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Supply chain congestion weighs on US rail intermodal volumes

US intermodal traffic down 7.3% in August

U.S. rail intermodal volumes have slipped in recent weeks. (Photo: Jim Allen/FreightWaves)

Issues weighing on the supply chain — labor and chassis shortages and congestion — are contributing toward a downward trend for U.S. intermodal volumes.

Weekly U.S. intermodal traffic was down 7.3% year-over-year for the week ending last Saturday, with volume at 266,212 containers and trailers, according to the Association of American Railroads

Furthermore, after several months of consecutive year-over-year gains, monthly intermodal volumes in August were down compared with August 2020, slipping 3.3% to nearly 1.09 million containers and trailers, AAR said on Sept. 1. 

While market needs for intermodal service persist, supply chain challenges are hampering efforts to respond to those needs, according to Mike Baudendistel, FreightWaves’ market expert for rail and intermodal. 

“There is plenty of intermodal demand, but capacity constraints are impairing volume, which is now lower year-over-year in both the international and domestic intermodal segments,” Baudendistel said. “Those constraints include a chassis shortage, a shortage of drayage capacity, intermodal terminal congestion and slower container turns.”

A comparison of international intermodal volumes in the U.S. in 2020 and 2021 (left) and domestic intermodal volumes in the U.S. in 2020 and 2021 (right). (FreightWaves SONAR) To learn more about FreightWaves SONAR, click here.

Union Pacific CFO Jennifer Hamann confirmed at a Cowen investor conference that supply chain challenges are impacting UP’s (NYSE: UNP) rail volumes. 

“Congestion within the international intermodal supply chain is affecting volumes as we are purposely matching the demand moving inland from the ports with the takeaway capacity at our Eastern gateways,” Hamann said. “At the same time, the number of ships anchored at port is growing, so overall demand remains strong.”

UP’s parcel segment is also facing tougher year-over-year comparisons as overall demand is down compared to the e-commerce strength seen in 2020, Hamann added.

Whether U.S. intermodal volumes continue their downward trend in the coming weeks remains to be seen. But imports have also slowed at the largest retail container ports in the U.S. from double-digit growth to single-digit growth amid persisting pandemic-related global supply chain disruptions, according to a monthly port volumes report produced by the National Retail Federation and Hackett Associates

“Year-over-year growth isn’t as dramatic as it was earlier because we’re now comparing against months when most stores closed by the pandemic last year had reopened and retailers were stocking up again,” said Jonathan Gold, NRF vice president for supply chain and customs policy. “We expected that. But we’re seeing issues ranging from port closures in Asia to ships lined up waiting to dock at U.S. ports. That’s creating continuing challenges as retailers work to supply enough inventory to meet demand.”

NRF and Hackett Associates’ port report projects that U.S. ports tracked by the report handled 2.27 million twenty-foot equivalent units in August, a 7.8% gain year-over-year. 

While last month’s volume would be the busiest August on record, the projected figure is short of a recent previous estimate for the month of 2.37 million TEUs, the groups said. Although August is traditionally the start of the peak season, the queue of ships waiting to unload at the ports of Los Angeles and Long Beach, as well as delayed sailings from Asia because of the COVID-19 pandemic, could mean that cargo will arrive later in the fall. 

“Supply chain logistics management is facing acute problems as disruptions make it difficult for both importers and exporters to transact their business,” Hackett Associates founder Ben Hackett said. “We are facing shortages in all sectors of the chain: a lack of sufficient shipping capacity, which leads to increases in the cost of shipment; lack of warehousing; lack of truck and rail capacity, and a shortage of labor across the board.”

Meanwhile, ocean carrier Maersk noted that while consumer demand could ease somewhat as consumers opt for in-person services versus online sales, the supply chain challenges will take some time to unknot. 

“As the economy continues to gradually reopen, we do eventually expect consumer demand to slow down as we switch over to a more service-driven economy,” Maersk said in a Thursday customer advisory. “While that should provide for some capacity relief, with inventory levels near or at record low levels, restoration of the same is expected to keep demand somewhat elevated as we look towards 2022.”

Maersk reported that both U.S. West Coast and East Coast ports are experiencing longer wait times for vessels to dock. That congestion, in ports such as LA/Long Beach, Savannah and Seattle, trickles inland amid labor restrictions and limited yard capacity.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.