As we’ve been doing every Monday, the SONAR team teaches you about another index (or two) found within SONAR, the freight forecasting platform from FreightWaves. This week, learn how freight market participants monitor intermodal shipping activity with two indices: the RAIL index, to measure intermodal volumes; and INTRM, to monitor domestic intermodal spot rates. In this article, you learn what both the RAIL and INTRM indices are, what the RAIL and INTRM indices tell freight market participants, who in the freight market relies on these indices and what is the value to each participant. In addition, there is a freight market expert’s deeper insight into the intermodal shipping segment using the INTRM index as well as other SONAR indices to provide deeper insights around what changes in these intermodal-centric mean to freight market participants.
What is the RAIL Index?
The RAIL index found in FreightWaves SONAR is a daily series of the average containerized intermodal volume from the prior seven days in two markets, domestic and international, which are noted by the addition of either “O” for domestic (ORAIL) and “I” for international (IRAIL) to monitor volumes in either markets.
For example, if there were 700 intermodal shipping containers moved between City A and City B in the past week, that lane shows a total ORAIL value of 100. Containers are counted at the time they enter the originating rail terminal, or are ingated, rather than when they are moved by the railroad, to make the series more forward-looking. The volume can be viewed in detailed granularity, as described below.
In the chart above, you can see the 40’ and 53’ container volume out of L.A. from May 2019 to May 2020.
What does RAIL tell freight market participants?
ORAIL/IRAIL is the ultimate intermodal shipping volume tool. It gives SONAR users visibility to daily changes in the intermodal market and is broken down in detailed granularity not found in other data sources.
According to the Association of American Railroads (AAR), rail intermodal is the largest single source of U.S. freight rail revenue and represents a competitively priced, environmentally friendly alternative to road transport. It has grown in large part because railroads have invested billions of dollars on new intermodal terminals, track upgrades, and other infrastructure projects that have made rail intermodal more reliable and cost-effective.
Rail intermodal is defined as the long-haul movement of shipping containers and truck trailers by rail, combined with a truck or water movement at one or both ends. Intermodal allows railroads, ocean carriers, trucking companies, and intermodal customers to take advantage of the best attributes of various transportation modes to yield an efficient and cost-effective overall freight movement.
The daily volume of intermodal shipping containers tells you:
- The volume of freight moving between freight markets
- The volume of empty containers being repositioned due to freight imbalances between markets
- The volume of international shipping containers moving by rail
- The volume of empty shipping containers being shipped overseas back to their port of origin due to international trade imbalances
Because domestic intermodal and international intermodal shipping are two distinct markets, ORAIL/IRAIL can be broken down between international (ORAILINT) and domestic (ORAILDOM), and can be further broken down by container size. For example, If one wants to look only at the volume of 53’ domestic containers and exclude all other sizes, use ORAIL53. For only the volume of 20’ international containers, use ORAIL20.
In addition, ORAIL and IRAIL are also broken down between loaded container volume (ORAILL) and empty container volume (ORAILE). We recommend utilizing that breakdown because of the differing economics between carriers moving loaded containers and revenue empties. For example, the volume of 40’ loaded container movements is ORAIL40L while the volume of empty 40’ container movements is ORAIL40E.
ORAIL and IRAIL are broken down by inbound and outbound volume origin/destination market and are also broken down by lane. That’s important since intermodal shipping volume is dominated by a few key lanes.
Use airport codes to utilize granularities. For example, for 53’ loaded containers between Los Angeles and Chicago use ORAIL53L.LAXCHI. For 40’ empty containers arriving into Seattle from all origins use IRAIL40E.SEA.
How can freight market participants utilize RAIL to monitor intermodal shipping volume?
- Analysts: Analysts can utilize ORAIL data to gain visibility into intermodal shipping volume trends in particular industry granularities (e.g., domestic container volume between L.A. and Dallas) that most impact publicly traded companies.
- Carriers: Growing containerized intermodal traffic into or out of a city means there will be more drayage opportunities to and from rail ramps. In addition, ORAIL can be used to illustrate how competitive intermodal is with truckload freight moves based on comparative volume trends in the same lanes or over similar lengths of haul. That helps carriers determine which services to offer in the lane and where to position resources.
- Brokers: Brokers can utilize loaded container volume (ORAILL/IRAILL) to gain visibility into which locations they can broker intermodal shipping loads in addition to truckloads and where they might be able to source capacity cheaper in the intermodal market. Brokers that arrange intermodal loads can utilize the visibility into empty container volume (ORAILE and IRAILE) to see where there is excess capacity and where empty containers can be sourced.
- Shippers: Shippers can quickly see what the market is telling them about intermodal’s competitiveness in their shipping lanes. Dense intermodal shipping lanes with growing volumes means that other shippers are finding savings on their transportation spend, combined with adequate levels of service, by utilizing rail intermodal.
What is the Intermodal 53’ Container Spot Rates (INTRM) index?
The Intermodal 53’ Container Spot Rates (INTRM) index displays the weekly average door-to-door intermodal spot rates for 53’ containerized movements.
The intermodal freight rates are presented on a per-mile basis, and SONAR users can see the weekly average for all origin-destination pairs (INTRM.USA) or for specific lanes, such as Los Angeles to Chicago (INTRM.LAXCHI).
In the TreeMap above, SONAR users can view average intermodal spot rates for 53’ containers on major intermodal lanes compared to this time last year.
What does the INTRM index show in regards to intermodal shipping?
Using INTRM, you are able to see intermodal shipping spot freight rates to move 53’ domestic containers, presented as a weekly average.
In addition to viewing the domestic intermodal spot rate for the U.S. market as a whole (INTRM.USA), intermodal spot rates can be seen on individual lanes such as L.A. to Chicago (INTRM.LAXCHI), New York/New Jersey to Chicago (INTRM.LINCHI), and Chicago to Atlanta (INTRM.CHIATL).
You can view this data as a change over the past week (INTRMW), fortnight (INTRMF), month (INTRMM), quarter (INTRMQ), or year (INTRMY). For example, to see the year-over-year change in the domestic intermodal spot rate between L.A. and Dallas, use the ticker INTRMY.LAXDAL.
How various freight market participants can utilize INTRM
The various freight market participants can use INTRM to monitor intermodal shipping spot rates domestically in the following ways:
- Analysts: The INTRM data series contained in SONAR gives you a unique way to gain insight into the pricing dynamic of the domestic intermodal market. While the large majority of intermodal volume travels in the contract market, intermodal spot rates are a near real-time indicator of intermodal supply and demand and can be thought of as a leading indicator for the rates on intermodal contracts. In addition, comparing intermodal spot rates to trucking spot rates provides insight into the relative attractiveness of intermodal shipping compared to truckload. They also indicate whether the railroads and the truckload-based intermodal providers will “take trucks off the road” and grow volume at a pace ahead of the overall freight market.
- Carriers: Truckload freight carriers should compare intermodal spot rates to truckload spot rates in lanes they participate in, and when intermodal rates are significantly less expensive than truckload, carriers should focus on different lanes or loads that are difficult to move via rail intermodal, such as those that are time-sensitive or have special requirements.
- Brokers: Brokers’ gross margins are a function of the spread between rates paid by shippers and the brokers’ costs of purchased transportation. For longer-haul shipments of dry goods that are less time-sensitive, brokering intermodal shipping loads may provide the lowest purchased transportation freight costs. But, that is not always the case because the relative competitiveness between truckload and rail intermodal is dynamic and needs to be monitored on a daily basis.
- Shippers: The INTRM data series is most relevant for shippers that are moving long-haul domestic freight in the spot freight market or are in the process of negotiating intermodal contracts. Shippers should generally look for a 10%-15% discount to truckload in exchange for the additional points of handling, and sometimes lower service and speed, associated with rail intermodal. Intermodal spot rates that are depressed, and/or near parity with truckload on relevant lanes, means that shippers should be in control when negotiating intermodal contracts.
Deeper market expert insights using intermodal shipping indices
With tender rejection rates hitting new highs and with one month remaining during peak season for trucking, look for intermodal volume and intermodal spot rates to remain elevated. Highlighting the impact that the tight trucking market is having on intermodal, intermodal containers (RTOICY.USA) and trailer volume (RTOITY.USA) increased 11.1% year-over-year (y/y) and 16.7% y/y, respectively, in the most recent week.
In addition, the SONAR nationwide intermodal shipping spot rate (INTRM.USA), calculated as a weighted-average of door-to-door spot rates to move 53’ containers as quoted by the Class I railroads, reached a new all-time high at $2.61, up from $2.48 the previous week and up 77% y/y. Those data points indicate that shippers may be unable to utilize intermodal as a relief valve to a tight truck market given capacity constraints in intermodal as well.
Keep ahead of the intermodal shipping market and turn to SONAR to see volumes and domestic spot rates
In uncertain times, freight market participants need certainty to stay ahead of the freight market and understand the freight demand occurring in each participant’s most important lanes, markets and shipping modes. The premier freight forecasting engine, FreightWaves SONAR, allows participants to benchmark, analyze, monitor and forecast freight demand and costs. SONAR ensures more proactive responses to the market, provides correlations between several indices to guide decisions, and the ability to manage freight budgets or margins more proactively. Get a demo of SONAR to see what the platform can do for you.