News / Trucking pressures raise allure of intermodal

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North American rail carriers sense an opportunity to grab market share from truckers besieged by high fuel costs, with rising tender rejections and rate hikes caused by shrinking capacity only further undermining truckers’ appeal to shippers.

Washington’s aggressive drive to weed out non-domiciled truck drivers and those with poor command of English is taking a toll on the US trucking market. Despite tepid demand, shippers find it harder to get capacity, which is reflected in tender rejection rates that have climbed into double digits beyond the rate seen during the holiday peak.

After years in the doldrums, spot rates have climbed, and the momentum has gained fresh impetus from the soaring oil price, which averaged $5.375 per gallon for diesel at the start of this week, 30 cents higher than on 16 March. Dry van spot rates are up 20% year on year.

Rail spot rates, on the other hand, have been stable. Intermodal traffic was relatively steady through the winter and has picked up in recent weeks. In the week ended 14 March US intermodal volume was up 1.1% year on year.

“Rail spot pricing is expected to remain relatively stable through early 2026,” CH Robinson told clients in February.

With the spread between truck and intermodal rates widening, the latter becomes a more attractive option. InTek Logistics noted that on 23 March the average domestic intermodal spot rate was down 1.2% from the previous week, 7.1% lower than a year ago, whereas the national truckload spot rate had climbed 1% from the week before and was 2.9% higher year on year.

“For shippers, this is a moment to review landed-cost models with fuel sensitivity built in across multiple scenarios,” it advised clients.

Moreover, industry experts have warned that the soaring fuel costs heap additional pressure on struggling small trucking companies and will likely accelerate exits from the industry, resulting in further capacity contraction and upward pricing pressure in trucking.

Mark George, CEO of Norfolk Southern (NS), commented that fuel cost pressure on truckers could blunt competition for the rail carriers.

“We’d love to see some evacuation of capacity in trucking. Maybe this helps accelerate the evacuation of some of the smaller players who can’t sustain the fuel spikes,” he commented.

Railways are responding to the situation. In the intermodal section of it its Q1 market report Uber Freight noted that “railroads are actively enhancing service offerings”. In February NS launched a new intermodal product in tandem with CMA CGM. The service, which is marketed as a move resembling trucking products, uses 40-foot high-cube containers and operates door-to-door.

Intermodal growth potential has also been a theme propagated by NS and Union Pacific (UP) in their merger plans. Speaking at the JP Morgan Industrials Conference on 18 March, UP CEO Jim Vena said that the planned merger to create the first transcontinental Class I rail carrier would convert 2m truckloads to rail. He went on to explain that the pair have the capacity to shoulder this with precision scheduled railroading, a concept that is popular with investors but viewed with scepticism by shippers as it aims to boost train length to reduce the number of trains in service in order to improve the operating ratio rather than expand capacity. The fact that previous mergers resulted in deterioration of service levels has also been pointed out by cargo owners.

Shippers are not rushing to intermodal solutions. Intermodal heavyweight JB Hunt Transport Services recently noted that shippers have not shifted significant volumes from road to rail. Darren Field, head of the logistics firm’s intermodal division, commented that most clients do not believe that energy markets have experienced a fundamental structural shift.

Uber Freight expects to see a change in shipper strategy and advises cargo owners to make a move.

“Intermodal rates tend to lag OTR rates by 6-12 months, and they will begin to increase over the coming months. Secure intermodal capacity now while capacity is plentiful and rates are still low,” its analysts advised cargo owners in its Q1 market report, adding that some customers are already locking in lower intermodal rates.

“Intermodal economics can flip quickly. Shippers are watching intermodal as a cost lever, but many still benchmark it to current OTR rates rather than where OTR is likely headed, underestimating how fast relative economics can flip,” Uber Freight’s analysts noted, adding that intermodal pricing is expected to rise 3-5% as truckload capacity tightens.