WASHINGTON, D.C. — Freight rail intermodal transportation, which is the movement of consumer goods and other products in a truck trailer or container on a railcar, posted an eight percent growth over the past three months and is poised to overtake coal as the top revenue source for railroads, according to research conducted by intermodal industry expert Thomas R. Brown and independent Wall Street analyst Anthony B. Hatch.
According to a press release from the Association of American Railroads, Brown and Hatch project a robust annual growth rate of five percent for intermodal over the next several years, its highest rate in five years. The projected growth rate also exceeds that of the U.S. GDP, which is expected to grow 3.3 percent per year during the same period. With U.S. freight demand expected to double in the next 20 years, the Brown-Hatch study concludes that intermodal is the most cost-effective means for handling the growth and will provide greater environmental benefits.
“Intermodal is less expensive and less disruptive than trucks on highways, which makes it universally beneficial,” said Brown. “Hands down, it is the best means of addressing the expected increase in freight traffic.”
“By the conclusion of 2003, intermodal will surpass coal as the greatest source of railroad freight revenue assuming the current revenue trends for each continues, and that the U.S. economy maintains at least its moderate growth rate,” Brown said. “People will have to start thinking of railroads differently now. Freight railroads are an increasingly significant delivery service for household products, in addition to bulk commodities like coal and grain.”
In 1999 and 2000, the freight rail industry invested over $14 billion — representing one-fifth of its revenues for that period — in intermodal. Information systems were upgraded, terminals were added, and state-of-the-art locomotives and intermodal cars were purchased. This has led to an increase in service performance and capacity, which has spurred an increase in intermodal usage.
“Intermodal’s service and economic advantages have prompted many shippers to rely more heavily on intermodal,” said Hatch.
In 1984, just one doublestack train per week originated on the West Coast and served only one U.S. inland market. Today, over 241 doublestack trains per week originate on the West Coast and serve all the major long haul U.S. markets. Today, more than 600 companies and organizations throughout the nation are engaged in the process of creating intermodal transportation. They range in size and nature from the entrepreneur running an intermodal company with a dozen trucks to global companies with billions of dollars in revenue.
Just last year, rail intermodal service took more than nine million long haul trucks off our roads.
“Rail intermodal already takes millions of trucks off our highways each year and its potential to play a much larger role in the future is enormous, both in traditional and transcontinental markets and in the new short-distance and middle-distance lanes,” said Brown. “Greater intermodal use would generate enormous societal and environmental benefits, including reduced highway congestion, a reduced need to build more highways, enhanced highway safety, lower harmful emissions and reduced fuel use.”
Brown believes that rail intermodal is underutilized today and has a significant potential for growth.
“Intermodal has the potential to become the core of our long-distance freight transportation networks, and to make substantial inroads in new markets,” he said. “This can be accomplished through the addition of new capacity in certain lanes and through the introduction of incentives for new intermodal investments.”
Those incentives include:
* Eliminate 4.3-cent fuel tax currently imposed on railroads. The tax is imposed on trucks and airplanes, but goes directly to infrastructure improvements for highways and airports. It makes sense for the 4.3- cent fuel tax currently imposed on privately owned and operated railroads to be returned to them for their own infrastructure improvements to increase intermodal capacity.
* Provide tax incentives and tax-exempt financing to companies making investments in intermodal freight infrastructure. This includes new terminals and cars, as well as technology connecting shippers and intermodal companies in real time. Public policy should support new capital investment in critical intermodal infrastructure, since it leads to major public benefits including higher productivity, enhanced global competitiveness, and ultimately more efficient GDP growth.
* Forge public/private partnerships to finance railroad infrastructure improvement projects, particularly in cases where the fundamental purpose of the project is to provide public benefits or meet public needs.
Hatch-Brown research noted that the United Parcel Service, the world’s largest shipping company, is a heavy user of intermodal, as are large retailers such as Wal-Mart.
“Today, everything from bicycles to automotive parts, from lawnmowers to glassware, from toys to electronic goods, moves by rail intermodal service,” said Brown.