Volume is down 17 percent from this time in 2008, the AAR said, and 2008 was a weak year for intermodal traffic even before last September’s financial and economic collapse.
Asked to predict the 2009 peak season — the summer-to-fall boom in intermodal imports — one rail executive winced, shook his head, and said, “What peak?”
Now, though, traffic is no longer sliding. More observers think the freight market is bottoming out, leading to a time when the box business can start its recovery.
“From the beginning of the year, it has stabilized at a very undesirable level,” said Lawrence Gross, senior consultant on intermodal issues at FTR Associates, a forecasting firm.
Some industry interests are intent on gaining market share from each other, battling for large customer accounts. Some are completing long-planned rail infrastructure projects to draw freight off the highways. And some are overhauling their operating plans.
A new two-month agreement with creditors led by Bank of America gives intermodal middleman Pacer International, which reported $2.1 billion in revenue in 2008, relief by lifting a cap on how much leverage it can carry.
Concord Calif.-based Pacer is cutting costs and streamlining operations as it plans to craft a new debt accord with banks before that agreement expires on Aug. 31. Pacer expects to produce a plan with its banks “that will satisfy everybody,” said Brian C. Kane, executive vice president and CFO.
Analysts see Pacer’s problems giving competitors, especially J.B. Hunt Trans-
DOMESTIC INTERMODAL TRAFFIC
550,000
■ In number of units.
2008
2009
500,000
450,000
400,000
May April March Feb. Jan.
port Services and Hub Group, a chance to add market share.
“It’s a tough marketplace out there, particularly given the current economic environment,” Kane said. “We’re always slugging it out with Hunt and Hub. “They are t wo very good, well-run companies and two formidable competitors.”
Over-the-road truckers are battling for intermodal freight, too.
“There’s a lot of truck capacity out there that is pricing aggressively to keep their trucks moving,” vying for the same loads Pacer and its competitors want for intermodal trains, Kane said. “The pricing environment is tough.”
Despite weakened rates, some companies are thriving. J.B. Hunt boasts the largest fleet of domestic 53-foot, high-cube containers and the largest drayage fleet, and is adding intermodal loads.
The Lowell, Ark., carrier’s intermodal volume grew 5 percent in the first quarter year-over-year to 200,232 loads, despite a 10 percent drop in intermodal revenue to $391.5 million. That segment now accounts for more than half of its total business. The recession is accelerating Hunt’s shift from over-the-road trucking to rail-based intermodal services.
“Our diversification strategy initiated several years ago and our best-in-class intermodal and dedicated services have helped sustain our earnings in these turbulent times,” Kirk Thompson,
Hunt’s president and CEO, said in April.
Railroads are making aggressive moves. Union Pacific recently nabbed most of the intermodal feeder business that middleman Hub ran on BNSF Railway. Hub shifted 8,400 containers to UP, bringing the total number of Hub containers handled by the Omaha, Neb.-based railroad to 14,400.
Hub left just 1,400 containers with Fort Worth, Texas-based BNSF, which has pushed customers to provide their own equipment, while UP offers containers to customers with an “asset-light” model such as Hub.
Some railroads are laying new track, extending rail net works in areas dominated by trucks.
Norfolk Southern Railway will complete most of its interstate, double-stack Heartland Corridor construction project this year. Starting in 2010, NS will be able to run stacktrains from container terminals near its headquarters in Norfolk, Va., to as far as Columbus, Ohio, and Chicago on a new time-saving slant route through West Virginia.
Kansas City Southern, the smallest of the big railroads, just wrapped up an important construction project of its own (Story, page 44). Kansas City, Mo.-based KCS plans to bite into a share of the cargo moving between Houston and northern Mexico that now runs on highways in and out of Laredo, Texas.
The rail infrastructure projects could help NS and KCS market their intermodal offerings
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