Rail rates move closer to trucking adding to dray volatility

White truck with double-stack intermodal train in background

(Photo: Jim Allen)

Despite a tough 2019 market, shippers face increasing price volatility around intermodal drayage as rail becomes more cost competitive compared with over-the-road trucking.

Last year was one that intermodal marketing companies may prefer to forget. The volume of containers riding the rails dropped 5% last year, according to the American Association of Railroads.

With overall container volumes coming into the U.S. expected to rise only slightly in 2019, the low rates offered by over-the-road trucking pulled more containers off the rail and onto the road, said FreightWaves Market Expert Mike Baudendistel in a recent commentary on the intermodal industry.

“That was mostly because of the poor truck market and carriers desperate to keep trucks filled even in lanes that were typically considered to be intermodal lanes,” Baudendistel said.


But there are early positive signs that intermodal may yet see some volume return. Truckload rates are moving closer to, or in some instances surpassing, intermodal rates on major lanes.

The DAT dry van freight rate for Los Angeles-to-Dallas currently sits at $1.75 per mile compared with an intermodal rate of $1.56 per mile.

(SONAR: INTRM.LAXDAL, DATVF.LAXDAL)

Similarly on the Los Angeles-to-Seattle lane, truckload rates are only 7 cents per mile lower than intermodal rates at $2.52 per mile , one of the tightest spreads of the past 12 months. The Chicago-to-Atlanta lane, meanwhile, is seeing truckload rates of $2.05 per mile versus $1.88 per mile for intermodal.

(SONAR: INTRM.LAXSEA, DATVF.LAXSEA)

Mike Albert, CEO of drayage load matching service DrayNow, said some intermodal lanes flipped to over-the-road in early July, but those lanes are starting to flip back to intermodal.


“The industry started to gain back some leverage, although it’s still very close in terms of truckload,” he added.

(SONAR: INTRM.CHIATL, DATVF.CHIATL)

But with over-the-road truck pricing moving higher, the cost of the rail dray move in and out of the container yard is becoming another area for shippers to watch. According to DrayNow data, the national average price for intermodal drayage reached $2.93 per mile in 2019, compared to $2.45 per mile in 2018.

That 2019 average rate has swung widely, though, going from $2.37 per mile in the second quarter to $3.20 per mile in the third, Albert said. Those rates can move, of course, as shippers jump between truckload and rail, depending on rates. Albert estimates that up to 15% of intermodal volume moves on spot basis, depending on the economics versus over-the-road.

To give shippers a more complete view of intermodal pricing, DrayNow introduced a real-time pricing tool in December to broker and shipper customers on its freight matching platform.

The tool takes in historical and current rates, origin-destination pairs, delivery times, freight scheduling, and carrier acceptance to provide feedback on rate competitiveness.

The lack of transparency on intermodal drayage has hindered greater uptake among shippers, Albert said. But with additional visibility on pricing and performance, “we can give our customers accurate information, and not rely on self-reported information.”

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