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LAND LINES 46 THE JOURNAL OF COMMERCE www.joc.com AUGUST 7.2017 Lawrence J. Gross SUCCESS POINTS NORTH GOOD THINGS ARE happening on the intermodal front north of the US-Canada border. The Canadian intermodal network has been bulk- ing up as if on steroids this year, and it shows little signs of abating. The Association of American Railroads reports weekly volume numbers by commodity for all the major North American railroads, and the fi gures are in for week 26, closing out the second quarter of 2017. Overall North America originations of inter- modal containers and trailers grew 5.4 percent from the same period in 2016. But Canadian volume, defi ned as volume originating on Canadian National and Canadian Pacifi c rail- roads collectively, grew 13.0 percent over the same period. Intermodal Association of North America data provides some color to the gains. This graphic shows inter- modal revenue movements by region or region-pair for 2017 year-to-date through May. Canadian data are shown highlighted in green with individual selected Canadian lanes identifi ed. Our analysis has divided the intermodal market by equipment t ype. International consists of revenue movements of ISO con- tainers (20-footers, 40-footers and 45-footers), and domestic includes movements of larger 53-foot con- tainers (and 48-footers to the small extent that they still move), as well as trailers. The data show that the forward momentum for Canadian intermo- dal is widespread, encompassing the international and domestic sectors, as well as all Canadian regions plus the cross-border trade with the US. What could account for the growth differential between the US and Canada? First and foremost is the economy. According to Statistics Canada, Canadian GDP grew at an annualized rate of 3.7 percent in the fi rst quarter, 2.6 times the reported US fi gure of 1.4 percent for the same period. But Canadian local intermo- dal volume grew at a rate 4.1 times faster than US local volume. Another factor is market share shift from the US. Volume flowing between the US Midwest and the western Canadian ports of Vancou- ver and Prince Rupert is growing rapidly, for example, apparently at the expense primarily of Seat- tle-Tacoma. (See the western Canada-Midwest statistics in the table.) Some may claim that the lack of Harbor Maintenance Tax on imports via Canadian ports is a big factor, but I'm more inclined to believe it's a function of quick ship-to-rail transfer, consistent, favorable transit times, and com- petitive economics. There is another intriguing difference between intermodal in Canada and the US. At the dawn of the intermodal era, the US railroads decided to wholesale intermodal ser- vices, outsourcing the sales function to an array of third parties, including steamship lines, truckers, and inter- modal marketing companies. The Canadian railroads went in a different direction, retaining the sales function. Although they employ the US wholesale model for their operations involving the US, north of the border they retail intermodal service directly. They work with the big steamship lines and truckers, but also directly with beneficial cargo owners, some of which operate extensive private fleets of intermodal equipment. Although each approach has important advantages, I suspect the direct customer contact generated by the direct retail channel can provide important insights in terms of the mar- ketplace and the opportunities therein. There are, of course, important differences between the Canadian and US markets. The Canadian mar- ket is much smaller. Canadian traf- fi c, including local and cross-border moves, collectively accounted for less than 19 percent of North Amer- ican intermodal movements in the fi rst half of this year. But in terms of overall volume, the Canadian lanes shown in the table all rank in the top third of the 54 IANA region-pairs in terms of total volume, and the long-haul trans-Canada lane between east and west is one of the biggest. Canadian intermodal is also much more heavily oriented toward international movements than is the case in the US. ISO containers account for more than 70 percent of Canadian local intermodal volume, far more than the comparable fi gure for the US of less than 45 percent. In my view, there is no single, silver-bullet reason for the recent exceptional Canadian gains. Inter- modal is a complex sport — attention to detail and execution are key differ- entiators. The evidence indicates that the intermodal sector would do well to look northward for insight. JOC Lawrence J. Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. He is a frequent speaker at industry events. Contact him at ljgross@optonline.net and follow him on Twitter: @intermodalist. CANADIAN INTERMODAL OUTSHINES US Intermodal Revenue Movements – Year/Year Change Region/Region-Pair Total International Domestic N.A. Lane Rank North America 3.0% 4.0% 2.1% Intra-U.S. 2.3% 3.1% 1.8% Intra-Canada 9.5% 10.3% 7.4% X-Border U.S./Canada 7.1% 7.1% 7.5% Trans-Canada 8.8% 9.3% 7.8% 4 Intra-Eastern Canada 11.4% 10.8% 13.1% 11 Intra-Western Canada 9.4% 13.0% -10.8% 15 Western Canada-Midwest 8.1% 8.8% -0.3% 9 Source: IANA ETSO Data ©2017 IHS Markit Intra-Canada 9.5% 10.3% 7.4% X-Border U.S./Canada 7.1% 7.1% 7.5% Trans-Canada 8.8% 9.3% 7.8% 4 Intra-Eastern Canada 11.4% 10.8% 13.1% 11 Intra-Western Canada 9.4% 13.0% -10.8% 15 Western Canada-Midwest 8.1% 8.8% -0.3% 9