Monday, March 2, 2015

A Tale of Two Modes

Intermodal pricing dips as truckload costs move north.

Costs for two modes of land transportation are headed in different directions at the beginning of 2015.

Truckload linehaul rates increased steadily while intermodal rail prices dropped in January, according to the latest indices from Cass Information Systems and Avondale Partners, reported the Journal of Commerce. The Cass Truckload Linehaul Index rose 7.9 percent year-over-year, a sign the impact of higher contract truckload rate increases is beginning to be felt by shippers, Cass said.

That 7.9 percent gain follows a 7.4 percent increase in December. Truck tonnage rose 6.6 percent year-over-year in January, the American Trucking Associations said Feb. 24. The cost of intermodal shipping, meanwhile, fell 0.3 percent year-over-year as fuel prices continued to drop, the first decline since December 2013, according to the Cass Intermodal Index.

Continued lower fuel and oil prices are expected to reduce demand for intermodal service, and shift some freight back to the highways, when and where capacity is available, analysts said. Truckload rates, however, are likely to rise between 4 and 9 percent in 2015, depending on how successful individual carriers were in raising pricing last year. Factors including a smaller pool of truck equipment, the truck driver shortage and tighter regulatory constraints are restricting the supply of truckload service in the face of continuing strong demand, creating a classic scenario for price increases.

Is faster always better? Shippers in many cases can save up to 20 percent on transportation costs by switching to intermodal rail and adding a day to transit times. “Deferred delivery,” whether of a package, a pallet or a trailer load, can be acceptable when there are savings. With careful planning, intermodal service offers supply chain managers a way to mitigate the inevitable higher costs of truckload moves in the months ahead. Does it “absolutely, positively” have to be there tomorrow?

Kirk Shearer
800-989-0054 x103

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