Intermodal Challenges Persist

2021 was a challenge for the intermodal industry. Coming off the pandemic-dented 2020, 2021 dawned with the promise and hope of better consistency and growth for intermodal and the supply chain in general.

Those hopes largely held up through the first half of the year, as volumes ran at consistently strong levels even as service struggled beginning in February. But the second half of the year shattered those illusions that 2021 would be able to deliver a calmer, strong-growth year for intermodal.

Volumes never recovered in second half

Intermodal volumes never recovered in the second half of 2021 to the levels they reached in April and May as chassis availability, labor availability at rail yards, and overall rail service dented intermodal’s competitiveness.

Despite a positive, competitive position relative to the domestic truckload market for most of the year, volumes in the second half of 2021 were never able to regain the levels they posted in the first half. In fact, Association of American Railroads loadings figures held nearly flat except for holiday weeks from the July 4th holiday through the week ended December 18. Such consistency is not caused by normal demand and is a testament to the capacity caps that were present in the intermodal supply chain during the year. Several railroads took the almost unprecedented step of curtailing intermodal shipments from west coast ports over the summer to mitigate rampant congestion that was mounting at their inland facilities.

Despite hope that 2021 would lead to sustained strong growth coming off 2020, volumes turned negative year-over-year with international leading the way as transloading increased.

Increased focus on demurrage

Demurrage and storage costs became a larger-than-life issue during 2021, with ports seeking to impose storage fees on ocean liners whose containers dwelt at the port for longer than a set amount of time. Ocean carriers said those fees would be passed through to the beneficial cargo owners whose cargo was in the containers. The largest port complex, Los Angeles and Long Beach, ended up threatening but never actually implementing the surcharges, though other ports did. Several shippers faced significant railroad demurrage bills during the year after not being able to retrieve their containers from railroad facilities that were overwhelmed with volume.

Overall rail service issues frustrated shippers

Rail service pervaded shippers’ experience of intermodal throughout the year, as service deteriorated after severe weather in February blanketed the country and things never really recovered.

Intermodal train speeds varied by carrier, but on a networkwide basis spent the year at or below their five-year average. This left shippers searching for capacity throughout the year and lessened intermodal’s competitive advantage relative to the domestic truckload market. Particularly in the east where service issues have been heard to be more acute, there has been some freight that has moved back to truck and away from intermodal in response to the railroads’ issues. One eastern carrier recently told the Surface Transportation Board that its service was not up to its own or its customers standards and that it was working to resolve the issue.

Potential for lasting damage in 2022

The intermodal industry’s service and congestion issues are not over. The first half of the year is likely to be marred by more of the same, as the number of ships off U.S. ports remains elevated and railroad service holds at or near historical averages. Railroads, like many sectors of the economy, have had difficulty attracting and retaining operating employees which could cause their service issues to drag on well into the future.

Shippers, for their part, have a long memory when it comes to service disruptions. All of intermodal’s stakeholder groups will need to come together to rebuild the damage that port congestion and rail service disruptions caused to shipper confidence to regain the volumes achieved in the first half of 2021.

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