Largest U.S. intermodal rail carrier sees uptick in domestic containers and trailers as trucking capacity remains tight.
BNSF wants to speed up intermodal service with new capital projects as the company aims to get a larger piece of ecommerce freight, says the company’s head of intermodal marketing.
BNSF, a unit of Berskshire Hathway (NYSE: BRK.A), has seen its intermodal service grow 4.2% this year-to-date to 3.8 million loads, according to Susquehanna Financial Group. Intermodal accounts for just over half the loads on its network.
Speaking at the Northeast Association of Rail Shippers conference, BNSF vice president Tom Williams says ecommerce has been a “big tailwind for intermodal.
“As larger ecommerce players build out distribution centers, they are able to use intermodal as much as brick and mortar does for their fulfillment centers,” Williams said. “We have seen strong intermodal growth from ecommerce.”
Intermodal’s growth comes amid the well-publicized shortfall in truck capacity. While spot truck rates have declined through the third quarter, they are still higher than last year, which Williams says is “indicative of a very tight environment.”
More of that volume is coming from domestic 53’ containers rather than marine containers, Williams says. Marine containers have accounted for majority of intermodal freight over the previous five years. But year-to-date, domestic containers have accounted for more of the intermodal volume on BNSF’s network.
“We’ve seen domestic container grow more strongly this year and we’ve seen a more flattish trajectory on international freight,” Williams said.
With domestic container capacity tight, BNSF has seen a “huge percentage increase” in trailers traveling via intermodal, Williams says, as tight trucking capacity pushes more trailers onto rail.
“As domestic container fleets are pretty-well utilized, we are seeing some excess growth coming from our trucking partners,” Williams said.
But the shift to more domestic containers and trailer loads has put “isolated pressure” on BNSF’s network this year, Williams said.
Some of that pressure is evident in slowing speeds. BNSF’s average train speed for intermodal fell to a 2018 low of 30.8 miles per hour at the start of September. It has since returned to 32.1 miles per hour.
To be sure, other Western U.S. intermodal carriers such as Union Pacific (NYSE: UNP)have also seen intermodal service slow through the year. But Williams says intermodal’s continued growth will require improving and sustaining train speeds.
“We are not happy to see a slight downward trend this year,” Williams said. “We are proud to have good network velocity.”
BNSF aims to improve network velocity through $500 million in capital projects this year. It is adding track capacity at its Gallup, New Mexico and Amarillo, Texas subdivisions, which will allow higher speed intermodal trains to bypass other trains. It also expects to finish up a quadruple track project at its San Bernardino, California by next October.
Included in that amount, BNSF is spending $90 million to add parking and lift equipment to its Alliance intermodal facility near Dallas-Fort Worth, new production track at its Hobart yard in Los Angeles and new track in Stockton, California.
BNSF is also testing automated straddle carriers from Finland’s Kalmar at its Kansas City intermodal yard for moving containers. The automated straddle carriers could be in place by June 2019.
“We are positioning for growth and improving network velocity,” Williams said.
As for drayage capacity, Williams says the demographic issue of an aging trucker workforce could impact intermodal. The upshot is that BNSF is working through how to improve turnaround times at its ramps to free up capacity.
Williams says 40,000 drivers are now using its RailPASS app which automates the process of entering a BNSF facility. Further out, Williams says BNSF is looking systems that can notify BNSF in advance of a truck’s arrival who the driver and have that information automatically transferred to the railroad.
“Drayage is a very import ant leg of intermodal capacity,” Williams said. “We need to have right drayage capacity with our intermodal partners.