Intermodal markets: Worse before it gets better

Containership lines are still voiding sailings to
West and East Coast ports in the United
States, threatening downstream domestic
intermodal volumes, but the more profound
risk is that consumer spending will pull back
further and kill the demand for intermodal

Contracted truckload volumes went negative
on a year-over-year basis Wednesday and will
continue to drop. We expect intermodal
capacity to be abundant.

In an April 1 client note assessing how
negative the freight outlook may get during
the pandemic, UBS transports analyst Tom
Wadewitz wrote, “2008 / 09 downturn may be
a reasonable framework and it implies
downside for [earnings per share] and the
transport stocks.”

Of the Class I rails, Wadewitz found that
Canadian National and Norfolk Southern were
most exposed to international intermodal
revenue, which he views as currently under
threat. He also noted that rail volumes
bottomed in the second quarter of 2009 at
-22% year-over-year, implying that there is still
room to run in the current downturn.

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