The Association of American Railroads reported that for the first 40 weeks of 2017, U.S. railroad intermodal volume increased 3.7 percent compared to last year, Canadian railroads by 11.3 percent and Mexican railways by 0.6 percent from the same point in 2016. To provide insights into some of the factors driving growth trends in intermodal traffic this article considers how intermodal rail is influencing Southern California, the Gulf Coast, and the Canadian Pacific Coast markets.
Southern California Container Traffic
On October 12, 2017, the Port of Los Angeles announced that volumes were up 8.2% year-to-date for September, with fewer vessel calls than 2016 but with a new container-per-ship record of an average 8,679 TEUs. Taken at face value, this is positive news since 2016 saw a record-breaking 8.8 million TEUs pass through the port.
An early indication of the impact of the Panama Canal expansion on the ports of Los Angeles/ Long Beach traffic volumes can be seen in the changes in relative costs and transit times since operations began in June 2016.
Davies Transportation Consulting Inc. Principal Phil Davies’ October 18, 2017, presentation to the METRANS International Urban Freight conference revealed that based on US Bureau of the Census statistics, the Southern California container market share fell from 46.2% in the first quarter of 2016 to 44.2% in the first quarter of 2017, a decline of 4.2%. The loss of market share took place because of the significant reductions in both ocean shipping rates and bunker surcharges for East/Gulf Coast destinations.
Davies observed that historically, the competitive position of the US Pacific Coast ports had been eroded by increasing intermodal rail rates. However, this does not appear to have been a significant problem since 2012, and rail rates have moderated since 2015. Davies notes, “I think it’s due to lower fuel surcharge revenues because of low diesel prices. Net rates have continued to climb, and the decline is due to lower fuel surcharges.”
Data assembled by the Association of American Railroads indicates that Chicago (5.8 million containers and trailers) and the Los Angeles/Long Beach region (5.2 million containers and trailers) dominate intermodal traffic in the US. Historically the Midwest accounts for the most substantial portion of both Interior Point Intermodal and transloaded cargo shipped from Los Angeles and Long Beach by rail.
Since the opening of the expanded Panama Canal in June 2016, the ocean freight differential between East Coast and West Coast rates has declined. To date, US intermodal service has not been able to stem the loss of Southern California’s container market share.
US Gulf Coast
Dallas/Fort Worth, the second largest intermodal hub in the United States, is only 246 miles away from the Port of Houston. Houston is the most important port on the US Gulf Coast with two container terminals. American Association of Port Authority NAFTA Region Container Traffic rankings for 2016 indicates that Houston is ranked 10th among U.S container ports with 2.2 million TEUs.
It is the largest Gulf Coast container port, handling 68% of US Gulf Coast container traffic in 2016. With approximately 28 million people, the state of Texas provides a ready consumer and industrial market. European/Mediterranean and South America container traffic account for the most significant shares of container traffic. The Far East and India/Middle East traffic were the next most significant markets.
The near-dock facility adjacent to the Port of Houston’s Barbours Cut facility is the primary water/rail Intermodal Container Transfer Facility (ICTF) in Houston. The rail ramp consists of 42.1 acres with four working tracks, five storage tracks, and 730 wheeled container spaces. The entire premise is paved with concrete and sustains wheeled operations only.
The Port of New Orleans with a local population of 4.7 million people relies on intermodal container service to extend its market reach. The port is the twenty-third ranked NAFTA container port. It is the only seaport in the United States to be served by all six Class-One railroads, which allows customers direct access to a 133,000 mile rail network.
While intermodal rail’s contribution to traffic growth in Southern California and Houston may be muted, expectations at the Port of New Orleans are much higher.
The Port of New Orleans has an intermodal rail terminal adjacent to its Napoleon Avenue Container Terminal providing on-dock access for all rail shipments. The US$25-million Mississippi River Intermodal Terminal opened in 2016. It offers a modern, efficient intermodal container transfer terminal located within the container yard, with on-dock access and improves CN’s link to the terminal.
CN and the Port of New Orleans signed an MOU in 2015 that reflected the railway’s continued focus on developing highly efficient Gulf of Mexico gateway for international trade. JJ Ruest, CN Executive Vice President, and Chief Marketing Officer said, “The expanded Panama Canal is expected to offer greater freight traffic opportunities to the ports of New Orleans and Mobile. Our plan to implement level-of-service agreements at these two ports and raise their involvement in rail transportation should help them take advantage of rising container trade with Asia and South America.”
Intermodal rail’s contribution to port traffic growth faces intense competition. With three inland ports, including the nation’s third and eighth most significant inland ports, the St. Louis region holds an enviable position within that inland waterway system, strategically located in the heart of the nation at the northernmost ice-free and lock-free point on the Mississippi River.
To leverage their strategic locations, the St. Louis Regional Freightway and Port of New Orleans signed a Memorandum of Understanding Aimed at Fostering Economic Growth in 2016. The St. Louis Regional Freightway hopes to capitalize on new container-on-barge services swiftly. The strengthened relationship fostered by the MOU should help to ensure that as growth continues at the Port of New Orleans, it triggers an increase on the inland waterways, and specifically in the St. Louis region.
Read the full article in the October 26, 2017 online edition of Maritime Executive. The content includes intermodal rails’ contribution to Pacific coast container traffic growth.