match Back” program loads those containers with commodities like grain, cotton and recycled paper. As an example the BNSF identified increased demand for high protein products in Southeast Asia and, working with an ocean carrier to match the opportunity to their surplus equipment, achieved significant cost reductions. The result was five double stack trains with over 200 loads each loaded back west to the ports for export. Most of the dialog about the Panama Canal is centered on a shift in retail goods produced in Asia moving to the U.S. East Coast versus the West Coast.

Farmer believes economics alone will not create a major shift and that any significant shift in allwater has already occurred. BNSF’s expedited network provides the fastest intermodal service in the industry averaging around 800 miles per day. This level of service is competitive on a rampto- ramp basis with single driver-over-theroad service. BNSF continues to focus on developing supply chain solutions that meet their customer needs.

The largest component of the 2013 capital plan is focused on BNSF’s core network and related assets. BNSF’s expansion and efficiency projects include capacity expansion such as the completion of BNSF’s Logistics Park Kansas City (LPKC) which will encompass 433 acres and has an initial lift capacity of 500,000 with the ability to scale to 1.5 million lifts.

Farmer says BNSF has a new 500,000 square foot warehouse in the business park and that warehouse is planned for occupancy during the fourth quarter of 2014. DeLong Grain DEMDACO, a large home décor and gift manufacturer, signed an agreement for a build-to-suit facility that should be ready in the spring of 2014. Joanne F. (Joni) Casey, president and CEO of the Intermodal Association of North America, comments that, based on monthly trends thru midyear, IANA expects domestic intermodal to continue its steady growth with slightly higher than the usual year-to-date increases thru October — with domestic containers at 10 to 12 percent then tapering slightly to 8 to10 percent for the remainder of the year.

Casey thinks that international volumes will grow at better than the 2 to 3 percent as was experienced in the first half of the year. The projected increases reflect actual growth as well as shifts from long haul trucking. “We see intermodal growing but nothing dramatic; with domestic containers showing most of the growth,” says David Yeager, Hub Group’s chairman and CEO. Drayage has always been a problem with intermodal so Hub has moved aggressively into this arena to insure a high level of service.

“We now 2,800 drayage drivers, 400 company and 2,400 owner/operators and we could use more,” says Yeager. He adds that this is a tight market but thinks some over the road drivers will come over to drayage they are home every night and the pay scales are similar. Hub Group has a fleet of 26,000 containers because their customers requested that they take this step, but this has necessitated some changes in Hub’s operation. “Now that we have assets, we have had to start managing by looking at lane balance, utilization and, turns,” said Yeager. He adds that they average about 13 days per turn, much higher than the industry standard of about 20 days.

Another area which is showing growth is inland ports. Inland Ports are a relatively new concept. The Transportation Research Board has defined them as “... a site located away from traditional land, air and coastal borders with the vision to facilitate and process international trade through strategic investment in multi-modal transportation assets and by promoting value added services as goods move through the supply chain.”

One significant factor in intermodal is the ability to compete with trucks is the cost of drayage. As John Larkin points out, lower drayage costs allow intermodal to compete with truck for shorter hauls. All the inland ports have made provision to provide space for distribution facilities and many of the “Big Box” stores have taken advantage of this. While Port of Virginia’s Virginia Inland Port was one of the first, it certainly was not the last.

In addition to Greer, S.C., the CenterPoint Intermodal Center, billed as “North America’s Largest Inland Port”, is located south of Chicago near the intersection of I-80 and I-55. The 6,400 acre site has both the Union Pacific’s Global IV Intermodal Terminal and BNSF’s Logistics Park Chicago in close proximity and there are several distribution facilities in the port. Intermodalism was slow to gain recognition with U.S. railroads, but current trends make it a rising star in transportation.

Continued investment by railroads, ocean lines, ports, and even previously non-asset 3PLs will ensure service levels continue to improve and other issues are addressed. The focus on property developers on bringing logistics parks — and intermodal capacity — to ports and inland sites reinforces the rise of both domestic and international intermodal. The only question appears to be when “intermodal” becomes a transportation mode of its own… and what it will be called when it does.

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