Intermodal rates accelerated during Q2
August 31, 2011
Intermodal base rates are rising faster than truck, but if fuel surcharges are factored in, the rate of increase is on par with truck. Intermodal rates are rising faster than carload rates. Year-over-year rate growth accelerated during Q2 and will remain strong through the end of the year.
Intermodal rates are accelerating due to increases in rail/truck costs. Shorter-haul rates will be most sensitive to increasing truck rates. Longer haul rates will respond to increases in both trucking dray costs and underlying rail line haul cost increases.
The slower economic growth has not affected the ability to capture rate increases. The high fuel costs during much of the first half of 2011 could have been a small catalyst to utilize more intermodal, thereby raising the rate potential. Carriers (both truck and rail) still retain strong pricing power and that will filter through to the intermodal sector.
As usual, intermodal rates will generally mirror TL rates. This is because of competitive pressure, and because truck costs make up 40% of intermodal costs.
There is a declining potential for equipment shortages this year. Rates had been under pressure from container shortages. There is considerable upside potential for rates should truck rates spike when HOS rules are implemented. Shorter haul intermodal rates will rise in 2011 and 2012 as fast as the increase in truck rates will allow. Long-haul rates will also increase, pushed up by increases in underlying rail costs.
The next 2 years should see an extended period of very strong rate increases, across many modal options. After dropping 6.5% in 2009 rates rebounded 7.2% in 2010. We expect rates to end the year up nearly 9% for 2011, with somewhat slower gains of 5.4% in 2012 and 6.3% in 2013.
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