IANA hears railroads losing $4 billion/year to trucking & shipping overcapacity is driving more blank sailings

The Intermodal Association of North America (IANA) Expo opened in Long Beach, California with panelists warning that railroads have lost $4 billion annually in business to trucking and that blank sailings, caused by new ship orders, are on the rise and will impact U.S. ports.

Alan Murphy, CEO, Sea-Intelligence, analyzes the global container shipping market. He said that new ship orders by major ocean container lines are creating so much additional capacity that carriers will have to cancel some scheduled services to U.S. ports: “What's going to happen is we're going to see a massive amount of blank sailing(s) … Now that is a consequence of course, that the shipping lines from a global perspective are going to see a 10% growth in supply this year … We have seen an explosion because there is far too much capacity and (the carriers) don't know what to do with it … This is not a forecast; this is just what's scheduled right now … You are going to have low (freight) rates, but it's going be very low service as well, I'm afraid.”

Intermodal Freight

Larry Gross, President, Gross Transportation Consulting said intermodal freight had been doing quite well until the pandemic when congestion and rail service problems caused a switch over to trucking. The result is a considerable market that the railroads need to win back: “We would've been handling another 1.6 million domestic loads per year and about $4 billion of additional revenue … So, my message here is that even though we spend a lot of time thinking about what the overall macro environment (is) … this is the biggest opportunity out there because we control our competitiveness with highway. What it's going to take is some pretty aggressive action for us …to gain back the share that we lost. But there is a giant opportunity out there to grow the business.”

Gross also expects a slow peak season: “Where I do have some concern here is if you look at what's happened in the most recent weeks, let's say going through August … we sort of have had a tail off there ... So, it's … an indication that perhaps the international side is a little on the weak side … So, certainly this is an indication that the peak season may be a little bit subpar.”

Field of Dreams

Katie Farmer, President and CEO, Burlington Northern Santa Fe (BNSF) Railroad, which serves West Coast ports, spoke to the conference via a video recording in which she lauded BNSF’s investments in infrastructure including building more rail capacity between U.S. West Coast ports and Midwest destinations. She also cited the investment in the Alliance Intermodal facility citing it as a bold step that was questioned by Wall Street financiers. Finally, Farmer cited the BNSF’s plans for a new intermodal facility at Barstow, California: “We also built Alliance, our first intermodal facility … the movie ‘Field of Dreams’ (released in 1989) came out right before we finished Alliance … which was met with skepticism and disapproval by Wall Street for building such a big facility in the middle of nowhere. Here we are 30 years later, and Alliance is the third largest intermodal facility in the country … And today we continue building for the future, ensuring BNSF remains the intermodal leader that continues to grow with our customers. Today, we're moving forward with the Barstow International Gateway, a $1.5 billion state-of-the-art master planned intermodal facility in Southern California. Once built, it will be the largest in North America sitting on more than 4,500 acres and will consist of a railyard, intermodal facility, and warehouses for (moving) freight from international to domestic containers. It will have multiple customer benefits, such as lowering supply chain costs and reducing carbon emissions. It also benefits the intermodal supply chain by reducing dwell at the Southern California ports and providing a lower cost rail move to an inland transload facility. This combination of … intermodal facility and customer warehousing facilitates new service lanes (and) faster transit off the West Coast and access to additional scarce warehouse capacity in Southern California. Being positioned for the future requires more than new facilities. In some respects, it's as simple as offering the best service.”

Railroad Improving Operating Systems

Todd Tatterson, Vice President Business Development Tideworks Technology, represents a company that provides terminal operating systems to marine terminals and railroads. He says the railroads are starting to invest more money in improving their operating systems: “Pre pandemic … with PSR (Precision Scheduled Railroading) being introduced … you see them (U.S. railroads) outsourcing some operations and insourcing other ones. The railroads … tend to lag behind the marine terminals in terms of sophistication and automation, but now they're catching up …They're bringing driverless cranes and … they have remote operated cranes, they have automated gate systems and they're moving into appointment systems. … So, it's, it's fun to be able to, to assist them with their technology initiatives and (see them) … catching up to the other … big players on the container side, like marine.”

Joni Casey, CEO, Intermodal Association of North America (IANA), opened the conference by warning that environmental issues are creating new challenges to trucking and rail: “Hopefully we've come through a lot in the past few years and are on path to normalization with intermodal volumes finally starting to come back. At the same time though, more disruptions loom in terms of threats to the independent contractor business model, stricter clean truck and environmental regulations, unproven safety legislation on a sector of the industry and the government's general foray into regulating our commercial business and supply chains.”

Stas Margaronis
Stas Margaronis


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