When Celtic International President Doug Punzel looks back at the intermodal marketing company’s volumes in mid-June, he sees Celtic beating last year’s levels for the same week. Intermodal volume reported by the country’s major railroads, meanwhile, is slowly climbing out of the double-digit year-over-year decreases that hit the industry during the first quarter of the year.
Both trends are reasons for Punzel to believe the intermodal market is in a relatively good position for the second half of 2020.
“Forecasters are saying that for the balance of this year, intermodal won’t get back to last year’s levels, let alone 2018 levels,” Punzel told Mike Baudendistel, FreightWaves’ market expert for rail and intermodal, during a fireside chat at FreightWaves 3PL Summit on Tuesday.
“However, I think it will come closer than initial expectations, which were somewhere in the double digits. So we certainly have hopes to get back on track and at least get close to last year’s numbers.”
Punzel acknowledged that over the past four to five years, the intermodal market — trailers and containers moving on railroad flat cars — has not been the avenue for growth in the rail industry that it had been 10 or 15 years ago, before railroads chose to eliminate lanes and coverage areas.
“But I think that’s behind us now,” he said. “In the time I’ve worked in this business, most customers understand an additional transit day or two, but what they really need is reliability. Reliability suffered in 2016-17, and that hurt our ability to convert customers and get them to use intermodal versus over-the-road trucking. But the railroads are actually bringing back lanes that they had canceled. So we expect growth — maybe not at as fast a pace as in the early 2000s, but at a better-than-GDP pace going forward.”
A cross-border product
Celtic, which logistics technology company Transplace purchased in 2011, hired Punzel in 2014 to help lead the company’s entry into the U.S.-Mexico cross-border intermodal market. Punzel explained that since then, Celtic’s customers have been taking advantage of the business and logistics opportunities offered at the Southern border.
Unlike trucks, “the train doesn’t stop at the border, so we’re generally able to provide a faster transit time than over the road as far as getting in and out of Mexico,” he said. “And it has allowed our customers in Mexico great access to capacity. We do quite a bit with various electronics, appliance and CPG [consumer packaged goods] companies located in Mexico. There’s a big demand for that today and we expect that to continue.”
Leveraging the railroads
Punzel pointed out that Celtic has been able to leverage the railroads’ ability to up their reliability game to provide current Transplace customers with another transportation option.
“Intermodal can provide cost savings, which is something our customers value,” he said. “As long as reliability is there — which we’ve seen from the railroads over the last 18 months — it’s a much easier product for our customers to use. So we’ve had great success in converting over-the-road to intermodal in the last few years. Many times it’s a customer who hasn’t had any experience, or at least a positive one, using intermodal before.”
Punzel also said that because the strong relationships that his company has with the major U.S. railroads are “fairly uncommon,” it provides two advantages. The first is location — particularly in the Eastern U.S., where customer proximity to rail ramps is critical. “A lot of times you’re dealing with short-haul moves of 500 to 800 miles, and if you’re located closer to the ramp it can be more effective,” he said.
The second reason is backup redundancy. “Occasionally there’s a derailment or tunnel outage that causes some kind of outage, and having close ties with the railroads allows us to work back and forth [between them] as needed.”