How Intermodal Transport Is Shaping the Truckload Market in November - Sobel Network Shipping Co., Inc.

How Intermodal Transport Is Shaping the Truckload Market in November

As we progress through November, intermodal demand continues to show strength, averaging over 8% higher compared to the same time last year. Meanwhile, truckload demand appears to be softening, with the national Outbound Tender Volume Index (OTVI) down by 3% year-over-year. Historically, intermodal demand declines in November as supply chains shift to a more reactive approach, raising the question: Is intermodal transport preventing a breakout in the truckload market?

Intermodal’s Vital Role in Supply Chains

The Los Angeles-to-Chicago corridor has emerged as the most significant route for intermodal container transportation in the United States. This prominence is driven by the large volume of international import containers arriving at the ports of Los Angeles and Long Beach.

Transporting goods across this transcontinental route via truck involves substantial time and resources, with solo drivers taking four days each way. Intermodal transport offers an efficient alternative, with each 40- or 53-foot container replacing eight days of truck capacity on this heavily trafficked lane.

Domestic intermodal transport, particularly the use of 48- and 53-foot containers, has grown significantly in recent years. Freight volumes in the Los Angeles-to-Chicago lane are now more than 25% higher than pre-pandemic levels, replacing an estimated 2,200-2,500 truckloads per week.

International containers, typically measuring 20 or 40 feet, also contribute significantly to intermodal’s impact. Even a conservative estimate suggests they replace an additional 1,700 truckloads weekly compared to the previous three years.

Overcoming Challenges to Intermodal Growth

Infrastructure constraints and container shortages, which once hindered intermodal viability, are no longer significant obstacles. As intermodal capacity grows, it continues to offset potential shortfalls in truckload capacity, a development that many in the trucking industry have underestimated.

However, truckload market dynamics are shifting. Tender rejection rates—the percentage of load requests turned down by carriers—reached their second-highest levels of the year in early November. Despite declining volumes, capacity is tightening due to a narrowing gap between contract and spot rates and reduced carrier compliance.

The Broader Impact of Intermodal Transport

Intermodal transport is playing a stabilizing role in the surface transportation market. Loaded container volumes are up 14% compared to November 2021, while truckload tender volumes have dropped by approximately 29% during the same period. Since intermodal freight typically involves longer hauls, the actual gap isn’t as wide as the percentages suggest, but the impact remains substantial.

Looking Ahead

In the short term, intermodal’s growth may seem like an obstacle for carriers and brokers hoping for a strong market breakout. However, this balancing effect could prove beneficial in the long run.

Recent surges in long-haul freight demand have been accompanied by uncertainties, including shipping delays, port strikes, and tariff concerns. A sharp market tightening, particularly if driven by seasonal or short-lived demand, could lead to volatility. While surging rates might temporarily boost capacity, they also risk triggering a snapback market where rates and demand drop sharply.

For example, the refrigerated truckload market experienced a snapback earlier this year after a strong fall and winter. Rates spiked temporarily but soon fell back to post-pandemic lows. A steadier, more sustainable tightening of the market, supported by intermodal capacity, provides a healthier path forward.

Intermodal as a Stabilizing Force

Intermodal transport is reshaping the truckload market, offering stability in an industry grappling with evolving challenges. By providing a reliable alternative to traditional trucking, intermodal helps balance capacity and demand, paving the way for a more sustainable future in freight transportation.