Intermodal rail taking growing share of containers out of NY-NJ Ports

Overall import growth mean more freight all around, but high drayage costs and better service bringing more boxes to rail.

Intermodal rail is taking a growing share of container traffic coming out of the largest U.S. East Coast port as more heavy freight moves across the docks and trucking costs rise.

Even so, some shippers remain wary of relying on intermodal rail due to the ongoing service changes being made in the push for “precision scheduled railroading.”

Rail volume at the Port of New York and New Jersey saw a 14 percent rose in the period between January to November 2018, reaching 593,806 containers, the Port Authority of New York and New Jersey said. The November tally of 53,609 containers is the ninth month in a row that volumes have been above 50,000 containers, the port noted.

Those volumes will grow more thanks to last week’s opening of the Port Jersey rail facility. The facility is designed to handle 250,000 container moves. Overall, the Port Authority hopes to bring rail container moves to 900,000 annually.

The volumes comes as the region’s incumbents boost their service. Norfolk Southern (NYSE: NSC) expanded service out of the Global Container Terminals New York with seven Midwest destinations, compared with just two destinations previously. Norfolk Southern also scheduled five destinations out of the new Port Jersey rail facility. Likewise, CSX (Nasdaq: CSX) started offering service out of NY-NJ to its Northwest Ohio Intermodal terminal.

Norfolk Southern vice president Ken Joyner says the surge in U.S. imports last year, with growth stronger on the East Coast than on the West Coast, also helped intermodal volumes.

“While tariffs had some impact on shippers’ decision to build inventory, consumer demand was strong, and every major Eastern port saw growth,” Joyner said.

Larry Gross, president of Gross Transportation Consulting, says NY-NJ has advantages over other East Coast ports. The raising of the Bayonne Bridge in 2017 and the size of the region’s consumer market means more frequent vessel calls by larger ships.

“All these East Coast ports are jockeying for this inland volume,” Gross said. “New York-New Jersey has a leg up because everybody calls there. The local volumes are so significant that you are not going to skip New York.”

An executive with an intermodal marketing company who spoke on condition of anonymity says tight trucking markets also likely play a role in the increase in intermodal rail.

The hours of service mandate has slowed delivery times for drayage carriers. A 100-mile run from Elizabeth, NJ to West Chester, Pa. now takes two days due to traffic and the required driver breaks. Likewise, drayage drivers are being tied up longer in the ports due to congestion.  

The result is that drayage costs have gone from $600 to $800 per container to $1,400 to $1,600.

 Shorthaul Tender Reject Index for Elizabeth, NJ (Source: SONAR)
Shorthaul Tender Reject Index for Elizabeth, NJ (Source: SONAR)

“The ports are so congested, they are keeping drivers three to four hours at a location,” the executive said. “They used to get four to six pulls per week. But they are lucky to get three to four pulls per week.”

He also adds that “heavy, dense freight” is going to intermodal. Furniture and home appliance imports through the NY-NJ ports have rising over the past year. The weight of refrigerators passing through NY-NJ hit a two year high of 9.5 million kilograms (20.9 million pounds) last September, according to U.S. customs data. Furniture freight reached 89 million kilograms last October, the highest since start of 2017.

Still, the intermodal executive says railroad service is “not getting any better and the railroads are not giving us rates that are attracting rubber to rail.”

He says unexpected service changes, such as CSX’s decision last year to cut a number of interline offerings with Union Pacific (NYSE: UNP), leaves shippers wary of relying on intermodal for long-term contracts.

“We hear about PSR, but what does it mean for customers?” he added.

Overall, Norfolk Southern is running about the same number of intermodal railcars as it did a year ago. According to December data submitted to the Surface Transportation Board, Norfolk Southern had 10,386 intermodal cars, about flat with the amount it had last year.

CSX, meanwhile, had 7,624 intermodal cars online, compared to 9,213 cars online last year.

Still, intermodal service does not appear to have been downgraded much. CSX saw its average intermodal train speed reach 29.7 miles per hour in December, compared to an average speed of 28.5 mph since March 2017. Norfolk Southern saw its train speed reach 25.4 mph, compared to an average of 26.4 mph.

“Norfolk Southern continuously strives to improve service and reliability, and we have made changes over the past year to accommodate growth and better serve our customers’ needs,” Joyner said.

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Michael Angell, Bulk and Intermodal Editor

Michael Angell covers maritime, intermodal and related topics for FreightWaves. His interest in transportation stretches back several generations. One great-grandfather was a dray horseman along the New York waterfront and another was a railway engineer in Texas. More recently, Michael has written about the shipping industry for TradeWinds, energy markets for Oil Price Information Service, and general business topics for FactSet Mergerstat and Investor's Business Daily. When he is not stuck in the office, he enjoys tours of ports, terminals, and railyards.