US Intermodal Growth Pegged to Rail Recovery

28 Apr 2014

rail, intermodal

U.S. intermodal should see another year of robust demand, provided that rail service recovers following service disruptions in the first quarter, according to an executive from Hub Group.

“There are some key corridors where service is not as good as it has been historically, and a lot of that is due to a lack of train capacity,” said Mark Yeager, vice chairman, president and chief operations officer of Hub Group, in the company’s first-quarter earnings call.

Yeager said that as long as the major U.S. railroads recover in the second quarter and offer “the kind of service that they’ve offered for the last five years or so,” then the “economic advantage of intermodal should point to growth that exceeds the truck market.”

Intermodal volumes have recovered well in the early weeks of the second quarter as rail networks have started to rebound from the winter. Weekly volumes grew 13.5 percent, 12.6 percent, 9.3 percent and 7.6 percent in the four weeks to April 19, higher than year-to-date volume growth of 5 percent through April 19, according to Association of American Railroads data.

Observers have been closely following the recovery of the rail networks following what the AAR described as a confluence of events that disrupted service in the first quarter. “These events include a winter that was far worse than usual and forced railroads to dramatically shorten train lengths and crew exposure to the elements; a record grain harvest and unexpected surge in grain exports; and higher coal volumes as utilities sought to replenish stockpiles they consumed when they generated additional electricity,” AAR said in a written statement.

Rail service had shown signs of faltering even before the severest winter in decades forced it to slow train speeds and shorten train lengths. Fourth-quarter average train speeds at the four largest U.S.-based Class I railroads — BNSF, CSX Transportation, Norfolk Southern Railway and Union Pacific Railway — fell 5.2 percent year-over-year, according to Wolfe Research, an investment research firm, citing AAR statistics. The average dwell time of loads at the railyards of the four railroads also worsened in the fourth quarter, rising 4.7 percent year-over-year on average, according to Wolfe Research.


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