Annual Review & Outlook 2025 Surface Transportation
Tracking the market
By Ted Prince
Looking ahead , the biggest unknown for the North American intermodal industry is whether a trade war may impact international cargo , which generates a majority of intermodal volumes . But with little clarity on the scope and scale of incoming tariffs , the best approach is to review the triptych of railroad duopolies : east , west and Canada . The eastern railroads , Norfolk Southern ( NS ) and CSX Transportation , offer similar product portfolios , starting with a strong base handling international ocean containers from both the west and east coasts . While the former offers length of haul , growth has historically come from the East Coast . This volume has been temporarily impacted by the International Longshoremen ’ s Association ( ILA ) contract negotiations , just as previous concerns about the International Longshore and Warehouse Union ( ILWU ) contract prompted cargo diversions to the East Coast .
Both railroads have worked with ports to develop inland facilities that offer an alternative to trucking ; however , there is a ceiling on how many of these can be developed . Since these inland ports are controlled by the ocean ports , they can only be developed in-state .
For domestic intermodal , there is the usual portfolio of parcel , less-than-truckload and truckload . In the truckload segment , both serve the bimodals , e . g ., JB Hunt and Hub Group , as well as smaller intermodal marketing companies through shared domestic container fleets with Union Pacific : EMP ( NS ) and UMAX ( CSX ). However , unlike the western railroads , most of these customers ship on both railroads .
The Canadian railroads , Canadian National and Canadian Pacific Kansas City ( CPKC ) now operate in two spaces : east-west in Canada and northsouth between Canada and Mexico . The former is straight up head-to-head competition , and the latter involves a plethora of alliances with western railroads and their allies .
Both railroads benefited from making western Canada a maritime gateway for US intermodal destinations ; however , CN ’ s Prince Rupert has been more of a game changer . Traffic diverted due to rail labor should eventually return due to the economic benefits .
For trans-border , CPKC has articulated a big plan , but it has infrastructure issues to resolve , such as capacity between Chicago and Kansas City . It also lives with the KCS legacy of viewing UP as a competitor , rather than their largest connection . The result has been a 15-plus year process of UP helping FXE ( of which it owns 28 %) achieve significant intermodal improvement . This traffic is heavily driven by auto makers , and the threat of a trade war looms large .
The western railroads are the largest and most interesting . Both have well established marine businesses . Southern California is the headwater of North American intermodal , not only for the intact intermodal , but the transloading of import cargo , accounting for roughly 80 % of all eastbound domestic traffic . This business , a high percentage of which originates in Asia , and especially China , has the most to lose in a trade war .
There is also a concern that California is headed for implosion due to governmental regulation and the inability of the ports , who move nothing but money , to affect meaningful change . Both railroads have major projects in the Inland Empire , but it will be years before the results are known .
On the domestic side , both railroads have diverse portfolios , focused on growth , with UP having more Mexico trans-border options . The major difference is their approach to working with IMCs . UP ’ s EMP and UMAX programs provide them the traditional rail-provided equipment . BNSF has no such program , relying on its bimodal partners to “ fourth party ” third-party business .
What is interesting to note is the impact of bimodal movement . Previously the major bimodals had exclusive agreements with either BNSF or UP . With the demise of the Pacer and “ SPUD ” legacy contracts UP has been able to effectively manage Hub and STG without the dreaded MFN provisions . In a world where perception is reality , BNSF had a much more difficult time managing JB Hunt , Knight-Swift and Schneider .
However , with Knight-Swift and Schneider moving to UP , BNSF was released from its obligation to maintain parity . BNSF could now allow JB Hunt to “ cry havoc and let slip the dogs of war .”
This has been an incredibly effective strategy during the recent freight recession . And , in a strategically brilliant move the two companies resurrected the Quantum brand as a premium service , complementing the base product , at a price level higher than the historical contract .
The industry is poised for a renewal of volume . There is certainly a great deal of capacity waiting to be redeployed . Beyond the traditional impact of fuel , trade , environment , labor and safety are all areas where governmental action can have disproportionate impact .
However , while tidal shifts will impact all , it is likely that partnership decisions will be the greatest determinant of winners and losers .
email : ted @ tricitiesintermodal . com
Southern California is the headwater , not only for the intact intermodal , but the transloading of import cargo .
www . joc . com January 6 , 2025 | Journal of Commerce 71