International volumes dropped but high fuel costs buoy domestic volumes By Peter A. Buxbaum, AJOT There is bad news, and then, there is good news and when it comes to intermodal. The bad news is that third quarter international volumes dropped dramatically, calling into question how the overall peak shipping season is going to shape up. The good news is that domestic volumes are surging, reflecting a trend among shippers to switch from truck to intermodal while fuel prices remain relatively high. Results from the second quarter were more promising, as both domestic and international intermodal volumes registered solid gains, according to the the Intermodal Association of North America (IANA). IANA’s second quarter report, released in August, showed total intermodal volume climbing 6.5 percent to 3.5 million units as compared to the second quarter of 2010. International container volume rose 5.4 percent; domestic container traffic increased 9 percent; and trailer traffic increased 4.6 percent year over year. But the third quarter results did not follow suit, according Tom Malloy, an IANA vice president. “The third quarter of this year was not as rosy,” he said. Total intermodal volumes grew only 1.5 percent in the third quarter, thanks to a 2.6 percent drop off in international volumes. “International volumes dropped precipitously,” said Malloy. “The better news is that year-to-date, the overall growth number is still north of five percent.” “Domestic with capital D,” said Malloy, is what is driving intermodal growth this year. Year-to-date growth in international container traffic through the first three quarters of 2011 stands at 3.5 percent, while domestic activity traffic was up 8.7 percent during the same period. What this says about the potential for this year’s peak shipping season is unclear at this point, according to Malloy. “It has been reported that toy imports are down nine percent this year,” he said. “Imported goods relating to housing, such as lighting fixtures and plumbing supplies are also down. Port activity in the ports of Los Angeles and Long Beach are down five percent. “But it remains to be seen when we hit the peak this year,” Malloy continued. “For the last five years the high point has come in August. We have to see what the numbers are for October before we can tell if that holds true again this year.” The October intermodal statistics are not yet available. The possibility of a later peak season this year was forecast by Ed Wolfe, chairman of the investment research firm Wolfe Trahan & Co. who surveyed 120 sizable shippers over the summer. “Our sense is that we will have a later and less pronounced peak season this year versus a year ago,” said Wolfe. Domestic intermodal growth is largely being driven by fuel costs. “Intermodal remains the low cost option for many shippers,” said Wolfe. “Intermodal will continue to see a secondary push as long as oil prices remain above $65 or $70 a barrel.” The Wolfe Trahan survey showed shippers shifting record proportions of their volumes from truck to rail this year. “Shippers shifted a net of 4.2 percent of their volumes from truck to intermodal in the second quarter, ” said Wolfe, “the largest shift to rail in our survey in eight years. Intermodal conversions should accelerate further over the next year. Thirty percent of shippers said they have already moved to intermodal from truck because of rising fuel costs and another 24 percent are currently considering the switch.” Wolfe perceives two reasons other than fuel costs for intermodal’s recent market share success. “There is political pressure to divert freight from congested highways,” he said. “Rail has also seen improved capacities and service levels.” Most shippers in the Wolfe survey perceive intermodal rates to be less expensive than truckload. Eighteen percent of the shippers estimated that rail rates are over 20 percent cheaper than truckload rates; 40 percent believed rail was ten to twenty percent less expensive; and 37 percent believe