Intermodal loads rose 0.4% in February

Domestic intermodal volume increased in a month that is normally the year’s weakest. Total intermodal volumes rose 0.4% in February after dropping 3.2% in January. Seasonally adjusted loadings were at 1.022 million and year-over-year growth improved slightly to 4.9%. The year ago comparisons will get tougher for the next 2 months before becoming easier for the balance of 2012. The outlook for 2012 and beyond is nearly unchanged but there is some additional upside to the outlook.

According to IANA data raw volumes were down once more. After accounting for seasonality, February was improved from January. Domestic volume increased in a month that is normally the year’s weakest.  International dropped but no more than normal for February. Although not a record in raw terms, February was strong enough that on a seasonally adjusted basis it was the strongest month in history for both Total and Domestic revenue movements.

Chinese New Year and Weather considerations: The Chinese New Year fell in late January this year, versus mid-February last year.  Given the on-the-water time lag, February results should have been depressed this year, but International held steady on a seasonally-adjusted basis—a good sign.  Mild winter weather this year probably helped February results as well.

Outlook
Intermodal data being released in early 2012 from both the Intermodal Association of North America (IANA) and the Association of American Railroads (AAR) continue to confirm our near-term expectations. Also, the economy is behaving as expected. Thus, the forecast is basically unchanged with the expectation of growth near 5% through 2014.

Intermodal loadings are forecast to continue a string of record-setting levels in 2012, especially in the domestic movements. It will continue growing over the next two years at a similar rate. After dropping 14.3% in 2009, volumes rebounded strongly in 2010 and surged 14.1%. The pace of growth slowed during 2011 but remained above trucking, rising 5.6%. The growth rate remains above that of trucking and we expect growth to maintain that advantage for the next several years, growing 5.7% in 2012, 5.3% in 2013, and 5.4% in 2014.

Analysis
East Coast Port Strike? There has not been a dock strike on the East Coast for 35 years.  But recent bellicose comments by the head of the International Longshoremen Association (ILA), Harold Daggett, are raising the real possibility of a work stoppage affecting East and Gulf coast ports when the current agreement expires at the end of September.

Forward-looking shippers are already beginning to make contingency plans to deal with the potential disruption.  Just the prospect of a potential work stoppage will soon begin to have significant effects on the flow of international containerized freight.  We can expect to see two main effects:

1. Shippers will shift routings to favor West Coast ports wherever possible.
2. Freight will move earlier this year to be better positioned to weather volume-related disruptions.

Unless the potential conflict is settled soon, brinksmanship will begin to exact a real and increasing cost.

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.

Chinese New Year effect: The results of the China shutdown can be seen clearly in the weekly figures, which reflect the slowdown in activity during weeks 7 and 8 (late February).

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 are running two to three percent ahead of pre-recession levels.

Canada outperforming US: Canadian year-over-year comparisons continue to look much stronger than the U.S.  But Canadian volume is tailing off while U.S. volume appears to have stabilized.  Some of the perceived Canadian improvement may still be an artifact of better operating conditions and the CP recovery.

NOTE:
Intermodal is rail intermodal units originated, seasonally adjusted. It contains International and Domestic containers as well as Trailers shipped via rail. The transfer of a container or trailer to another railroad for the purpose of terminating the shipment or passing it to another railroad is only counted as one loading. Intermodal is defined as a movement of a container or trailer via more than one mode of transportation (i.e. rail and truck).