DC Velocity - January 2012

newsworthy
U.S. railroads map out
expansion plans

Despite a few bumps along the way, the domestic intermodal segment enjoyed a respectable to solid 2011. And if the railroads’ 2012 and 2013 battle plans are any indication, the industry expects more of the same from the domestic front.

Through October, domestic equipment loads—defined as an intermodal movement handled by rail—hit 600,000 loads, up from 560,000 through the same period in 2010, according to the Intermodal Association of North America (IANA), the trade group for the continent’s intermodal industry. IANA didn’t have numbers for November and December at this writing.

Generally, intermodal load activity tapers off in the last two months of the year, when shipments of holiday-related inventory have been completed and product ordering hits a seasonal lull. Barring a collapse in volumes through New Year’s, however, full-year 2011 totals are expected to exceed 2010 levels, a continuing sign of domestic intermodal’s growing appeal to cost and environmentally conscious shippers, and moves by truckers and intermodal marketing companies to book more loads with the railroads due to concerns about truck driver and rig availability.

READY FOR THE REBOUND

The railroads plan to make hay while the sun shines. Eastern railroad Norfolk Southern Corp. will open domestic intermodal terminals this year in Birmingham, Ala.; Memphis, Tenn.; Mechanicville, N.Y., which is located north of Albany; and Greencastle, Pa., in the state’s southwest corner. A fifth facility, in Harrisburg, Pa., is planned but has not been built.

The five terminals combined will add 525,000 annual “lifts” to Norfolk, Va.-based Norfolk Southern’s domestic intermodal network. A lift is defined as a trailer or container being lifted onto or off of a railcar, and one intermodal movement can consist of multiple lifts, depending on how many transport modes are involved.

CSX Corp., Norfolk Southern’s rival in the East, declined comment on its intermodal capacity plans.

BNSF Railway is building a domestic intermodal facility near Kansas City that will open in 2013. It will come three years after the 2010 launch of BNSF’s latest domestic facility, located in Memphis. The Memphis terminal added 500,000 annual lifts to the BNSF network, about the same as the Kansas City facility will bring on stream, according to Krista K. York-Woolley, a BNSF spokeswoman.

York-Woolley said BNSF has available domestic capacity in its network and can add capacity at existing terminals during 2012 to meet demand spikes. The railroad has 30 intermodal terminals, of which only four are solely devoted to international shipments.

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Western railroad Union Pacific Corp. (UP) broke ground last year on its 33rd domestic intermodal facility, located in Santa Teresa, N.M., near El Paso, Texas. The facility will open in 2014, according to UP spokesman Tom Lange.

As for equipment, Matt Gloeb, UP’s assistant vice president of domestic intermodal, said it’s unclear how many intermodal containers UP will add in 2012, given that it has boosted its container fleet by more than 40 percent since the first quarter of 2010. Gloeb said the current supply of containers in UP’s network exceeds the demand, though that may change if the U.S. economy improves this year.

Gloeb said he expects robust domestic growth in the latter half of 2012.

RATES ON THE RISE?

Domestic intermodal service is currently priced at a 30- to 40-percent premium over international intermodal. David Howland, vice president of land transport services for third-party logistics giant APL Logistics, a big user of intermodal, said a resurgence of international intermodal business— which was largely flat in 2011—will give railroads an incentive to boost domestic rates as well. However, if international business remains relatively weak, the pace of domestic rate increases will moderate as railroads look to protect their market share any way they can. Overall, Howland expects increases along the lines of 3 to 5 percent in 2012.

John White, CEO of Chattanooga, Tenn.-based truckload carrier USXpress Enterprises Inc., believes domestic intermodal rate increases will fall only in the 2- to 4-percent range as an increase in equipment supply keeps pricing soft. Those increases would lag behind the price hikes that White predicts will occur in the truckload industry this year. ;