Rail intermodal volumes were off in Q1 2022, but they may be turning a corner

Intermodal volumes declined in first-quarter 2022 at most North American Class Is. Ian Dewar / Shutterstock

By Julie Sneider, Senior Associate Editor 


During first-quarter 2022, North American railroads’ intermodal traffic declined a combined 7.5% to 4,059,581 containers and trailers compared with the total from the same period in 2021, according to Association of American Railroads (AAR) data. 

A closer look at the numbers shows: 

• U.S. railroads’ intermodal volume fell 7% to 3,099,667 units versus Q1 2021’s total; 

• Canadian railroads’ intermodal volume plunged 10.4% to 771,776 units; and 

• Mexican railroads’ intermodal volume dipped 2.7% to 188,138 units. 

To get a better understanding of the factors influencing current North American intermodal trends, RailPrime recently interviewed Todd Tranausky, vice president of rail and intermodal at FTR Transportation Intelligence. Tranausky hosts the Rail Market Update on FTR’s weekly “State of Freight” podcast, available at www.FTRintel.com/Podcast

RailPrime: Before we talk about 2022, let’s review how intermodal volumes performed in 2021. The Association of American Railroads described last year as the second-best year ever for intermodal, behind 2018. Why was that the case? 

Tranausky: There was such strong demand for consumer goods coming out of the pandemic. Everybody wanted consumer goods and they wanted them now, and shippers found capacity wherever they could get it. On the whole, 2021 was a good year for intermodal. But I would also say that it was a tale of halves: The first half of 2021, things went gangbusters. The second half really didn’t achieve that same level of growth that you would have expected given the demand environment. 

If you look at volumes on an intermodal basis [from] July 4th through end of the year, you could almost draw a straight line all the way across. That's not normal. 


RailPrime What caused that lack of growth in intermodal volume during 2021’s second half? Were supply-chain issues primarily to blame? 

Tranausky: It was a host of reasons. Certainly, you had the ports contributing to it with their backlogs. The railroads had their own backlogs at their inland terminals and [challenges] getting containers off to shippers. You also had the issue of railroads not having enough operating personnel to be able to move all the freight that was available. 


RailPrime In first-quarter 2022, intermodal seemed to be a drag on overall rail traffic numbers, at least according to AAR’s figures. Yet in your last two podcasts, you seemed more optimistic about what’s happening in intermodal, even though AAR’s total figures don’t yet reflect that. What’s making you a bit more positive about intermodal?  

Tranausky: It really depends on how you look at the numbers. Compared to last year, looking where we were versus where we are now: Yes, it’s been a first quarter that’s been below where we were last year. But remember in the first half of 2021, we were moving every box we possibly could. We were going gangbusters, so it’s hard to repeat those levels. 

If you look at those levels in context, if you look at the five-year average level, we’ve been at about historical norms except for the last three weeks or so, where we’ve seen an uptick to a place between the five-year average and last year. And that is encouraging for intermodal — again, because the demand environment is still in place. You still have strong import numbers, you still have a strong desire to move freight, you still have an environment where intermodal is in a positive place relative to its truck competition. 

Todd Tranausky "You still have an environment where intermodal is in a positive place relative to its truck competition." — Todd Tranausky, FTRftrintel.com

RailPrime In one of your recent podcasts, you mentioned that ‘unfortunately,’ any growth in intermodal is coming from containers. Why is that an unfortunate situation? 

Tranausky: Because you want to see both sides of the business grow. Granted, trailers are a small piece of intermodal. But you expect that a rising tide would lift all boats. In 2022, we really haven’t seen trailers participate in a meaningful way. We're below the five-year average, we’re below last year. We haven’t seen trailers perform at historically average levels.  

You would expect with diesel prices running up you would have expected to see some truckload carriers, instead of trucking that trailer all the way across the country, to use rail for the long-haul portion of that move and we haven’t seen any indication of that happening. That's abnormal. 


RailPrime Does or will the increase in fuel prices help move more truck business to rail?  

Tranausky: It certainly helps the competitive balance picture. Now, the same things that held rail back in 2021 could potentially hold rail back this year, next year and beyond. It really comes down to the railroads being able to get service up to acceptable levels.  

Really, since we started to come out of the pandemic, rail service has not been where even the carriers want it to be. I think everyone — even the carriers recognize there needs to be improvements made there. If the railroads make those improvements, that will help shippers feel comfortable moving more volumes back to intermodal even in a high fuel price environment where rail should have an advantage. 

It’s possible that service could be a headwind over time and not allow rail to capture the volumes that naturally should come to them. 


RailPrime Are those service issues primarily the result of the railroads’ employment reductions when they transitioned to PSR? 

Tranausky: It is an employment issue and it is a resource issue, certainly. If you look at the Surface Transportation Board employment numbers, if you look just at the number of the engineers and conductors actually moving the freight day in and day out, [the employment numbers] are not even back to where they were going into the pandemic, let alone where they were in 2019 before precision scheduled railroading took over. So, there’s a huge gap there. ... 

Now, there are reasons for that: In a tight labor market across the economy, those folks who got laid off may have gotten jobs in other industries. They aren’t waiting for the railroads to call them back. 


RailPrime During first-quarter 2022, all the Class Is except Kansas City Southern and Kansas City Southern de Mexico posted decreases in their intermodal volume. Why?  

Tranausky: KCS and KCSM are unique in terms of their intermodal profile and business. They are highly leveraged to Mexico. One thing we haven’t seen this year that we saw coming out of the pandemic is the protests in Mexico that blocked the rail lines and made it very hard for the railroads to move goods. So, the first quarter this year really didn’t have the same level of disruption that we’ve seen over the last 18 months. My take on that is that KCS and KCSM were able to run a more fluid, more normal schedule than they had been able to over the last 18 months. 


RailPrime How might inflation — now at a rate unseen in decades — impact intermodal traffic?  

Tranausky: From an intermodal perspective, the biggest risk is if consumer spending comes down. … If consumer spending takes a downturn in the next several months, it could have a dramatic effect on the freight markets, both on the truck side and the intermodal side. 


RailPrime What rail traffic trends — both carload and intermodal — will you be watching over the next few quarters? 

Tranausky: What I want to see is whether intermodal can get back to where we were in the first half of last year, particularly during the second quarter. I think we’re going to continue to see domestic outpace international; I think we’re going to continue to see transloading take off, particularly out of California. …  

On the carload side, I’m going to be looking particularly at those sectors that are more closely tied to the underlying economy [like] lumber and wood and metals. I will not be looking so much at things like coal, which is tied to a commodity price; or grain, which is tied to a commodity price; or petroleum, which is tied to a commodity price.