News / US rail giants link up to play the intermodal card amid merger pursuit

© Jonathan Weiss

Class I rail carriers CSX and BNSF are linking up through new joint intermodal offerings  on Friday they announced direct coast-to-coast domestic services.

These include services from southern California to North Carolina and Florida, connections from the port of New York & New Jersey to Virginia and Missouri, and a planned service between Phoenix and Atlanta.

In addition, the pair plan to install two 10,000ft sidings in Arizona for ‘smooth meet/pass operations’ on the route connecting to the Los Angeles-Chicago rail corridor.

Jon Gabriel, BNSF’s group VP of consumer products, said: “We are looking forward to these offerings providing immediate, streamlined service to the supply chain across key markets nationwide.”

BNSF and CSX are under pressure to hook up in response to the proposed $85bn merger of rival Union Pacific (UP) and Norfolk Southern (NS) that aims to create the first transcontinental US rail operation. Echoing criticism of CSX’s management, activist investor Ancora urged the rail carrier’s leadership to pursue merger negotiations this month, repeating its efforts last year to trigger change on the NS board.

The UP-NS marriage is not a done deal, although an endorsement from US commerce secretary Howard Lutnick suggests a favourable view in Washington. The proposal has drawn opposition from unions as well as shippers. The Freight Rail Customer Alliance, which represents over 3,500 companies, has slammed it as a move towards higher costs and unreliable service, and argued that consolidation in the rail sector had tilted the playing field in favour of railways and investors.

“Shippers, particularly captive shippers, need guaranteed competitive solutions that are workable, effective, and enforced by the STB,” Emily Regis, the group’s president, said. “Even if this imperative can be achieved in a transcontinental merger, there are concerns about how long it would take for the improvements to be successfully implemented and whether the integration problems and service meltdowns of past mergers can be avoided.”

The Surface Transportation Board’s 2001 merger review rules require railroads to show that their combination would enhance competition — not merely preserve it — and to be in the public interest.

UP and NS have argued that their merger would eliminate bottlenecks in locations like Chicago and New Orleans, and that the transit time for a shipment could be reduced by one or two days.

Hub Group, one of the major intermodal companies in the US, has taken a similar view. It said: “The announced transaction would further accelerate our long-term growth opportunity. Specifically, a transcontinental network removes friction in gateways, reduces transit times, provides access to new markets, and increases competition with truck volume through new single-line service.”

Rivals JB Hunt and Schneider face some awkward choices if the four US Class I railways do align. The former is allied with BNSF in the west but uses NS primarily in the east. Schneider currently uses UP and CSX. Neither has commented thus far.

The intermodal sector has been a bright spot for US rail carriers this year, notwithstanding some ups and downs. Globally, its future looks bright, according to the Intermodals Market Outlook 2025-2034, recently published on Research & Markets. Its authors predict compound annual growth of 14.6% over the period, from $28.3bn this year to $96.4bn in 2034.

They see growing adoption of intermodal services (especially in the Asia Pacific region) “due to their efficiency in long-haul freight and ability to reduce carbon emissions”, with further impetus from investment in inland ports and from container standardisation, automation and real-time tracking technologies.

North American intermodal volume was up 4.4% year on year in July, according to the Intermodal Association of North America (IANA). Whereas trailer volume dropped 13.6%, the domestic container count rose 1.4% and international container traffic climbed 8.4%.

Through the first seven months of the year, total volume was up 4.3%, IANA records show. A 20.7% drop in trailers was compensated by a 3.7% gain in domestic containers and a 6.5% increase in international boxes. The second quarter showed an overall gain of 2.4%, which marked the seventh consecutive quarter of annual growth.

The bright picture masks some volatility, however. After a strong May, North American intermodal volume slipped 0.5% in June, reflecting the slowdown in waterborne imports as the initial implementation date for US tariffs on imports from China approached, while the rebound in July was caused by the postponement of tariffs. IANA numbers for August show slight declines, in line with slowing throughput at US ocean gateways.

A recent report on the sector from Descartes sees headwinds in the near future, concluding that the spike seen in July “likely represents a high watermark rather than a sustained trend, as looming tariff expirations and slowing demand point to potential declines in the months ahead”.