Intermodal volumes see September declines, according to IANA and AAR data

Intermodal volumes finished the third quarter with September declines, according to data recently respectively issued by the Intermodal Association of North America (IANA) and the Association of American Railroads (AAR).

IANA reported that total September volumes, at 1,489,303, fell 3.7% annually. Trailers saw the largest annual decline, falling 19.1% to 94,337, and domestic containers, at 625,332, fell 3.9%, with all domestic equipment off 6.2% to 719,669. ISO, or international, containers, were down 1.3% to 769,634.

Many of the drivers for declining intermodal volumes cited by IANA have been intact for most of 2019.

These drivers include things along the line of loose trucking capacity and softer prices compared to a robust 2018, which it said created more intense competition with intermodal than a year ago and resulted in major domestic intermodal traffic declines. And it also noted that the ongoing tariff-related issues have remained an issue, too, with slowing international volumes, coupled with container imports, notably on the West Coast, facing challenges.

The last point was made clear earlier this month by Port of Los Angeles Executive Director Gene Seroka, when the port issued September volumes.

“The ill-advised U.S.-China trade war continues to wreak havoc on American exporters and manufacturers,” said Seroka. “We’ve seen declining exports for 11 consecutive months while our fastest growing market segment is exporting empty containers back to Asia. It’s likely we’ll see softer volumes in the fourth quarter. We must have a negotiated settlement of the trade war as it is beginning to impact the more than 3 million jobs in the U.S. that are tied to this port complex.”

The AAR reported that September U.S. intermodal container and trailer volumes, at 1.06 million, were off 5.9%, or 65,989 containers and trailers, annually. And it also pointed out that weekly average intermodal originations in September, at 265,371, represent the lowest September tally going back to 2016.

For the third quarter, AAR said that intermodal volume was down 5.8% annually, which marks the largest intermodal quarterly percentage decline since the third quarter of 2009. On a year-to-date basis through September, total intermodal volume is off 4.1%, or 441,953 units, compared to September 2018. But even with this decline, AAR observed that this year-to-date tally through September is the second highest ever, for this period, trailing only 2018.   

Tony Hatch, principal of New York-based ABH Consulting, noted in a research note that intermodal volume comparisons will get easier as the year-end of 2019 approaches, with several intermodal players expecting an inflection soon.

And he added that the “domestic intermodal decline will be temporary and may be due to rail management strategy, not just Precision Scheduled Railroading (PSR), but the railroads deciding to hold on to historically hard fought pricing gains while waiting for the cycle to turn (and trade policy to become….saner) and their own operating improvements to come into play.” 

Mark Wallace, executive vice president of sales and marketing for Jacksonville, Fla.-based Class I rail carrier CSX said on the company’s third quarter earnings call that while the consumer-based economy is still doing relatively well, with items like apparel and toys coming into the U.S., intermodal also moves items related to the industrial economy, like machinery and auto parts, among others.

“So because of the economy, the industrial economy being soft and IDP [industrial production] being so weak…it's affected a lot of the intermodal volumes,” said Wallace. “Fourth quarter, because of the economy and because of the consumer economy, we're hoping to have a relatively good post-Thanksgiving holiday peak. So, into the Christmas timeframe, hopefully, people order a lot of stuff online and we have the pleasure and the honor of moving a lot of that stuff. So, I think that will help our intermodal volumes this [fourth] quarter.”