U.S. railroads including CSX Corp, Union Pacific and BNSF are moving to recapture freight from trucke
rs as tightening trucking capacity and rising road-haul rates bolster rail’s competitive position.
For years, low trucking rates and greater flexibility helped road carriers capture cargo tha
t might otherwise have moved by rail, weighing on rail volumes and limiting pricing power.
That dynamic is now shifting, at least temporarily.
Freight broker C.H. Robinson said trucking capacity is shrinking as small carriers exit the market and federal scrutiny of driver licensing, safety and insurance requirements intensifies.
The added pressure is reducing driver supply and raising operating costs.
National van spot rates rose to $2.43 per mile in February from $2.03 a year earlier, according to DAT Freight & Analytics, a benchmark for spot-market pricing.
Railroads do not publish standardized spot rates, making direct comparisons difficult.
“A tightening truckload market has the potential to support domestic intermodal volumes and pricing, particularly on shorter length average-of-haul where routes c
ompetition with over-the-road trucking is typically most intense,” BMO Capital Markets analyst Fadi Chamoun said.
Intermodal freight, cargo moved in containers that can be transferred between ships, trucks and trains, is a key battleground between the two sectors.
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Chamoun said eastern railroads CSX Corp and Norfolk Southern could benefit disproportionately because of their heaviness exposure to intermodal traffic in densely populated corridors.
CSX told Reuters that converting freight from trucks remains a priority for its intermodal business. Af
ter years of excess highway capacity, it now sees opportunities to capture profitable volumes.
The company said it was expanding terminals and working with port authorities to develop inland hubs closer to end markets.
Union Pacific Chief Financial Officer Jennifer Hamann told investors at a Barclays conference that the industry leader expects about 75% of new business growth to be “coming off the highway.”
The company added that its pending acquisition of Norfolk Southern, creating the first coast-to-coast rail network, could eventually remove about 2 million trucks from U.S. roads.
Berkshire Hathaway-owned BNSF said it has invested in terminal expansions in Chicago, Dallas-Fort Worth and Phoenix to prepare for a potential rebound.
“Both new shippers and our large traditional customers are leaning more on rail for capacity, cost advantages and sustainability benefits,” Jon Gabriel, group vice president of consumer products, told Reuters.
