INTERMODAL AT ROCK BOTTOM

Hit severely by the repercussions of the Covid-19 pandemic, intermodal traffic in the US is going from bad to worse. April volumes hit levels not seen since the start of regular statistics, and May started off with further decline. Rail operators hope that the reopening of the US economy will revive traffic, but many obstacles loom.

 

Weekly traffic updates from the Association of American Railroads (AAR) have tracked a relentless decline. At the end of March, a 15% drop in volumes brought intermodal volumes to levels not seen since the economic crisis of 2008-09.

 

The following month continued the slide, showing a 25.2% drop in rail carloads from April 2019, with intermodal containers and trailers down 17.2% from a year earlier. This marked the lowest level recorded since 1989 and the steepest drop on record.

 

“The pandemic made April a challenging month for rail traffic. The 25.2% year-over-year decline in total rail carloads was the worst decline for total carloads for any month since our records begin in 1989,” said AAR senior vice president John Gray.

 

May brought further grief. In the week ending May 9, car loads ended up 28.4% below the level recorded a year earlier.

 

Adding to the gloom, this was a week in which none of the major commodities moved on rail showed any gains. In April two of the 20 commodities tracked by the AAR (farm products excluding grain and ‘all other carloads’) recorded growth, but other categories suffered heavy setbacks. Motor vehicles and parts were down 86.3%, coal retreated 38% and chemicals fell 11.9%.

 

Automotive traffic and fashion have been hit the hardest, with the latter showing a 50% drop, according to the Port of Long Beach. Automotive was hit hard by the shutdown of car production across North America.

 

Rail operators and ports have pointed to the decline in imports, reflected by the high number of blanked sailings, as the main cause for their woes. According to SeaIntelligence, container lines have blanked 17.3% of trans-Pacific capacity in the second quarter. At the Port of Oakland, 11% of the calls scheduled for May and June have been cancelled.

 

In April, Oakland’s container volume was down 6.5%. The port of Los Angeles saw container traffic shrink 6.4% during that month (with overall volumes off about 15%), while container throughput at the port of Long Beach fell 17.2%.

 

Logistics interest groups in California have sounded the alarm. The California Trucking Association and the Pacific Merchant Shipping Association have warned that the state’s ports were already losing market share prior to the pandemic and should be included in recovery assistance funding.

 

Ports elsewhere have not fared much better. Houston reported a 12.3% decline in container traffic for April. It handled 41% fewer vehicles and steel throughput dropped 50%.

 

East Coast ports, which had been going at full throttle before the outbreak, have also suffered double-digit reverses. At the Port of Virginia, container count for April was down 15.7%, while the South Carolina Ports Authority reported a 13.2% contraction in container throughput.

 

Blanked sailings are hitting hard on the US Atlantic coast as well. At the Port of Savannah, 37 sailings scheduled for May have been blanked – more than 20% of the port’s vessel calls scheduled for the month.

 

After an 8.6% drop in volume recorded in March, the Virginia Port Authority decided to suspend operations at its Portsmouth Marine Terminal effective May 4. The smallest of the port’s three container facilities, it handled one in five vessel calls last year, but that dropped to one in 10 in the first quarter of 2020.

 

The port authority is not expecting to see volume growth in the near term. For the near future it predicted double-digit decline in container numbers.

 

Some rail executives have expressed hopes that the resumption of automotive production in North America will revive rail volumes. However, early efforts have not gone smoothly. A Daimler production plant in Alabama restarted production in late April but had to halt it again after a few days, owing to lack of parts manufactured in Mexico.

 

The government in Mexico City had signalled that automotive factories would be allowed to get back into action on May 18, but three days before that it pushed the date back to June 1.

 

Some forwarders are responding to the double whammy of blanked sailings and limited airfreight capacity with their own solutions. Dachser started a dedicated freighter service from Shanghai and Hong Kong to Los Angeles, and it has expanded its LCL offerings in the US.

 

Guido Gries, managing director of Dachser Americas, cited reduced ocean and air capacity as the reason for this step. “Furthermore, as retailers cancel or reduce orders in response to the economy, many shippers are shifting plans from FCL to LCL,” he added.

 

“Right now, we are often pointing to LCL as the most efficient, fast and cost-effective way to move freight.”

 

By Ian Putzger

Correspondent | Toronto