Intermodal loadings growth below expectations

After a small decline in March intermodal volumes did rise in April but well below expectations. Rail intermodal loadings increased 0.4% from March to April. This followed a drop of 0.3% in March and a gain of 1.0% in February. Seasonally adjusted loadings were at 1.028 million. Year-over-year growth has slowed noticeably, rising just 2.1% in April. The year ago comparisons become easier once we get past May. Some softening in intermodal economics has moved the outlook down but is still showing robust growth.

According to IANA data raw volumes were down in April after an increase in March. Domestic volume dropped sharply from March to April, giving back most of the March increase. Year-over-year gains continued to retreat down to low single-digits. International volume was nearly unchanged from last month and year-over-year volume is showing small but steady improvement.

Seasonally adjusted volume on the domestic side has declined for two months running and stands roughly back at January levels. Year-over-year improvement has narrowed sharply in the past two months. International showed a small seasonally adjusted decline and volume has been relatively stable so far this year.

Outlook
The intermodal forecast moved noticeably lower this month, after being relatively stable over the last several months. In that time, the underlying economic fundamentals have started to ease some. Also, April data came in below expectations. As such, the forecasted growth was pulled down. Even with the adjustment to the forecast, the industry is still looking at healthy growth over the next several years. 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%. Demand for intermodal is expected to grow 4.8% this year, 4.3% in 2013, and another 4.7% in 2014.

Analysis
Although International volumes fell back somewhat in April, it is worth noting that March’s seasonally adjusted International volume was the best since July 2008.

53’ trailer volume continues to drop, and the year ago comparisons have turned negative for the first time since the recovery began. However, service metrics continue to look good. Train speeds are slowing slightly but remain higher than last year.

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.

Consistent and favorable: Recent AAR weekly figures indicate that N.A. intermodal activity is ramping back up a bit, with the most recent four-week rolling average coming at about 6% ahead of prior year.

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 continue to run about 6% higher. U.S. comparisonss are 3% ahead of pre-recession levels.

Canada outperforming US: Canadian year-over-year comparisons continue to look much stronger than the U.S. with the recent four week rolling average in the range of +11%. Late May figures can be expected to drop, however, due to the disruption of the Canadian Pacific strike.

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).