Pressure on intermodal shipping: Uncertainty ahead
Despite weather and U.S. tariff concerns earlier in the year, intermodal volumes for domestic freight were still strong. Now, continued high tariffs are likely to lead to lower imports, which could lead to softness in the intermodal sector, especially on the West Coast. May and June will be critical in telling the volume trends for 2025.
Risks influencing intermodal volumes
Many importers pulled orders forward to keep costs down before new tariffs went into effect. That pre-tariff inventory has since entered the market. What remains to be seen is how much more inventory importers need to meet demand.
Many shippers ordering from China are canceling or delaying sailings as they wait for more clarity on tariffs, leading to the number of containers arriving from China dropping dramatically.
This will have the largest effect on the intermodal market outbound from Los Angeles, California. The length of that downturn is the next factor to watch. The outbound California market may get unseasonably loose in May. If U.S. tariffs on goods made in China drop, there is likely to be pent-up demand. If this surge in catch-up freight occurs in July or August, it could cause an early start to West Coast peak season.
Intermodal offers potential cost savings
Related to tariff uncertainty, some importers are looking for cost savings in their transportation networks.
Accordingly, they’re more willing to increase lead times to accommodate intermodal. Intermodal's longer average transit times are an advantage in building inventory at a slight discount, allowing for a more gradual buildup of stock at distribution centers.
Shippers are also looking to diversify their carrier base to include different rail providers and non-asset-based providers. During times of quick fluctuations, spreading out some freight can greatly increase capacity options.
Improving comparisons to truckload
Rail carriers have been staying closely attuned to the spot truckload market. As part of this, they have allowed the gap between over-the-road truckload and intermodal spot rates to widen beyond the typical 20%. The railroads appear to be keeping their spot market rates near the floor while truckload rates fluctuate. As truckload rates push upwards during produce season, it’s possible that intermodal rates may follow.
2025 intermodal pricing prospects
Intermodal pricing for committed, long-term contracts has experienced low, single-digit increases year over year. Recent rail labor agreements signed by the U.S. railroads and persistent inflation drove this increase.
Intermodal spot rates remain depressed, as they continue to mirror the truckload market. When factoring in the forecast for 2025, pricing is currently at the most competitive rate of the year.
Intermodal service: Strong despite volume
Despite increased volume and demand, intermodal service metrics, such as train speeds, are performing well, even if slightly below the five-year average.
With strong service and low pricing, contact your C.H. Robinson representative to see how you can best take advantage of intermodal service within your portfolio.