Intermodal freight volumes improve, truck tonnage falls in July

Intermodal volumes improved between June and July as truck tonnage declined over the same period, analysts said. However, intermodal and truck freight volumes continue to remain below 2019 levels.

The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index fell 5.1% in July, from June. The index fell 8.3% in July, from the same month in 2019.

“After a very strong June, for-hire contract freight tonnage, which dominates ATA’s index, slipped in July for a couple of reasons,” said ATA Chief Economist Bob Costello. “It is likely that tonnage was down because many fleets didn’t have the capacity to take advantage of stronger retail freight volumes. Therefore, much of that overflow freight moved to the spot market, which did increase in July.”

Dry van spot rates rose 12.2% between June and July, according to DAT Solutions. The rates were up 10.3% in July, from the same month in 2019.

“Other ATA data shows that for-hire truckload fleets are operating 3% fewer trucks this summer than a year earlier, so it can be difficult to take on a significant amount of additional freight,” Costello said. “Also, while retail volumes have snapped back strongly, manufacturing output and international trade freight is lagging well behind.”

Between January and July, the For-Hire Truck Tonnage Index has fallen 3.2%, from the same period in 2019. The trucking industry carries 72.5% of tonnage transported by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 11.84 billion tons of freight in 2019.

With truck rates up in June and July, intermodal shipping is expected to be a more economical option for shippers in the third quarter, according to a recent Journal of Commerce research note. Shippers will likely save more money on rail through September because of the higher trucking rates.

Intermodal contract rates have been set for the year, while truck contract rates rose in June and July, from the preceding months, according to the note.

Total intermodal volumes declined 11.9% in the second quarter of 2020, from the same period in 2019, according to the Intermodal Association of North America. Domestic containers and trailers declined by 7% and 14%, respectively. International shipments decreased by 15.4%.

“Second quarter results showed the full impact of the economic downturn attributed to COVID-19,” said Joni Casey, president and CEO of the Intermodal Association of North America. “Slowing imports and declining diesel prices affected both international and domestic volumes. We anticipate that the Q2 drop-off should be a floor going forward.”

In a recent note on the railroad industry, analyst Justin Long and associate George Sellers, both of Little Rock-based Stephens Inc., said second-quarter earnings for the sector was “better-than-feared.” The impacts of COVID-19 hit a floor in April, the freight market started to improve into the second quarter compared to the previous period and most companies reduced costs at a rate that exceeded expectations, Long and Sellers said.

Most companies in the sector have withdrawn their guidance, but “the level of cautious optimism has improved although the rise in the COVID-19 cases and the presidential election clearly remain swing factors,” the analysts noted. “Looking ahead, we remain positive on the rail / intermodal sectors over the next 12+ months but are more hesitant on the transportation equipment sector as we expect a more prolonged recovery in these markets.”

Rail volumes improved in June and July, with volumes so far in the third quarter down about 9%, from the same period in 2019, according to Long and Sellers.

Recently, intermodal providers, including Lowell-based carrier J.B. Hunt Transport Services Inc., reported second-quarter results that exceeded expectations. The carrier’s intermodal volumes fell 1.5% in the period, from the same period in 2019, but management projected in the first-quarter earnings call the volumes would be down double digits, said Long and Sellers. The carrier’s intermodal segment comprised half of its revenue and 61% of its operating income in the second quarter.

The Stephens analysts were positive on the outlook for intermodal as volumes and pricing should improve following an improvement in the truckload sector over the past several months.