csxt_southbound_freight_train

For long-suffering rail customers in the US, further grief is on the horizon.

From September 17, those which have to move traffic across Chicago on Union Pacific and CSX will face a costly slalom on nearly 200 routes.

The two Class One rail companies are scrapping transfers on 197 origin/destination pairs next month, after they failed to reach an agreement how to handle changes brought about by the eastern carrier’s shift to precision railroading.

As a result, shippers have to make their own arrangements to move the boxes across the Chicago area in-between the respective rail sections.

Not surprisingly, it is yet again the Chicago area that emerges as a stumbling block for shippers using rail.

To move through this notorious bottleneck they face a choice of either longer transit times or paying hefty fees: to the railroads for offloading and re-loading their cargo and to truckers hauling it between the pair. Drayage rates range from $80 to $300.

Most shippers will have to grit their teeth and bear the misery, as alternatives are few and far between in an exceedingly tight market. In July, drayage capacity utilisation was at twice the normal level for this time of the year, and it is expected to get even tighter into the peak season.

Using alternative rail carriers – where possible – is equally challenging, given strong loads in this mode. Moreover, the rail companies have struggled with performance.

A year ago service complaints filed with the Surface Transportation Board doubled. Average train speeds have deteriorated steadily and are down 5% from the beginning of the year.

According to the American Trucking Association, truck tonnage was up 8.6% in July. The CASS Truckload Linehaul Index for the month is up 10.2%. It has now risen year on year for 16 consecutive months.

The US trucking sector is squeezed by a combination of strong demand, the driver shortage and the impact of the electronic logging mandate that has stretched transit times and made truckers reluctant to take on shipments that might push the envelope.

Above all, however, the US economy has kept chugging along. July marked the 23rdconsecutive month of growth in the Purchasing Managers Index, with 17 out of 18 manufacturing sectors in expansion mode.

Intermodal numbers also reflect a robust market, although they lag trucking growth. The Intermodal Association of North America has reported a 6.8% rise in traffic for the first seven months of this year, with marine container volumes up 6% and domestics intermodal containers 6.2% higher than a year ago. Six major intermodal lanes registered double-digit growth in the first half of the year, according to the organisation.

The CASS Intermodal Price Index for July was up 12%, having registered increases for 21 consecutive months. In light of the current trends, this upward trajectory is likely to continue in the coming months.

In an earnings call following the release of its second-quarter results, the management of Hub Group expressed expectations of a very strong peak season. For the intermodal services firm, the market has been good. Revenue in the second quarter rose 28% and operating income soared 93%, while the gross margin was up 34%.

For shippers, the peak season is more likely to be a nail-biter, with painful logistics cost increases.

COMMENTS 3


Leave a Reply

  • Aaron

    August 29, 2018 at 7:43 pm

    The shipping industry needs a change.

    Reply
  • Richard Hagemeyer

    August 30, 2018 at 3:19 pm

    The lead off paragraphs in this article could have been factually presented but was not. It is full of scare, fear and innuendo. As someone who has been in intermodal shipping in the US for 30 years, I realize that articles like this are way Europeans do not understand America’s freight rail system. The event discussed is an attempt by CSX to fix the problem this writer is shaking his head over. Oh well.

    Reply
  • Lewis Johnson

    September 18, 2018 at 2:24 pm

    Looks like the prices will be rising again.

    Reply