Construction of New Intermodal Terminal Only the Latest Sign of Turnaround

Maersk shipping containers
Photo courtesy Wikimedia Commons (In the public domain)

The Canadian National railroad’s recent announcement that it will invest $250 million in a new intermodal rail yard outside of  Toronto is just the latest indicator that the challenges that have hobbled intermodal in recent months are finally clearing up.

While the CN only announced plans to build the new facility Wednesday and the project still needs to be reviewed by the Canadian Environmental Assessment Agency, already the intermodal industry already is anticipating that it will provide much needed relief to the overburdened North American transportation system.

Weather Problems and West Coast Labor Issues

Over the past two years, intermodal has struggled to keep up with increased demand and higher shipper expectations. But the severe winter of 2013-14 — as well as this past winter’s follow-up one-two punch — put the brakes on the industry’s ability to achieve its ambitious operating standards.

On top of that, a nine-month labor dispute that pitted union dockworkers against West Coast port owners only compounded slower train velocities, volume backups, and long dwell times. While both parties finally agreed to a new five-year contract on February 20, the intermodal system was slowed down even further by lingering backups at the ports caused cargo containers to line up offshore for days waiting for berths to unload their cargo.

Things got so bad that billionaire Warren Buffett took the unusual step of publicly criticizing the performance record of his own railroad — the BNSF Railway Company — in part because of its inability to efficiently operate its intermodal yards outside Chicago and elsewhere.

A Marked Increase in Performance

But now it appears that intermodal finally has turned a corner– not only because of CN’s major investment in its infrastructure, but also because intermodal’s service quality is improving.

Larry Gross, senior analyst for the intermodal consulting firm FTR, said things began to turn around in late November.

“Poor service conditions reached their nadir last fall but then really began to improve the week after Thanksgiving,” Gross told Logistics Management. “There has been a significant improvement to the point where year-over-year comparisons are turning positive.”

Still, Gross said he and other industry observers aren’t completely convinced that intermodal has found its way out of the woods completely.

“You really need to look back two years for more accurate comparisons instead of year over year,” he said. “We still have significant distance to go and I would say that the Western railroads have seen a little bit more of the gains than the Eastern ones. But when you look at the weather situation, that stands to reason.”

One of the reasons intermodal’s performance is improving is because carriers didn’t slow down their operations over the holidays as they normally do. Instead, this year they sped them up by hiring new workers and investing in more equipment.

“The crews take some time to train and we are now starting to see some of the benefit of that,” said Gross. “They were just able to turn the corner and get ahead of things. And once network velocity starts to tick up, then it self-generates more resources because locomotive productivity and crew productivity both improve. So success breeds success and there are now more crews moving faster and they can do more work.”