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September 3 2018

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September 3 2018 | The Journal of Commerce 47 www.joc.com Land Lines Lawrence J. Gross THE RECENT ANNOUNCEMENT of the imminent cancellation of interline service on nearly 200 joint Union Pacific Railroad-CSX Transportation lanes transiting Chicago promises to scramble peak-season plans for many intermodal shippers. But setting the near-term disruption aside, what does it say about the ability for intermodal to grow longer term? It will likely result in further concentration of in - termodal share in a relatively smaller sliver of the total market. Gross Transportation Consulting has teamed up with Noel Perry of Transport Futures to produce what we believe is the first-ever measurement of intermodal market share by mileage range. Figure 1 sets out the distribution of US dry van and reefer freight by mile - age range. The green columns show the percentages for all such truck moves, while the gray columns exclude local and short-haul truck moves of less the 250 miles from consideration. Of the roughly 111 million dry van and reefer heavy duty truck moves that occurred in the United States in second-quarter 2018, about 50 million truckloads (46 percent) moved 250 miles or more and therefore might be considered "intermodal-eligible." The mileage distribution for truck follows a very familiar and straightforward pattern. The longer the haul, the fewer trucks are moving. Indeed, only 3.6 percent of all intermodal-eligible truck moves took place between 2,000 and 2,500 miles. The teal columns present similar data for intermodal. (These percent- ages are approximations that were produced by reviewing the IANA ETSO US region-to-region intermodal data and assigning a mileage range to each region-pair.) Figure 2 combines these statistics to produce a rough idea of intermodal market share by length of haul. The results are striking. Overall intermodal share was about 10.1 percent of all dry van and reefer truck moves of more than 500 miles in second-quarter 2018 and 6.8 percent of such moves over 250 miles. (These figures are lower than previously published numbers, mainly because of the inclusion of reefer truck volume in the totals.) Intermodal share in the 2,000- to 2,500-mile range towers over all other ranges at more than 42 per - cent. In distant second place are 750- to 1,000-mile hauls at about 12 percent. A simplistic look at intermodal economics versus truck would lead one to expect that intermodal share would rise as length of haul and the percentage of low-cost rail miles increases. But, obviously, things don't work that way in the real world. For example, intermodal share in the 1,000- to 2,000-mile range is lower than the 750- to 1,000-mile range. Interchange appears to be the issue. Rubber-tire interchange across Chi- cago versus steel-wheel interchange adds two lifts (off and then back on) at about $50 each, plus the cost of the cross-town dray ($100 to $300, depending on which terminals are involved). The total is somewhere in the range of $200 to $400. For a long-haul move of 3,000 miles, that works out to a perhaps-tol- erable 6 cents to 12 additional cents per mile. But for a haul of 1,000 miles that happens to traverse Chicago, it means a likely prohibitive 20 to 40 cents addi- tional per mile. Intermodal appears to work best when only one railroad is involved and there is no interchange. The industry just doesn't seem to cope very well with interline and the task of dividing both the required work and revenue to everyone's satisfaction. JOC Contact Lawrence J. Gross at lgross@intermodalindepth.com and follow him on Twitter @intermodalist. Interline woes 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Local 80-250 251-500 501-750 751-1,000 1,001-1,500 1,501-2,000 2,001-2,500 >2,500 Total Truck Dry Van + Reefer Dry Van + Reefer >250 Mi Intermodal Fig. 1 Longer hauls shift to rail Source: Transport Futures, IANA ETSO Data, Gross Transportation Consulting © 2018 IHS Markit US origin and destination dry van and refrigerated freight by mileage range 1.8% 2.5% 12.4% 9.7% 1.4% 42.1% 7.7% 10.1% 6.8% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 251-500 501-750 751-1,000 1,001-1,500 1,501-2,000 2,001-2,500 >2,500 Total >500 Total >250 Mileage Ranges Fig. 2 Intermodal dominates longhaul freight Source: Transport Futures, IANA Etso Data, Gross Transportation Consulting © 2018 IHS Markit Intermodal market share of US origin and destination dry van and refrigerated freight

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