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Intermodal Markets: Another round of network redesigns

Posted - July 30, 2020
Intermodal volumes continued their slow recovery and moved closer to par. The Eastern railroads – CSX and Norfolk Southern (NSC) – were especially upbeat on their earnings calls regarding intermodal growth prospects against a backdrop of tightening trucking capacity and fewer ocean blank sailings.
      One notable change to CSX’s intermodal operation has been the blending of recovering automotive volumes into intermodal trains; CSX has the highest concentration of automotive freight of all the Class 1s except KSC Mexico, and those volumes were hit hard by the COVID-19 pandemic. We’re curious to see if mixed commodity trains reemerge in the CSX network and what that means for intermodal service.
        Speaking of service, both NSC and CSX have made deep capacity cuts to their networks both in terms of assets and crew starts/ headcount, and the railroads appear to be willing to let new incremental capacity lag rising volumes. That strategy will generate operating margin lift as revenues rise faster than costs, but also means that the so-far intermittent service issues and equipment shortages may persist.
          On the Gulf Coast, Union Pacific is consolidating its intermodal yards in Houston in a way that appears similar to previous network redesigns in Chicago.

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