US railroads nudging shippers away from trailers 10/10/19

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US railroads nudging shippers away from trailers

 

US railroads nudging shippers away from trailers

Ari Ashe, Associate Editor | Oct 10, 2019 3:37PM EDT

 

Marten Transport, which has been doing TOFC since 2005, will shift to containers after talking with BNSF and NS about how to maximize the use of trains and terminal space efficiently. Photo credit: Marten Transport.

Two refrigerated (reefer) intermodal carriers have purchased more than 1,000 containers combined this year as part of a larger effort by some US Class I railroads to limit the use of trailers by shipper customers.

Using containers instead of trailers benefits all shippers, according to the railroads, because they can fit more cargo onto each train and maximize terminal space by double stacking. The ability to stack is being pitched as a way to maximize throughput without jeopardizing terminal fluidity, according to Marten Transport and KLLM Transport.

The two refrigerated carriers are the latest intermodal providers to convert from trailers to containers at the behest of BNSF Railway and Norfolk Southern Railway (NS). KLLM has acquired 610 reefer containers and Marten 500 this year from China Intermodal Marine Containers (CIMC), the first major push into containers for both companies. YRC recently announced the purchase of 600 dry containers by the end of the year for use on BNSF.

Trailer volume on the rails has significantly cooled since 2015. Through August 2019, trailer volume has dropped nearly 23 percent compared with the same eight-month period four years ago, the last year of the Triple Crown service, a featured NS trailer product that was eliminated. Year-to-date trailer volume has fallen 12 percent compared with 2018, and the rolling three-month average through August shows volume plunging nearly 17 percent, according to data from the Intermodal Association of North America (IANA).

BNSF and NS said during the IANA Expo conference last month there will be a place for trailer-on-flatcar (TOFC) service, but they also didn’t rule out network changes in the future. BNSF identified Willow Springs, Illinois, terminal during the conference as a location where land constraints may result in service changes. Sources told JOC.com that BNSF will curtail TOFC service between Los Angeles and the Chicago-area terminal in 2020.

“We've been in the TOFC business since 2005. We're probably doing 600 to 700 loads a week TOFC,” Randy Marten, CEO of Marten Transport, told JOC.com. “But the BNSF made it very clear — along with the NS and CSX — that they prefer to do containers. So, we ordered 500 containers from China and equipped them from Thermo King [reefer units] from Europe.”

KLLM was in the process of converting to containers when NS cancelled TOFC service between Atlanta and Chicago this February.

Photo credit: KLLM.

“For us, that was thousands of loads a year,” said Todd Davis, KLLM’s director of intermodal. “So we started talking to equipment manufacturers, and the problem with containers is that none of them are made domestically. It gets a little bit more complicated on the temperature-controlled side because you buy the box, you bring it to the United States and then you finish it out here with the reefer unit, the tank, the chutes, all those things.”

Why trailers were being used

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The popularity of TOFC service has to do with capacity and weight, which factors into how many pallets can be loaded per shipment.

Larry Gross, president of Gross Transportation Consulting, explains that more cargo could fit into a trailer than a container, especially when considering the 80,000-pound federal weight limit for US highways.

“The container is just naturally heavier. An integrated system is always going to be better than a two-part system [i.e. a container and a chassis] structurally speaking. Just like dry domestic containers are considerably heavier on a chassis than an over-the-road trip,” Gross said.

Davis said the container-chassis combination and reefer unit adds nearly 6,000 additional pounds to a load and the fuel an additional 725 pounds. Trailers, meanwhile, don’t have these impediments. Within the last two years, however, CIMC designed a slimmer container with Thermo King and Carrier.

“The previous iteration [of containers] were missing four inches, and that four inches is what kept us from putting in an extra row of 40x48 pallets,” Davis said. “The thing that we heard the most from current customers was, ‘Well, we tried containers with carrier X, Y, Z. And we had to forfeit payload, and we don't want to have to do that.’” Now, he said there isn’t much difference between what can fit inside a container and a trailer on rail.

Railroads prefer containers because they can be double stacked on a train, unlike trailers. This increases throughput in rail terminals that cannot be expanded, such as BNSF Willow Springs. Double stacking is also important in precision scheduled railroading (PSR), which emphasizes longer trains to make more efficient use of locomotives. In other words, PSR operators want the maximum amount of cargo on each train.

How railroads are approaching customers

Marten and Davis were clear that BNSF and NS have been collaborative about the process. Although the railroads are not eliminating the option altogether, they are disincentivizing the use of trailers by raising TOFC rates.

“What we were told is that the rate for TOFC service was going to continue to dramatically increase just because the railroads are running out of flat cars, and that they have yard congestion,” Davis said. Marten said railroads haven’t pushed to cease TOFC but also provided a glimpse of future rates.

Shippers who prefer trailers have options available. Marten will provide limited reefer trailer service. Other intermodal providers with a sizeable trailer fleet include Alliance Shippers, Hub Group, and Prime, Inc.

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