What to Expect During Intermodal Peak Season

10/15/2012

What to Expect During Intermodal Peak Season

We are now at the time of the year when peak season is starting up for the intermodal services. We often hear a similar question from both the seasoned intermodal shipper as well as the customers who have just recently started using intermodal shipping:  “What should I expect during intermodal peak season?”

I have been following the intermodal product for many years now, and I have several years’ worth of data that shows the loadings on a week-to-week basis.  I love to listen to some of the “old-timers of intermodal” (especially since I am one) talk about how the peak season starts around the third week of September every year, and grows and grows until the first week of December, when the volumes start to drop off.  Based on that information, if you were looking at a graph, you would basically expect to see a large spike or peak that starts in September and continues to grow all the way to December.

When looking at the data that reflects the volumes on a week-to-week basis, it is pretty easy to see that generally, there is a peak or spike in the loadings generally around the 3rd or 4th week of September. But for the past few years, after that one-week peak, the loadings then start to fall off gradually until the week of Thanksgiving, when a large drop-off occurs.  After Thanksgiving, the volumes rebound back to where they were they were, and the gradual decline continues for about 2 more weeks, when the volumes start to drop quickly.

In summary, the peak season for the past few years has been a one-week period where the loadings spike, and then the very next week, we see them start to gradually decline. This has an effect in two different areas: capacity and price.

CAPACITY
There are two factors that have an effect on container capacity; the first is simply the law of supply and demand. As the demand picks up, the supply will drop, and since there is an average of 12 – 14 days per intermodal load cycle, it will take at least two weeks before we see the supply start to build back up.  So even though the data shows that that generally, we only see one week of spiked loadings, it can and will have an effect on supply for about 2-3 weeks.

The other factor that has an effect on container capacity is the IMC’s hanging onto the empties and holding them even though they might not have a load for them.  Basically, the IMC’s are willing to pay the daily per diem for 3-5 days so they can then cover a load in the future.  When this happens, it slows down the cycle time for the containers, resulting in fewer loads per box during peak season, which is the exact opposite of what you would normally expect to happen.  When demand picks up, you would expect to see the utilization of the boxes increase drastically, thus more turns or loaded trips per month.

With the spike in loadings occurring quickly, the draymen struggle to cover the pickups from the shippers, and then when the loads get to the destination, the draymen there struggle to get the loads delivered in a timely fashion.  During the peak season of 2011, there were boxes available for loading; however, it was impossible to find a drayman to pick up the loads, so once again, empty time is added to the cycle of the container.

PRICE
The laws of supply and demand certainly come into play with intermodal pricing during peak season; as the supply of equipment drops, the price per load goes up.  It is no secret that in years past, there were charges put up front to “buy” an empty box (sometimes as high as $500) plus the surcharges or price increases the rails take, so any given lane could see a spike in cost of $200 – $650. These price increases are generally short-lived, and as the supply of equipment starts to grow, due to a reduction in demand, the price will drop back to where it was pre-peak season.

If you want it simple and sweet: during peak, the price will go up, and the availability of empty equipment and driver capacity will be tight.

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