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88 Journal of Commerce | J anuar y 2, 2023 www.joc.com Surface Transportation IN PERSPECTIVE ANNUAL REVIEW & OUTLOOK 2023 Lawrence Gross Setting the stage Growth prospects for intact inland ISO container moves in 2023 can politely be described as "tepid." shift in share from other domestic intermodal sectors, rather than an increase in the size of the overall domestic intermodal pie. While a year or two of underper- formance is perhaps not a cause for concern, that's not the case for North American intermodal, which just completed a sixth consecutive year of lackluster performance. This time frame has spanned a wide variety of economic and market conditions — from the electronic logging device (ELD) truck capacity crisis of 2018 and the implementation of precision scheduled railroading (PSR) to the initial COVID-19 lockdowns and post-pandemic surge in imports. It's time to step back and question what, if anything, needs to change for the sector to return to growth. The core question is whether a limited PSR-governed network of ultra-long, infrequent trains, composed exclusively of domestic containers and connecting only large population centers, can provide a basis for grow - ing domestic intermodal share. Growth in domestic intermodal volume growth fell behind that of trucking in early 2019 as the PSR model took hold, and aside from a few months in late 2020, during the early stages of the post-lockdown surge, it has trailed ever since. In 2021 and 2022, the gap has become even more pronounced. The railroads are certainly talking about a "pivot to growth," and there are concrete signs of a shift. Rather than "right-sizing" — i.e., closing ter- minals and trimming services — rail- roads are announcing new terminals and service concepts. With the economy slowing and freight demand easing, making prog- ress won't be easy. But during slower economic periods, shippers become more value-conscious and less focused on service, so if intermodal can complete its service recovery, the stage will be set for growth during the next upturn. JOC email: lgross@intermodalindepth.com twitter: @intermodalist the ILWU and their employers will eventually reach an agreement, at which point some, but by no means all, of that diverted volume will return to the West Coast. But underlying trends, includ- ing the development of alternative sourcing outside of China, will keep shipments to the East and Gulf coasts strong. This is bad news overall for intermodal volumes, because lengths of haul off the East Coast are shorter and, as such, intermodal takes a smaller share of overall volumes than on the West Coast. Given this, the intermodal sector will need to look to domestic volumes for growth. But here too, there is cause for concern when looking at the long-term trend. From the first quarter of 2016 through the third quarter of 2022, domestic intermodal volumes have grown just 7 percent, according to IANA ETSO data, while long-haul truckload moves rose roughly 27 percent, according to Noel Perry, principal at Transport Futures. Drilling down further, it's apparent that the gains in revenue moves occurring in privately owned domestic containers — i.e., boxes not owned by a railroad — kept pace with the gains in truckload. But these gains were largely offset by decreases in rail-owned container moves and trailer-on-flatcar (TOFC) moves, with both sectors shedding more than a quarter of their volume since 2016. That means most of the gains in private container moves represent a THE NORTH AMERICAN intermodal sector turned in another disappoint- ing performance in 2022. According to data from the Intermodal Association of North America's (IANA) ETSO database, through the first 10 months of 2022, movements of intact ISO containers via intermodal rail were down 7.0 percent year over year. Perhaps more concerning — given that 2022 was supposed to mark a departure from the capacity and con - gestion issues that held back volume in 2021 — movements of domestic con- tainers and trailers were down 0.3 per- cent during the same period. Was 2022 a victim of special circumstances or are longer-term issues in play? In the international intermodal sector, the growth prospects for intact inland ISO container moves in 2023 can politely be described as "tepid." While very easy year- end 2022 comps will likely result in a smaller deficit for the full year than the 7 percent decline recorded through October, in all likelihood, it will still be a significant shortfall. Beyond that, prospects will be driven primarily by growth — or a lack thereof — in containerized imports. As we come to the end of a surge of historic proportions in terms of both scope and longevity, the only place for volumes to go, at least in the near term, is down. There are additional headwinds. Most notable is the continuing shift from ports of entry on the West Coast to those on the East Coast. Early in 2022, this was driven by congestion on the West Coast. More recently, it has stemmed from shipper skittish- ness over potential disruption linked to drawn-out International Long- shore and Warehouse Union (ILWU) contract negotiations. Presumably, Ramon Cliff / Shutterstock.com