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5/13/2024
By Jeff Stagl, Managing Editor
The first quarter turned out to be an exceptional cargo-handling period for the Port of Los Angeles, North America's largest port.
Volume reached 2,380,503 20-foot equivalent units (TEUs), up about 30% year over year. It was the third-best Q1 by volume for the port, trailing only the first quarters in 2021 and 2022, when the pandemic-related import surge drove up cargo flows.
In March alone, the port registered 743,417 TEUs, up 19% and its eighth-straight month of year-over-year volume growth.
"Moving into the second quarter, I expect robust cargo flow to continue here," said Port of Los Angeles Executive Director Gene Seroka in a press release.
That's highly encouraging to North America's largest railroads, which count on a high flow of exported and imported freight to help propel their intermodal traffic. The Class Is already have been reaping big volume and revenue gains with international intermodal traffic thanks to a number of favorable factors and macro trends.
Among them: rising consumer confidence; retail restocking after a period of high inventories; robust global trade; supply-chain challenges in many parts of the world; ship reroutings to avoid vessel attacks in the Red Sea; recent drought challenges at the Panama Canal; and ongoing efforts with near-shoring, a business strategy that involves shifting production and manufacturing operations from overseas to closer vicinities, such as Mexico.
The large roads' domestic intermodal business hasn't been nearly as robust of late, mostly falling in the "flat" or "soft" categories. But it's expected to strengthen through 2024, in part because a weak truck market that drove down trucking rates is anticipated to ease.
In addition, many shippers still retain a high interest in sustainable transport methods, which favor rail. Moreover, technological advancements at intermodal terminals and ongoing truck challenges — such as recruiting/retaining enough drivers and dealing with excess capacity — are helping Class Is divert freight to rail and increase their domestic traffic.
Since both the international and domestic sectors pose growth opportunities, the Class Is are trying hard to exploit them.
Those efforts bore fruit for some in the first quarter. For example, CSX's Q1 intermodal traffic rose 3% year over year, with international business increasing 7%.
"Growth was very strong for our international business," said CSX Executive Vice President and Chief Commercial Officer Kevin Boone during an earnings presentation on April 17. "We saw volumes increase year over year with many of our shipping partners as we gained from new contracts and new lanes."
To continue to build intermodal business, CSX is focusing on developing new opportunities — including truck-to-rail conversions — and working closer with rail partners to identify joint opportunities and accelerate strategic discussions with shippers.
Ditto for Union Pacific Railroad, which in Q1 logged a 3% drop in revenue but 1% gain in volume in "premium" business that includes intermodal. The railroad aims to continue working with other Class Is — as well as regionals, short lines and other partners — to offer new or enhanced intermodal services that entice more shippers.
About 40% of UP's overall business is interchanged traffic, said Kenny Rocker, the Class I's executive vice president of marketing and sales, during an April 17 interview.
"That's a high percentage. So, it's important to work together [with partners] as if it's one railroad," he said. "Customers don't care if their freight is moved by one railroad in the East or one in Canada. It needs to be seamless."
Given the importance of joint intermodal services as well as the performance of those offerings, Class Is have been unveiling or participating in new and improved services with various partners. Following are some examples.
Last year, UP, CN and Grupo Mexico Transportes (GMXT) introduced a Falcon Premium intermodal service that runs between Canada, the United States and Mexico.
The service was unveiled in April 2023 and then upgraded in September 2023, when operational changes implemented by UP removed a full day of transit time.
Featuring a seamless rail connection in Chicago, the Falcon Premium service is designed to handle a variety of intermodal freight, including automotive parts, food, home appliances and temperature-controlled products.
The service connects a dozen CN terminals with GMXT terminals in Monterrey and Silao, Mexico. It also connects key CN points — including Detroit — to UP in Illinois, and then to GMXT terminals in Monterrey and Silao through Eagle Pass, Texas, and Piedras Negras, Mexico.
Falcon Premium offers the most direct route between Canada and Mexico with better transit times and payload advantages compared to truck transportation, said CN Senior Manager of Media Relations Ashley Michnowski in an email.
"This new service provides seamless border crossings between all three countries enabling efficient, reliable and faster service for customers than any other mode of transportation available on the market," she said.
The service aims to leverage GMXT's transit times between Silao and Guanajuato, and Eagle Pass; UP's route from Texas to Chicago; and CN's service offerings connecting Chicago to all points in Canada through the Elgin, Joliet & Eastern bypass in Chicago. GMXT owns Ferromex and Ferrosur in Mexico, and Florida East Coast Railway and Texas Pacifico Transportation Ltd. in the United States.
Falcon Premium in part was created to offer multiple benefits to wholesale intermodal providers and beneficial cargo owners (BCOs), including an all-rail service across two borders. The partners are committed to being highly focused on maximizing speed, reliability and customer satisfaction through the service while providing cost savings, higher dependability and a greener transportation option.
Compared with other rail networks, UP offers the shortest distance between Mexico and Chicago, saving hundreds of miles versus other intermodal services, said Michnowski.
So far, the partners are generating truck conversions and logging wins in the marketplace with the Falcon Premium service, said UP's Rocker.
For example, some auto parts customers are using the service to supplement their transportation needs more with rail, he said. If they had used a 70% truck/30% rail split, the trucking percentage now is decreasing, said Rocker.
Auto parts shippers are most interested in the Falcon Premium's potential cost savings while other shippers are more intrigued by its speed and service consistency, said Rocker. That has led to business generation.
"Some customers are test piloting the Falcon in new lanes," Rocker said.
Those lanes might run from Montreal or Toronto to other points, or involve points in the Midwest, such as in Michigan or Ohio.
For CN, a new customer that's been reassessing its supply-chain network recently decided to try the Falcon Premium on a trial basis. The undisclosed shipper previously relied exclusively on trucks.
"The customer has been pleasantly impressed by the transit time and reliability of our service," said Michnowski. "As a result, they are now reevaluating their entire strategy to take advantage of the cost and emissions savings our service offers, particularly with significant shipment volumes."
Shipper feedback on the service has been mostly positive so far, said Rocker. More of them are gaining confidence to pour additional freight on the Falcon Premium, which is helping to increase volume, he added.
"We have seen sequential growth quarter over quarter," Rocker said.
The service is steadily building a reputation as a trustworthy brand for customers to transport their goods from one location to another, said Michnowski.
"We are optimistic about our growth and the potential for this intermodal service," she said. "Growth has been steady despite the overall dip in freight from slowed consumer spending and suppressed truck rates."
The partners plan to continue to seek ways to improve the service. In the coming months, they expect to add Pantaco/Mexico City service to the Falcon Premium to extend its reach and help support a larger market in Mexico, said Michnowski.
UP and CN also are working with CSX and Norfolk Southern Railway on an enhanced domestic container intermodal service UP introduced April 1. UP now provides service between its Global 2 intermodal terminal in Northlake, Illinois, near Chicago and its Lance Fritz Inland Empire Intermodal Terminal (IEIT) in Fontana, California.
The service offers access to the Los Angeles Basin's busiest warehouse district direct to the heart of the Chicago metroplex, supplementing existing service between the IEIT and UP's Global 4 intermodal terminal in Joliet, Illinois.
The transit time for eastbound and westbound shipments is four to six days, depending on the contracted services.
Interline services to and from the IEIT now reach more than 20 destinations/lanes via UP, CN, CSX and NS. The destinations include Baltimore; Cincinnati; Cleveland; Philadelphia; Pittsburgh; Toledo, Ohio; Calgary, Alberta; and Montreal.
Both intermodal marketing companies and BCOs are inquiring about the service, said Rocker. UP has expanded capacity at the IEIT and plans to continue doing so to keep up with demand, he said.
"The terminal is near a lot of distribution and warehouse space," said Rocker.
On Jan. 1, BNSF Railway Co. and partners Grupo Mexico Transportes (GMXT) and J.B. Hunt Transport Services Inc. launched an intermodal service between Monterrey, Silao-Bajio and Pantaco-Mexico City regions — key markets in Northern and Central Mexico — through the Eagle Pass, Texas, border gateway.
The service offers transit time that’s one day faster than the previous service from Monterrey to Chicago, and a reliable and more sustainable transportation option to move goods seamlessly across the border to and from Mexico with coast-to-coast access in the United States.
Trains carrying containers interchange in Eagle Pass, Texas, to and from GMXT, which operate the trains between the border crossing and Monterrey, Silao-Bajio and Pantaco-Mexico City six days a week. The intermodal service offers new opportunities for customers to grow in the expanding Mexico markets, BNSF officials believe.
All three of the service’s partners bring something big to the table: BNSF is North America’s largest intermodal rail service provider; GMXT is the largest rail provider in Mexico; and J.B. Hunt is one of the largest supply-chain solution providers in North America, said Katie Hower, BNSF’s VP of domestic intermodal marketing-consumer products.
“This new intermodal service gives our customers access to the largest container fleet in North America, with coast-to-coast market access through J.B. Hunt’s North American reach,” she said.
In addition, all three companies share a customer-centric view that’s helped shape early efforts with the service, said Sarthak Verma, J.B. Hunt’s senior VP of international.
“All sizes of companies can leverage our joint intermodal service with BNSF that connects the largest intermodal operation in North America with one of the most extensive rail networks in the country, ultimately elevating the performance of their supply chain,” Verma said.
J.B. Hunt owns and operates the largest intermodal fleet in North America, with more than 119,000 containers and 6,300-plus trucks.
A dedicated BNSF customer support team tracks the service’s shipments 24/7 from in-gate to out-gate to and from Mexico and the United States. Southbound shipments are moved in-bond to minimize Mexico customs clearance delays, while northbound shipments are pre-cleared with U.S. Customs and Border Protection by a customs broker of the customer’s choice.
Planning and proactive communication between railroads, carriers, beneficial cargo owners (BCOs), brokers and U.S. Customs officials has attributed to a successful service startup, said Hower. So far, the cross-border experience over Eagle Pass has exceeded the service partners’ expectations.
“We have experienced a successful transition with this new gateway over Eagle Pass,” said Hower.
Customers now are experiencing a consistent transit time with the service, Hower said. There are new opportunities to move heavyweight loads at BNSF’s intermodal hub in Alliance, Texas.
“This provides a unique solution for customers with shipments that are too heavy to move over the road between Mexico and the U.S.,” said Hower. “We also now have capabilities to provide service in and out of Pantaco, which is in the heart of Mexico City.”
BNSF, GMXT and J.B. Hunt have strived to make significant investments to ensure the competitiveness, reliability and operating success of their intermodal networks. The investments aim to benefit all customers and ensure a long-term ability to handle future growth, including through the new service.
Going forward, the partners are seeking opportunities to improve performance and provide creative solutions that consistently meet market demand. They are targeting truck conversions through reduced transit times and consistency, said Hower.
“We are working with the Mexico terminals, BCOs and custom brokers to improve the time to complete the customs clearance, which will reduce the overall door-to-door transit time,” she said. “We are also evaluating opportunities to move temperature-controlled shipments on our new service product.”
Editor’s note: In the May print edition of the cover story, this BNSF intermodal service with J.B. Hunt and GMXT is mischaracterized as “Quantum.” Quantum is a different intermodal service offered by BNSF and J.B. Hunt.
In March, Norfolk Southern Railway and Florida East Coast Railway (FEC) announced an expansion of their international and domestic intermodal services. They introduced a new, two-way service called Florida Express that runs between Charlotte, North Carolina, and south Florida.
Florida Express builds upon a strong, productive and growing relationship between the two railroads, which interchange in Jacksonville, Florida, said Shawn Tureman, NS' VP of automotive and intermodal marketing. The service operates in both directions and expands offerings for customers accessing global markets through south Florida.
U.S.-based logistics, marine and energy solutions firm Crowley uses the Florida Express to help its customers in the United States, Central America and Caribbean Basin expand their options to move textile goods to and from Charlotte, North Carolina, for garment and apparel manufacturing. North Carolina currently leads the nation with nearly 20% of all U.S. textile exports, the largest textile mill industry and more than 395 textile manufacturers.
Crowley moves textiles to and from North Carolina via a combination of truck and rail, but now the company can put more on rail because Florida Express is designed to be more consistent and reliable, said Tureman.
"Crowley competes for textiles to the Carolinas. They need truck-competitive service," he said.
To accommodate a host of customers, Florida Express also targets such goods as produce, poultry and numerous agricultural products.
"Florida Express can handle anything in a grocery store. We target it all, including what's in the freezer," said Tureman. "This is not just an international play, it's all about meeting consumers' needs."
NS and FEC began to develop the service a year ago to better serve fast-growing consumer markets in Florida and the Southeast. About 67% of U.S. consumers reside east of the Mississippi River, said Tureman.
"We are positioned to deliver goods to those markets," he said. "We know where the opportunities are, like in Tennessee, Georgia and Alabama. We need to skate to where the puck's going to be in the future."
In the past six months, NS and FEC have expanded services in the Florida market and Southeast to address growing consumption and manufacturing.
"We see growth in on- and near-shoring and Mexico continuing, and there will need to be [transportation] solutions," said Tureman.
In October 2023, NS expanded its intermodal service portfolio to include FEC's intermodal terminals in Fort Pierce and Fort Lauderdale, Florida. The two railroads had announced that expansion to their partnership the month before.
The expansion — which complemented NS' service to FEC terminals in Titusville and Miami — provided more flexibility to the two railroads' shared customers.
It also created direct access to and from markets in Chicago; Cincinnati; Harrisburg, Pennsylvania; Kansas City, Missouri; Memphis; St. Louis; and points in southern California.
Last year, NS also continued to complete improvements to its Jacksonville intermodal terminal to boost the quality, reliability and resiliency of the facility's operation, and help the Class I be better positioned and prepared to address the region's strong growth.
The work — some of which was completed or will be performed in 2024 — includes the addition of 113 new parking spaces to boost the facility's annual capacity to 25,000 lifts; asphalt paving a 10.5-acre area encompassing 306 parking spaces and a chassis lot that previously were unpaved; a gate expansion to double throughput capacity; a new chassis repair shelter; new lighting throughout the terminal; and the implementation of three new diesel-electric, rubber-tired gantry cranes with partner Kunz GmbH.
To continue an ongoing transition to lower-emission equipment, NS has ordered three more of the hybrid overhead cranes for delivery in 2025.
In February, the Sierra Northern Railway (SERA) launched operations at its Wamble Road Transload Facility in Oakdale, California. The more than 100-mile short line works with BNSF Railway Co. to move cargo from the facility to the Port of Los Angeles.
Located in California's Central Valley, the new inland port is designed to transload 800,000 tons of feed ingredients, nuts and agricultural commodities annually from truck to rail.
The facility can access some of the most agricultural-rich areas in California and link to various ports on the West Coast. It can divert about 20,000 truckloads to rail in a year, SERA officials estimate.
The inland port has been planned for about a year and the operations launched in February constitute the facility's first phase, said SERA President and CEO Kennan Beard. For now, the facility features one track and can process one train at a time.
Phases two and three are in the planning/design stage and are expected to advance later this year. Then the facility will be able to process more trains per week, said Beard.
For now, various containerized freight coming from Asia to the U.S. Southeast arrives in Memphis, Tennessee, where the containers are emptied, filled with cottonseed bound for dairy farmers in California and then transported by BNSF. Cottonseed meal is mixed with other products to create an animal feed.
After arriving in Oakdale, the containers are emptied again and then filled with nuts and grains headed for export to Asia through the Port of Los Angeles. BNSF moves those containers from a Riverbank interchange with SERA to the port.
Previously, the nuts and grains were trucked to the Port of Oakland on extremely congested highways, said Beard.
"The Port of Oakland is a smaller port with lots of congestion that doesn't get as many ships as L.A. Shippers found their freight could sit on the dock for up to a year," he said. "Many of them don't get paid until they sell their products. Now, basically the loads don't hit the road — it's all rail."
Central Valley Ag Group serves as the transload facility's operator for SERA, which won the American Short Line and Regional Railroad Association's 2024 Environmental Award for developing the inland port. By diverting freight to rail, the facility helps reduce environmental impacts and contributes to the short-line industry's sustainability goals.
While SERA now works with BNSF on both the cottonseed and nut/grain moves, Union Pacific Railroad is interested in developing its own lanes of business using the inland port, said Beard.
Since there is more talk about inland ports around the nation, SERA also might be interested in developing another one somewhere along its lines.
"We think there could be a good opportunity in other places, but you need a big investment to build one and you need the right products to make it work," he said.
Email questions or comments to jeff.stagl@tradepress.com.