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Jan.12, 2015

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112 THE JOURNAL OF COMMERCE JANUARY 12.2015 2015 ANNUAL REVIEW & OUTLOOK RAIL AND INTERMODAL IN PERSPECTIVE A s 2014 drew to a close, intermodal transporta- tion in North America was poised to break more records. In 2013, intermodal rail operators handled 15.5 million container and trailer units combined. Last year, intermodal units likely topped 16 million easily, if the run rate through 2014's third quarter — up 5.3 percent year-over-year — held. 2015 should continue this trend, but not without some anxiety for shippers. Rates are likely to increase, even in the face of declining fuel prices, as truckers face significant driver shortages, and railroads struggle to handle burgeoning traffic growth in all commodities, not just intermodal. Intermodal continues to make inroads into generally shorter-haul domestic shipping lanes. Ten years ago, interna- tional shipments comprised 55.3 percent of all intermodal shipments in North America. In 2014, the balance between international and domestic shipments was roughly even. And in the year's clos- ing weeks, domestic volume actually overtook international volume. Another 2014 trend worth noting is the modest, 3.8 percent year-over-year increase in trailer shipments. Motor carriers, facing capacity and resource challenges, put many of their trailers onto trains to get them to their destinations. At the same time, sluggish rail service lengthened container cycle times, creat- ing spot shortages of domestic containers and leaving some shippers with little choice but to use trailers for intermodal. Although intermodal transportation's growth and changing composition are impressive on their own merits, such performance is all the more remarkable, given the well-publicized congestion and service issues on the railroads. For much of 2014, railroad service across the northern swath of the U.S. and western Canada suffered from growing traffic volumes, difficult winter weather conditions, a dearth of train crews and insufficient equip- ment and infrastructure. Although initially blamed on cold weather, service issues persisted even as the seasons transitioned into spring, summer, fall, and, again, winter. As 2015 begins, rail carriers are unlikely to be able to get their houses completely in order. Some headway was made in 2014, as railroads spent massively to expand infrastructure, acquire new — and, in some cases, used — locomotives, and hire several thousand train service employees. These assets and resources may not be brought online in time to clear existing traffic backlogs, however, even as a new record harvest is being readied for market and potentially disruptive winter weather moves in again. In addition, seaports, especially those on the West Coast, are struggling to match chassis and railcar supply with the huge volume surges created by the new genera- tion of 18,000-plus-TEU vessels. Because of a relatively weak global economy and the near-sourcing trend — itself driven in part by lower domestic energy costs — these out- sized vessels are consolidating volume into fewer, larger peaks, rather than smoothing day-to-day volume levels. This creates operational challenges, as more resources are required to handle peak volumes, even if overall import- export volumes don't necessarily increase. Of course, not all is gloom and doom for intermodal, as many factors operate in its favor. First, intermodal transportation has an advantage when it comes to infra- structure, because its primary competitor, trucking, relies on the publicly funded highway system. U.S. investment in infrastructure has been woefully inadequate of late, as federal and state governments struggle — thus far, unsuc- cessfully — to balance the need to maintain and expand A N D J A RO D H AG E B Y J A S O N K U E H N Intermodal's Gains and Pains

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