US shippers brace for sharper intermodal rates hikes

That’s an acceleration from the 1.3 percent increase shippers expected in the second quarter and 0.8 percentage points higher than their forecasts from a year ago, according to New York-based investment research firm’s survey of roughly 600 shippers with more than $10 billion in total transportation spend.

The anticipated rise in intermodal rates still lags expectations for truckload pricing increases, which surveyed shippers forecast will increase 3.4 percent over the next 12 months. Wolfe Research said. Shippers said they saw truckload rates rise 3.9 percent year-over-year on average in the second quarter. The report didn’t disclose the scope of intermodal rate increases shippers saw in the second quarter — only that they expects a sharper increase in rates.

“We believe intermodal rates ultimately remain driven by the direction of truckload pricing,” Wolfe Research said. “So with rising (truckload) pricing, we would expect to see continued strength in intermodal pricing.”

Intermodal pricing, both for domestic and international equipment, rose on average about 4 percent year-over-year in the early months of this year, Eric Starks, president of FTR, an Indiana-based research and consulting firm, told in August.  But rates will likely end the year 3 percent to 4 percent higher than in 2013, he said.

That forecast roughly parallels what the Cass Information Systems and Avondale Partners have been tracking through their Cass Intermodal Price Index, based on data from freight bills submitted by the freight bill payment company’s clients, totaling more than $23 billion last year.

Domestic intermodal pricing in August rose 3.5 percent year-over-year, according to the index, calculated by Avondale Partners using Cass data. Avondale Partners, an equity research firm, expect domestic intermodal pricing to rise this year a low-single digit clip, “as a tighter truckload environment offers an umbrella for higher pricing.”

Seventy-one percent of surveyed shippers told Wolfe Research they expect tighter truckload capacity over the next 12 months. Of the group, 27 percent expect capacity to remain static and only 2 percent of shippers expect more truckload capacity to come online over the next 12 months.

“Into better demand, but no material increases in (truckload fleets) and no near-term improvements in rail intermodal service levels, we expect (truckload) capacity to remain tight well into next year,” Wolfe Research said.

The Class I railroad industry’s third-quarter earning period kicks off with CSX Transportation releasing its results Tuesday. The other major railroads — except for privately-held BNSF Railway, will report earnings in the following weeks.

SCS BlogVanessa Frye