Wednesday, July 11, 2012

Growth forecast for trucking may be optimistic

For the first six months of 2012, intermodal rail tonnage continued to increase as ATA’s trucking index contracts in April and May.

Good news for freight transportation providers – according to the American Trucking Association’s (ATA) latest forecast, overall freight tonnage is expected to grow 21% by 2023. Not surprising, the trucking segment is expected to lead this growth with its share extending to almost 70% of total freight movements.
On the other hand, rail’s share of total freight movement is expected to decline from 15.7% in 2011 to 15% by 2023, while intermodal is expected to increase 6.2% annually between 2012 and 2017; and then at a 5.4% annual increase through 2023.
This forecasted increase in intermodal is quite possible. For the first half of 2012, intermodal traffic was up 3.3% compared to same period in 2011. Since the recovery began in 2009, the growth has been quite impressive. In the first six months of 2009, the average weekly intermodal loadings were 185,075 containers and trailers. In the first six months of 2012, the average was up to 232,682 containers and trailers, a 25.7% increase.
However, the trucking segment appears not to have had such a strong first half of 2012,  which therefore does not support the forecast for growth in the sector. ATA data is currently available only through May but for April and May, the index declined indicating tonnage declined. The association’s economist noted the declines were attributed to the sluggish economy. Still, the association expects an annual 3% to 3.5% growth for the year.
Oddly enough, the sluggish economy does not appear to have had as much of a negative effect on intermodal as it has on trucking. Perhaps this is because the majority of US rail intermodal traffic is international and only 45% is domestic. Another possibility is that intermodal rail is gaining significant market share from the trucking industry within domestic movements.
The rise in intermodal has indeed been impressive. Among the reasons for this rise are the fact that railroads have spent billions of dollars on infrastructure and equipment related to intermodal services; High congestion and truck driver shortages; and conversion of boxcar traffic.
Intermodal’s continued increases in tonnage seems to defy a slowing economy and although intermodal tonnage is lower than that of trucking tonnage in general, it does cause one to question the ambitious market share forecast for trucking by 2023.