Intermodal savings all but disappeared in April, according to the Journal of Commerce’s Intermodal Savings Index (ISI). Generally, rail tends to be less expensive than over the road shipping. The difference in rates narrowed considerably last month in nearly 200 lanes. Savings from using intermodal fell in April to its lowest in over a year, the Journal found.
The ISI measures savings that a shipper would get from using intermodal versus using a truck to haul goods. It looks at both the spot market and contract market. The index starts with a base of 100. A higher number indicates savings from using rail, and a lower number indicates a better value over the road.
In April, the spot value index fell to 102.9, in the weakest month for rail since February 2019. In comparison, the index was 116.5 in March and the historical average is 113.9. Translating into percentages, this signals that while savings from intermodal were 16.5% in March and 13.9% historically, the difference shrank to 2.9% in April.
Much of this can be chalked up to Covid-19 sending trucking spot rates downward. DAT reports that dry van rates in April were $1.64 per mile, the lowest since September 2016. In some lanes, rates have fallen below $1 per mile. Trucks have become cheaper than rail in parts of the country.
Rail volumes did not fare well either. The Intermodal Association of North America reports that total intermodal lost 6.7% volume in the first quarter. The Association of American Railroads announced that volumes are falling to 2008-2009 levels, and have been down nearly 10% every week since the last week of February.
Drivers protested the low rates and increasing operational costs in Washington DC last week. Unfortunately, operating costs have not slowed down, even as rates take a nosedive. Many drivers report that they feel compelled to accept any trip they can to keep up with job related expenses.