Intermodal Adds Value

Like many logistics functions over the past few years, the intermodal market has faced several significant challenges. At the same time, these challenges offer an opportunity, and intermodal transportation remains a valuable element in many organizations’ logistics operations.

Challenges Impact Intermodal Volumes

As of late April 2023, intermodal volumes were off the five-year average by approximately 28,000 carloads per week, says Todd Tranausky, vice president, rail and intermodal with FTR Transportation Intelligence.

A big reason is the drop in imports, and particularly those arriving at the West Coast, where more imports leave via rail. During the first three months of 2023, the Port of Los Angeles handled about 1.8 million twenty-foot equivalent units (TEUs), down 32% from 2022, which was the best first quarter in the port’s history.

Conversely, over the past few years, the ports in the southeastern and northeastern regions of the United States have gained modest amounts of market share, Tranausky says.

This matters to the intermodal market, as imports arriving in, say, Savannah or New York, must travel only about 500 miles to reach midwestern markets, while those coming from the West Coast might travel a few thousand miles, making rail more competitive.

Approximately 85% of imports arriving at the Port of New York and New Jersey leave via truck, while about 85% of those leaving the ports at Los Angeles and Long Beach travel via rail.

The diversion of cargo away from the West Coast is likely to last at least until the labor contract situation at the West Coast ports is resolved, Tranausky estimates.

The longer the impasse continues, the more likely shippers will have developed relationships at other ports, “making it harder to just flip a switch and go back,” he adds.

Reduced buying by retailers, many of which are holding high levels of inventory, means lower import numbers, says Shelli Austin, chair of the Intermodal Association of North America and president and co-founder at InTek Freight & Logistics. The value of imported consumer goods dropped by $3.7 billion in February 2023, the U.S. Bureau of Economic Analysis (BEA) reports.

Factors internal to the intermodal market also have affected its performance. When volumes roared back after the pandemic lockdowns, the intermodal market was able to cope for a time. Then equipment shutdowns and chassis shortages interrupted operations.

With fewer chassis on which to place containers, the system slowed.

“Intermodal was capacity-limited at a time when demand was surging,” says Larry Gross, president and founder, Gross Transportation Consulting.

In the meantime, the over-the-road trucking market was scaling up to meet demand, Gross says. The result? Intermodal lost market share to the truck market.

More recently, the challenges have flipped. Among other changes, the domestic container fleet has grown by about 12% and equipment velocity has improved, “creating capacity out of thin air,” Gross says.

Yet demand is down. The shift benefits shippers, but isn’t as positive for the intermodal ecosystem.

Recent train derailments, like the one in East Palestine, Ohio, have “shined a serious light on the rail industry from both an infrastructure and a regulatory standpoint,” says Michelle Comerford, project director and industry and supply chain practice leader at Biggins Lacy Shapiro & Co., a site selection and incentives advisory firm.

Taking Another Look at Intermodal Solutions

The Association of American Railroads says that more than 99.9% of all hazmat moved by rail reaches its destination without a release caused by a train accident.

In addition, the Biden administration has been pushing for greater investment in infrastructure, including in the nation’s rail systems. In June 2022, the administration announced $368 million in grants to improve rail infrastructure and strengthen supply chains.

Even for most truckloads traveling 500 miles or more, intermodal’s market share is less than 10%. “It’s small, but it can be a very useful tool,” Gross says. “It’s time to take another look at intermodal.”

For shipments of non-perishable goods that will travel more than 500 miles, intermodal can be a great way to cut transportation costs, Comerford says. This will be key if the economy tightens.

Shifting some trips from truck to rail can help organizations reach sustainability goals, Comerford says. The average carbon dioxide emitted per ton-mile of freight in 2019 was .4 for truck and .05 for rail, according to a December 2022 Congressional Budget Office report.

Debunking Misperceptions

What’s more, the perception that intermodal is slow and more prone to damage often doesn’t hold true, Austin says, noting that most intermodal lanes are truck plus one or two days. And cargo often is protected more in a rail move than during over-the-road transportation because of the blocking and bracing requirements.

Shippers sometimes assume that to use rail services, their shipping location needs to be railsided—that is, next to or connected to the railroad tracks. That’s not the case, Austin says, as the intermodal solution is a truck-like product and picks up at a dock just the same as a truck pickup.

The recently completed merger between Canadian Pacific and Kansas City Southern, now CPKC, creates a 20,000-mile network connecting Canada, Mexico, and the United States, the company said in its pres announcement.

The merged company should be well positioned to participate in the nascent nearshoring initiatives occurring closer to American markets, Gross says.

Effective Intermodal Transport

Several steps can help shippers ensure smoother intermodal transport. As in all areas of the supply chain, visibility tools can help shippers keep tabs on their cargo.

Over the past few years, more intermodal service providers have offered the ability to track shipments, Comerford says.

Collaboration is essential, given the complexity of the solutions and the number of entities involved. Intermodal shipments “can run very smoothly with the proper communication and participation from each of the stakeholders,” Austin says.

Shippers that haven’t tried intermodal solutions or are looking to return to intermodal solutions will want to give it a try.

“The rail network has plenty of capacity, and the railroads are excited for new opportunities to keep the trains moving on consistent schedules,” Austin says.

Maryland Port Administration: A Top Cargo Port

In 1963, or about one year before the other Beatles landed stateside, the Volkswagen Beetle made its U.S. debut through the Port of Baltimore. Today, Baltimore has become the top automobile port in the United States.

One reason is its stellar automobile service and handling capabilities. A barcode scanning system captures detailed information about every vehicle that moves through the Port of Baltimore, as well as the drivers handling them, accurately tracking inventory and reducing damage.

The Quality Cargo Handling Action Team (QCHAT) program is recognized across the globe for its successful port-wide quality care program. In addition, the port has dedicated more than 700 acres to handling automobiles and roll-on/roll-off (RoRo) cargo.

Indeed, Baltimore handles more roll-on/roll-o​ff farm and construction machinery than any other U.S. port. This cargo typically is expensive to move and requires special care. The port’s highly skilled and trained labor force ensures all RoRo cargo is carefully handled.

Because the Port of Baltimore is about 150 miles farther inland than other Mid-Atlantic ports, it’s closer to many factories that are exporting goods, while imports coming through the port can more quickly reach the Baltimore-Washington consumer market. More than one-third of the U.S. population is within an overnight drive from Maryland.

These features have helped drive growth at the Port of Baltimore. It ranks 11th among major U.S. ports for foreign cargo handled and ninth for total foreign cargo value. Through its six public marine terminals, the Port of Baltimore handles roll-on/roll-o​ff shipments, container and breakbulk/project cargo, and forest products.

The port also handles specialized cargo, like machinery used to build power plants, transit systems, airports, and other massive, complex projects.

Direct Connections

When it’s time to move cargo from the port, two Class 1 rail carriers, Norfolk Southern and CSX, offer on-dock services. Both offer direct connections to Midwest markets.

Interstates I-95 and I-70 are minutes from the port. About 250 trucking companies, including many specialized heavy haulers, can transport nearly any type of cargo and offer connections across the United States and Canada.

The Port of Baltimore’s proximity to major farm and construction equipment manufacturers in the Midwest has helped it become a leading port in the United States for exporting combines, tractors, and hay balers. It also leads in importing excavators and backhoes.

Balterm, the port’s terminal for forest products, is a top handler of imported forest products. This is due in large part to its exclusive stevedoring company, Tartan Terminals. Tartan has more than 180 employees who have received extensive training in the specialized needs of the forest products industry. The terminal also offers more than 1.1 million square feet of warehouse space.

Just a handful of East Coast ports can handle ships carrying 14,000-plus TEUs and Baltimore is one. Its $220-million Seagirt terminal boasts a berth that’s 50-feet deep, as well as 11 cranes, including four Neo-Panamax cranes that can reach 22 containers across.

Seagirt can process 1.5 million TEU containers annually. Because cargo moves efficiently from the dock, the impact on truck traffic and the environment is mitigated.

In June 2022, the Port of Baltimore announced it would receive a $15.6-million grant to reconstruct and update the Seagirt Terminal’s intermodal rail yard infrastructure to support increased demand for double stacked trains of containerized cargo.

The improvements will include new rail tracks and two crane rail beams.

“This is terrific news for the Port of Baltimore,” said William P. Doyle, executive director, Maryland Port Administration and Port of Baltimore, in a statement. He notes that improving intermodal rail operations is a top priority, as rail service from the Port of Baltimore to the Midwest is increasing, as the port gains shippers diverting around congested gateways.