Surface Transportation 2025 Annual Review & Outlook
In Perspective
An intermodal imbalance
By Larry Gross
This somewhat artificial “ sugar high ” will eventually have to be repaid .
Last year proved to be a strong but turbulent year for North American intermodal . The sector was the recipient of a potent stew of exterior events , some entirely foreseeable and others truly of the “ black swan ” variety . Overall activity was up significantly , with North American intermodal originations growing 7.5 % year over year through the first week of December , according to data from the Association of American Railroads ( AAR ).
The horsepower behind the gain came from the international side of the market . In the first 10 months of 2024 , North American revenue movements of ISO containers jumped 15 % above prior year , compared with a 3.1 % gain in domestic containers and trailers , according to Intermodal Association of North America ( IANA ) data .
A mix of factors drove the gains in international intermodal , including strong retail activity that boosted imports and US West Coast ports gaining import share . One reason was clearly foreseeable : labor instability on the East and Gulf coasts that culminated in a brief strike that , while suspended for the moment , remains an issue for 2025 .
But another big reason was the closing of the Suez Canal routing . The required routing around Africa added days and dollars to East Coast imports , changing the calculus for discretionary cargo . Any share shift from east to west constitutes an intermodal tailwind , as the lengths of haul to interior points from the West Coast are much longer and more intermodal-friendly than the more truck-oriented East Coast . Undoubtedly , another source of strength was cargo moving earlier than normal to beat the strike and , later , tariffs .
By contrast , domestic intermodal has been much more restrained . The domestic truck market that is a dominant force in intermodal activity , remained difficult , with slow growth in demand and too much capacity . The for-hire carriers that constitute the primary competition for intermodal were further stymied by freight shifting to private fleets .
From a geographic perspective , the US was the big winner in 2024 , as Canadian markets were badly hurt by repeated labor disruptions . Through October , intra-US activity jumped 9.8 %, intra-Canada loadings rose just 4.8 % and movements crossing the Canada-US border slipped 2.9 %. The Mexico market was extremely strong , with total activity surging by more than 30 %, propelled by huge gains in the small but fast-growing domestic sector . However , this strength did not extend to the Mexico-US cross-border market , which declined year-to-date .
The intermodal system handled the surge reasonably well , without the service disruptions that were widespread during the COVID-19 pandemic .
At the end of the year , average intermodal train speeds were a bit below normal , and container dwell times in the Los Angeles basin had been stretched . But the number of trains being held in terminals awaiting crews or locomotives was lower than normal , indicating that supplies of these critical inputs were more than adequate .
The outlook for 2025 appears to be somewhat constrained , particularly on the international side . The considerable volumes that ordinarily would have moved next year have likely been pulled forward into 2024 . This somewhat artificial “ sugar high ” will eventually have to be repaid .
In addition , the huge growth differential between international and domestic in 2024 will not endure . The gap will need to be closed by some combination of slowing international volumes and accelerating domestic shipments .
The supply-demand balance for domestic truckload has been improving very slowly . Demand has is expected to continue rising , but a dramatic upturn does not appear to be in the cards .
Proposed actions under a second Trump administration could prove to be inflationary , including higher tariffs and large-scale deportation of migrants , many of whom are currently contributing to the workforce . The disruption could be considerable , and in the near term , this poses more of a downside risk than upside potential for 2025 .
However , the shift from for-hire to privates appears to be over . This , plus a continued slow exiting of capacity , should help shore up trucking rates .
The improving situation in truckload will provide an opportunity for domestic intermodal . Railroads have lost considerable share since 2018 due to the implementation of PSR , followed by service disruptions and capacity crises during the pandemic .
A small green shoot was spotted in the third quarter of 2024 , as domestic intermodal ’ s share of US long-haul truck movements edged up to 6.1 %, after spending over a year at 6.0 %. This may be a harbinger of continued growth , or it could just be noise in the numbers . Time will tell .
Intermodal activity in the third quarter was just about equal to the average volume per quarter in 2017 . In other words , the sector has seen zero growth in six years ; this is a long-term problem .
As such , intermodal needs a competitive strategy that will enable it to thrive in both flush times and lean times . Getting service levels in order was a necessary first step , but by itself , this will be insufficient to drive growth . Further adjustments in price , service and accessibility will be required .
email : lgross @ intermodalindepth . com
72 Journal of Commerce | January 6 , 2025 www . joc . com