Tight truck capacity will shift the balance between over-the-road trucking and rail.

Tight truck capacity and low fuel prices will shift the balance between over-the-road trucking and intermodal rail this year, with some intermodal freight being transferred to truck despite rising truckload rates, according to Cass Information Systems and Avondale Partners. 

The freight payment company and investment research firm expect truckload rates to climb 4 to 9 percent in 2015, while intermodal rates drop, Cass and Avondale said last week.

The Cass Linehaul Truckload Index rose 7.4 percent in December, pushed up by strong contract rate increases, the companies said. The Cass Intermodal Pricing Index rose 1.5 percent year-over-year, less than half the 3.1 percent increase reported for November.

“We concede that the extent to which loads can be shifted from domestic intermodal back to over-the-road truck is dependent on trucking capacity, but the greater than $0.15 a mile decline in fuel surcharges collected by truckers in the last six months (with most of that decline coming in the most recent month) has to challenge demand and pricing power for domestic intermodal,” Avondale Partners said in an analysis of the December index.

Month-to-month, the Intermodal Pricing Index was up 3 percent from November.

Freight railroads don’t believe fuel prices and truckload fuel surcharges will drop low enough to balance out higher truckload rates and draw intermodal freight off the tracks.

CSX Transportation told Wall Street analysts Jan. 16 that shippers weren’t shifting freight back to the highway because of lower fuel surcharges. “The big issue that has been in trucking remains the big issue in trucking and that is driver availability,” CSX Chief Commercial Officer Clarence Gooden said in a fourth-quarter earnings conference call.

Intermodal rail is still cheaper than over-the-road trucking, despite low oil prices that are pulling down truck fuel surcharges, Canadian Pacific Railway President and Chief Operating Officer Keith Creel said Jan. 22. And as fuel surcharges fall, base truckload rates are rising, Thomas Albrecht, a transportation analyst at BB&T Capital Markets, said Jan. 16.

Albrecht expects truckload rates to increase 4 to 6 percent in 2015, while intermodal rates rise 3 to 4 percent. “And while some shippers might convert a few loads back to truck, our sense is that intermodal is more sticky than some investors recognize,” he said.

The wildcards in the equation are fuel prices and rail intermodal service levels. If either drop precipitously, shippers may be more willing to shift some of their intermodal freight back to highways, at least until rail service improves or fuel prices begin to climb again.

Lower intermodal prices could also draw even more freight off the highways as truckload rates increase and capacity remains tight, particularly if the fuel price pendulum swings upward later in the year. The railroads are banking on that.

Cass and Avondale said strong contract rate hikes were behind the 7.4 percent increase in the Truckload Linehaul Index in December — the biggest year-over-year increase of 2014.