Arguably, the most exciting development for the railroads since the invention of the diesel engine has been the growth in intermodal freight movements. The intermodal concept is an old one and actually originated when the Chicago Great Western Railway put the first trailer on a flatcar in 1936. It wasn't until 1952, however, that a major carrier, the Canadian Pacific Railway, introduced intermodal as a regular, ongoing service.
While this option gained popularity over the years, the momentum was slow to build. It took until 1993 before we began to see significant growth in intermodal traffic, particularly containers on flatcars. This resulted primarily from the dramatic increase in imports, mostly from Asia, arriving at U.S. ports in containers, as well as the diversion of freight from the highways to the rails. Through the third quarter of 2012, about 58 percent of the containers moved originated offshore, with the remainder originating domestically.
It's not hard to understand intermodal's appeal. The main attraction, of course, is efficiency—fuel and otherwise. A typical intermodal train hauls the equivalent of about 280 truckloads of freight and can move one ton 480 miles on a single gallon of fuel. This, obviously, reduces both carbon emissions and highway traffic.
That hasn't gone unnoticed by the motor carriers. Faced with rising fuel costs and driver shortages (and encouraged by greatly improved intermodal service), truckers have increasingly diverted highway traffic to the rails. J.B. Hunt is a case in point. The J.B. Hunt Intermodal business segment was formed in 1989, when Hunt entered into an agreement with BNSF Railway to jointly market intermodal service. By 2012, J.B. Hunt had over 50,000 53-foot trailers in service, one of the largest fleets of company-owned equipment in North America. On 10 different occasions, JBH has been chosen as Wal-Mart's Intermodal Carrier of the Year, an interesting distinction for a motor carrier.
Rail service has improved greatly over the years, and if current trends continue, intermodal will be an ongoing significant factor in rail revenues and growth. The rail carriers obviously are committed to making this happen. Most of the Class I carriers have spent hundreds of millions of dollars on state-of-the-art intermodal yards. For example, the BNSF Railway, which has already invested in a significant network of intermodal yards, recently announced the construction of still another facility in Edgerton, Kan., at a cost of $250 million. On Jan. 25, CSX announced a new intermodal terminal in Quebec. This 89-acre, $100 million facility will handle 100,000 lifts per year and will connect this region of Canada with NAFTA trading partners in the U.S.
Recently, I had an opportunity to tour the newly opened, $129 million Norfolk Southern intermodal terminal in Rossville, Tenn. This 570-acre site will have a capacity of 327,000 lifts and will be an important part of the NS "Crescent Corridor." This will make the fifth intermodal terminal in the Memphis area alone.
With the significant commitment of the shipping public and both rail and motor carriers, intermodal should continue to increase. Even if imports slow down somewhat, as many think they will, there is little doubt that intermodal service is mature enough to maintain its important and ever increasing role in the supply chain.
Gartner, Inc.
