As truck capacity continues to tighten and rates rise, more shippers are switching to intermodal options to keep a lid on transportation cost increases and firms across the transportation spectrum are profiting.
"In our intermodal segment, our operating ratio improved to 88.1% for the third quarter this year - a 30 basis point improvement versus the same quarter last year," said Kirk Thompson, president & CEO of Lowell, AR-based truckload carrier J.B. Hunt. "Intermodal revenue now represents approximately 41% of our company's consolidated revenue - and it rose 8%, excluding fuel surcharges, in the third quarter this year, with volume growing by 3% and revenue per loaded mile going up 4.3%."
Downers Grove, IL-based third party logistics giant Hub Group noted that its intermodal revenue increased 9% to $283.5 million in the third quarter this year as shippers explored different freight transportation options. This dwarfed its truckload brokerage business ($68.3 million) and pure logistics services ($35.7 million) combined.
Minneapolis-based third party logistics firm C.H. Robinson Worldwide noted that its intermodal gross profits increases 19.6% in the third quarter this year, largely due to an increase in profit margins despite a decrease in volumes. J.B. Hunt's Thompson added that continued lane mix changes also contributed to both the increased revenue and the improved margin of the carrier's intermodal business.
However, cost increases from railroads are driving the need to raise rates for the carrier's intermodal customers. "Significantly higher truck rates over the last several years continue to create new demand as shippers consider switching highway freight to intermodal when practical," he said. "The trend of modal conversion from highway to rail plus the significant growth in imports should continue to promote growth in our intermodal segment."
Railroads are profiting from intermodal demand as well. Norfolk, VA-based rail giant Norfolk Southern (NS) said its intermodal revenue climbed 17% in the third quarter this year to an all-time high of $471 million -- the highest of any quarter in its history, said NS chairman & CEO David Goode.
"For the first nine months, intermodal revenues reached a record-setting $1.31 billion, a 19% increase compared to the same period in 2004," he added. "A 9% increase in traffic volume during both periods, higher average revenues and fuel surcharges helped drive this growth."