BLOG — Dec 31, 2024

IMCs say railroads handled peak season surge better than pandemic

Following a prolonged peak shipping season, intermodal providers are crediting North American Class I railroads for handling the surge in volume better they did during the tumult of the COVID-19 pandemic.

Admittedly, asset and non-asset intermodal marketing companies (IMCs) were irritated over disruptions in Chicago, Los Angeles, Portland and Tacoma during the second half of 2024. Yet those challenges were not as severe as the backlogs experienced in 2020 and 2021 despite a more than 20% year-over-year jump in freight volumes originating in the Southwest US in October and November, IMCs say.

Container availability, a problem during the pandemic, was manageable this peak season. Surcharges to use containers only went as high as $850 using rail-owned containers and some private boxes of Hub Group, Schneider National, STG Logistics and Swift Intermodal. By comparison, Union Pacific levied fees as high as $5,000 per box in Los Angeles during the pandemic. Even J.B. Hunt Transport Services, which assessed surcharges exceeding $1,000 per container late this past summer, limited the fees to select customers in 2024.

In 2020 and 2021, the railroads and private box owners assessed surcharges on almost every shipper.

“We had shippers paying the surcharges in 2020–21, but we couldn’t secure a gate reservation [required to drop off containers] with Union Pacific Railroad for weeks,” said one IMC executive who asked not to be identified. “This year, none of our contractual shippers incurred surcharges, and Union Pacific consistently provided equipment for baseload commitments.”

Chassis availability was not a problem for domestic and international intermodal shipments, unlike during the pandemic. While the ports of Los Angeles and Long Beach saw volume spikes and two-year highs in rail dwell times this fall, no significant terminal congestion was reported in Chicago, Dallas, Kansas City or Memphis.

Gate reservations in Los Angeles were hard to procure in September and October, but delays were measured in days, not weeks, according to IMC executives, who also noted BNSF and Union Pacific did a better job communicating than four years ago, which in turn made it possible to keep shippers informed.

“The [East and Gulf coast] work stoppage [in October] forced retailers to pull forward some volume as well as reroute away from those ports in favor of Los Angeles-Long Beach,” said a second IMC executive. “Without that, peak intermodal volumes could have been tepid at best.”

In the most recent Journal of Commerce Intermodal Service Scorecard survey, 77.4% of intermodal providers say they were satisfied with the performance of North American Class I railroads over the past six months, down from 91.1% in the spring poll.

Almost 91% of shippers say they were satisfied with the intermodal providers in the second half of the year, approximately on par with the 90.4% in the first half, according to the survey.

The results show that while IMCs felt service on the rails was slower and less reliable in the second half of the year compared with the first — when volume was lower — their shippers did not experience any significant supply chain disruptions over the past six months. The IMCs and railroads successfully insulated shippers from congestion in Los Angeles, whereas disruptions in 2020 and 2021 had a profound negative impact on shippers.

More than 250 participants responded to the H2 survey, conducted between Nov. 1 and Dec. 31.

Legit comparison?

Despite the recent kudos for railroads, some market players question the value of pandemic-era comparisons, suggesting that 2024’s peak season aligns more closely with pre-pandemic trends.

“It’s probably better to compare this year with a more ‘normal’ peak season than to compare it to the surge of COVID-19 as that seems an apples-to-oranges comparison,” another IMC executive said.

There is evidence to support both sides of the question.

Railroads hauled approximately 50,000 domestic containers from Los Angeles to Chicago in October — a record for any month — followed by 45,000 in November, the highest volume for that month in history, according to an analysis by the Journal of Commerce of data from the Intermodal Association of North America (IANA). The Los Angeles to Chicago route is the largest by volume annually for domestic and international intermodal.

However, the US intermodal fleet has expanded by more than 80,000 containers, or 30%, in the last four years, according to an analysis of data from PIERS, a sister product of the Journal of Commerce within S&P Global. Some argue that this capacity growth may explain the smoother peak season despite the volume spike out of Los Angeles.

Another barometer of success for the railroads is on-time performance.

During the pandemic, railroads were required to report weekly on-time performance data for intermodal to the US Surface Transportation Board, and the western railroads set their benchmark as 80%.

Railroads are no longer required to report the metric to federal officials, but some IMCs question whether 80% is too low of a standard as trucks can deliver a 90% or better on-time performance on the highest volume lanes out of Los Angeles.

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