Freight Railroads Get Boost from Tight Trucking Markets

U.S. railroads posted a 6.5% increase in intermodal traffic in March, according to a report from the Association of American Railroads, making the month “Easily the best” March in history. The trade group said intermodal volume is tracking to top records set last year, with growth accelerating in April. The AAR said the number of truck trailers moving on major railroad networks expanded 15.3% in the first quarter from the same period a year ago.

The major freight railroads have captured the higher volume despite pockets of service issues in parts of the country where the carriers are dealing with hiring shortfalls and higher demand. The railway has been picking up cargo from trucks, with intermodal revenue up 19% in the first quarter. Volume rose 8% while revenue per unit rose 10%, a sign that shipping customers were paying more to get their goods on trains. “So we’re very confident that as the year progresses, we’ll be able to continue to lean into price reflecting the value of our service.” , which reported first-quarter results Thursday, domestic intermodal volume increased 5% on strength in parcel shipments and tight truck capacity.

Other lines of business, including the railroad’s refrigerated boxcar business, have also gotten a bounce from the tight truck market. Railroads tend to have longer-term contracts with shippers, so changes in the trucking market may not allow them to adjust prices or go after new contracts quickly. I don’t win any awards for how many truck trailers I move on our railroad. Freight brokers who arrange transportation are also feeling the effects as customers switch some shipments over to rail.

Hub Group one of the largest brokers in the U.S. focused on rail shipping, said a 14% increase in intermodal revenue in the first quarter to $482.5 million, helped boost the company’s net profit 56% to $16.1 million. The Jacksonville, Fla.-based railroad it dismantled a hub-and-spoke model in favor of longer-haul routes that are more profitable. In the first quarter, CSX didn’t expand its intermodal volume compared with the year before, but revenue rose 3% on higher rates. CSX Chief Executive James Foote said the company is focusing on converting truck volume only if it can do so profitably. “I don’t win any awards for how many truck trailers I move on our railroad,” Mr. Foote said in an interview this month.