Intermodal Industry Update: Conquering the 2017 Capacity Crunch

October 10 / US
Intermodal Industry Update: Conquering the 2017 Capacity Crunch

By: Kelly St. Aubin, Vice President of Strategic Sales, Celtic Intermodal

For shippers and carriers alike, it’s certainly an interesting time in transportation. The intermodal market in particular has shifted on a dime in Q3 of 2017, while over-the-road (OTR) capacity has also changed significantly. For a few years, the market had been fairly saturated, but with recent hurricanes in the southern parts of the country, capacity has tightened significantly. Now is a great time for shippers to take note of this market shift and consider how intermodal transportation can help as capacity continues to tighten.

Over the past few weeks, many shippers have already been feeling the effects of the capacity crunch, often paying premiums for the capacity they need. Additionally, we are moving into peak season with the holidays coming up – and it is definitely time for shippers to prepare for what lies ahead in 2018.

Current Capacity Conditions

So, what does capacity look like right now? Overall, capacity has tightened in 2017 across all equipment modes. This trend will remain consistent if economic growth continues to expand. Moving through Q3, van capacity has been significantly tighter than in 2016 and 2015, and is tighter than normal for this time of year.

And although the recent Hours-of-Service (HOS) rules regarding the 34-hour restart have been rescinded, the ELD mandate in late 2017 is still being fully implemented and will further reduce effective capacity. Larger carriers had been adding trucks reflecting bullish attitudes on pricing levels, but that has slowed, and regional seasonal capacity tightness has occurred and will continue throughout the end of the year.

Natural Disasters Tighten Capacity Even Further

With any natural disaster involving FEMA, capacity gets pulled from the market. And regardless of where the disaster occurs, this affects the entire nation – for example, although Chicago isn’t necessarily impacted by Hurricanes Harvey and Irma, capacity will be pulled from that market to go south to support the hurricane efforts.

Carrying on Through the Capacity Crunch

In light of the current capacity market, shippers should look at identifying how they can be diverse in mode. The market is becoming less and less a shipper’s market as carriers are exercising choice, and intermodal is becoming, in many cases, a more competitive financial option.

And in spite of the uncertainty regarding our nation’s infrastructure budget and potential improvements, each railroad has their own budget for maintaining railways. This helps with fluidity, and keeps trains moving even when there is congestion or construction on U.S. highways and interstates.

Additionally, in an event such as severe weather, diversifying carriers is key – not only with truckloads, but also with rail. A non-asset provider can absorb loads and divert traffic from one railroad to another to give customers an alternate choice when disruptive events occur. For shippers, it all comes down to diversification! It’s important to pick the location and mode of transport that makes the most sense – which saves time, resources and money for shippers in the long run.

What benefits has your organization seen from diversifying your carrier base?

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