By Nick Lung.    Photo：Johannes Plenio

Inland-loaded U.S. rail intermodal container traffic is down about 8% from the first quarter of last year and, more surprisingly, 5.7% from the pre-pandemic first quarter of 2020—suggesting that freight demand in the industry has been affected. The challenges are more than simple. Changing transportation demand patterns have weakened the number of routine operations in this mode and may threaten the growth potential in the coming years.

Intermodality as a growth opportunity has long been an issue for railroads. Margins for moving intermodal units are much lower than moving high-margin commodity unit trains, but intermodal should still be a viable path to increased volume and help improve operating margins. The boom in consumer goods should have been a great opportunity for intermodal to shine as trucking rates soared, but congestion around multiple rail points shows how inflexible infrastructure limits growth potential, even in a stable environment. improved efficiency.

Imports have fallen more than 16% since last April as demand has shifted slightly away from the West Coast. A sharp drop in imports is to blame for intermodal operators in the short term, with some recovery expected as inventories stabilize. While that expectation is correct, the longer-term concern is how much potential remains as the macro environment changes.

Railroads benefited from a more than 20-year period of growth during which U.S. companies increasingly sourced goods from China. Now, political pressure is pushing them to abandon China as a major source of goods. While moving supply chain infrastructure is a multi-year long-term investment, rail transport doesn't have many options in the supply chain. The concept of Precision Scheduling Rail (PSR) has helped railroads achieve extreme operational efficiencies, and while less intermodal volume does not spell the end of railroads, it may mean they will need to find ways to accommodate long-term revenue growth.

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