Continued growth seen for intermodal

Service providers detail intermodal issues at the annual IANA conference.    David Yeager, the president and chief executive officer of the intermodal company Hub Group, said his company has been growing in the “high single digits” and that he expected that kind of intermodal growth to continue.
   Yeager made his remarks at the 32nd Intermodal Expo put on by the Intermodal Association of North America in Long Beach. The trade show has attracted more than 1,600 attendees.
   Intermodal transportation is now the “fastest growing segment in the freight transportation industry — we surpassed air cargo several years ago and remain on a trajectory to add to these successes,” said Joni Casey, president and chief executive officer of IANA.
   Last year, IANA said intermodal cargo volumes amounted to 15.5 million moves; in the first half of 2014, volumes amounted were running 5.5 percent of 2013’s levels.
   “Who would have thought intermodal would supplant coal as the rail’s largest source of revenue; who would have foreseen that the intermodal supply chain could knit the world together as seamlessly as it does today; and who would have anticipated that a box a few pieces of sheet metal, rivets and a coat of paint would revolutionize the cargo transportation industry?” Casey said.
   She highlighted challenges facing the industry including congested terminals due to high volumes of inbound freight; equipment imbalances; the challenges brought on by larger ships and carrier alliances; and the decision by many steamship lines to sell their equipment fleets
   Speaking on the same panel at the conference as Yeager, Lance Fritz, the president and chief executive officer of Union Pacific Railroad, said “there are periods of time like right now where we are not providing the best service in the world,” but vowed his company would fix the problem, adding additional workers in coming months and adding locomotive power.
   Fritz said the railroad is running between 1 mile per hour and 1.5 miles per hour more slowly than it intends. He attributed the decline in service to both poor weather and strong growth.
   Fritz said UP began the year thinking it would hire about 1,600 trainmen and will hire 3,400 or more. “As soon as we saw growth outstripping our game plan, we began increasing our hiring pace” this summer,” he said.
   The addition of those workers is resulting in modest improvement every week, he said. “My expectation is that regardless of growth, which right now is roughly at our historic highs for 2006 to 2007, we should be able to make modest improvement,” he continued. “We do not see a obstacle in the path to recovering service to an acceptable level, one that you’ve been accustomed to over the last half dozen years.”
   In addition to new personnel, he said UP has added locomotives. Since the fall of last year, he said the company has brought about 800 locomotives that were in storage into its network and added 170 new locomotives. This amounts to about a 13-percent increase on a 7-percent volume rise, he said.
   “I’m confident we are adequately resourced,” he said.
   He told attendees that intermodal accounts for about 20 percent of UP’s revenue, and that the railroad continues to invest in the intermodal business, spending $1.4 billion to $1.5 billion in intermodal terminals in addition to “line of road” investments since 2000.
   Casey noted that about a half year ago, domestic intermodal volumes equaled international volumes.
   Fritz said that his company has ample room to grow in excess capacity in terms of train size on many domestic intermodal lanes and can accommodate cargo that is converted from truck to rail. He added that while there may be some incremental impact from the Panama Canal on the intermodal business, from conversations with its customers, UP expects it to be relatively small.
   The Hub Group’s Yeager said length of haul for intermodal at his company has dropped from about 1,640 miles to less than 1,600 miles in the past two years as activity picks up on shorter-haul routes, such as those along the Crescent Corridor.
   Fritz said UP has seen growth in international intermodal cargo during the year and that the railroad is seeing a seasonal peak.
   “We thought with preshipping, given the potential strike at West Coast ports, that would not be the case, but the most recent international volume we see looks like it is about as high as in July” when the contract between the International Longshore and Warehouse Union and its employers expired.
   Yeager noted that his company has moved from being a “non-asset based company” to one that owns 28,000 owned or leased containers and 3,000 truckers, “25 percent of which are company drivers using company cabs.” He noted his company has invested $400 million over the past five years, and $140 million this year for containers, tractors and technology. He said the company is faced with a quandary because even as its need for capital has increased, the gross margin for intermodal has shrunk.
   Yeager said that he expects the driver shortage to negatively impact intermodal as well as over-the road trucking. “It could be the choke-point for intermodal if we are not very careful,” he said.
   He said that the industry faces increased government regulation in the form of the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability regulations, hours of service rules and mandated electronic logbooks. He said his company supports e-logs, believing they can positively impact safety, but says they will negatively impact the average number of hours driven, as 80 percent of the industry does not have e-logs on its tractors.