Intermodal

Intermodal loadings up 0.2% in June

Intermodal growth slowed in the second quarter. Seasonally adjusted performance has been flat since the beginning of the year. Good year-over-year growth is still in evidence, but it is mainly the product of growth that occurred more than six months ago. Sufficient truck capacity and lower fuel prices are two factors contributing to the slowing. Overall performance remains solid, however. Since a 1.2% surge in April rail intermodal loadings have been essentially flat, up just 0.2% from May to June. Seasonally adjusted loadings were at 1.040 million. Year-over-year growth continues to improve after hitting a recent low in April. Growth hit 5.1% in June after growing 4.0% in May. The year ago comparisons will continue to get easier during Q3.

Raw volume registered gains in June for the second month running. But volume is essentially flat on a seasonally adjusted basis. Year-over-year comparisons remain positive; however, much of the gains appear to have occurred back in late 2011.

Outlook
The forecast for intermodal loadings originated has been relatively stable over the last several months. With the second quarter coming in a bit higher than expected, this moved the full year forecast higher. Demand for intermodal is expected to grow a healthy 5.3% this year, with additional growth of 4.5% in 2013, and 4.7% in 2014.

Analysis

The latest data is leading us to a cautious conclusion. Although the year-over-year comparisons continue to look good at mid-year, it appears that much of the growth action occurred nearer to the end of last year, and that growth has now stalled. This is particularly true on the Domestic side which had been the intermodal growth star. Now that we have Q2 under our belts, we can state that Q2 Domestic volume was 5.5% higher than Q1, which sounds good until you realize that normal seasonal growth would produce a 6.0% gain. Low fuel prices and better availability of trucks appear to be creating some headwinds that are holding back conversion from OTR. This is confirmed by our market share estimates which show a slight decline in Intermodal share from Q1 to Q2. Certainly a situation that we will be following closely over the next few months.

Train speeds are stable at levels higher than last year. Domestic container volumes are stable as year-over-year comparisons ease but remain over 10%. Through the first half of 2012 volume is up 13.9%. Intermodal’s market share growth has stalled, and Domestic share actually ticked down a hair in Q2.

AAR weekly data provides the most timely information on recent intermodal activity. Data is issued on Thursday of each week covering the prior week’s movements.

No slowdown here: Recent AAR weekly figures indicate that N.A. intermodal growth is running about 6% ahead of last year. However, volume remains at the same level as 10 weeks ago.

Comparison with pre-recession activity levels: Comparing the current 4-week moving average volume with the average for the same period for the years 2006 through 2008, North American comparisons have narrowed slightly to just under 8%. U.S. comparisons are 3.3% ahead of pre-recession levels.

Canadian rebound eases: After spiking strongly in the wake of the Canadian Pacific work stoppage, year-over-year comps are coming back to earth. Recent volume has been flat.

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