Larry Gross, president of Gross Transportation Consulting, brings his decades of industry experience and sharp market insights to analyze the current state, challenges, and future opportunities of intermodal rail transportation. His examination covers the strategic CSX-BNSF partnership, warnings about a potential UP-NS merger, tariff policy impacts, and how to navigate future uncertainties.
I. A New Rail Partnership Model: The Strategic Significance of CSX-BNSF Intermodal
According to American Association of Railroads (AAR) data, only about 14% of intermodal activity involves direct rail-to-rail transfers, excluding significant "rubber tire" transfers where cargo is trucked between railroads in cities like Chicago. This inefficient model shifts system complexity onto users and municipalities rather than optimizing rail-based freight distribution.
The drawbacks of "rubber tire" transfers are clear: double handling, cross-town trucking, and chassis usage create substantial costs. While these may be offset for ultra-long-haul shipments, they significantly reduce intermodal competitiveness in short-to-medium distance markets. Gross strongly supports the CSX-BNSF partnership to increase direct rail transfers, noting that while trucking operates a national network, intermodal relies on regional single-line networks.
Gross observes that if rail mergers could stimulate growth, intermodal would show the most potential. However, he dismisses as fantasy the notion that mergers could reverse railroads' long-term freight volume declines.
II. The CSX-BNSF Partnership: Benefits and Limitations of a "Light" Transcontinental Merger
Some industry experts suggest the CSX-BNSF collaboration achieves many benefits of transcontinental merger without Surface Transportation Board (STB) complications. Gross agrees this represents progress, but calls it merely "a baby step" toward the needed seamless, interconnected national network.
Between 2006-2024, U.S. GDP grew 42% and trucking volumes increased 29%, while major railroads' non-coal freight declined 12%. In theory, a UP-NS merger might stimulate growth. Simply matching GDP growth would represent significant achievement, let alone recapturing trucking market share. Intermodal performs slightly better due to untapped mid-distance market potential, but realizing this would require operational changes beyond mergers - railroads must move beyond 200-300 container unit trains to serve these fragmented markets.
III. The UP-NS Merger: Long Road Ahead With Uncertain Outcome
Gross considers the UP-NS merger far from certain, dismissing claims of predictable STB decisions as nonsense. While some assume the Trump administration's pro-business stance favors approval, this overlooks the merger's complex dynamics: major shippers oppose consolidation while railroads support it. With STB currently one member short and no clear administration position, the outcome remains uncertain.
IV. Intermodal Service: Strong Current Performance With Untapped Potential
Current intermodal service levels are excellent, with STB metrics showing historically low numbers of trains delayed by crew or power shortages. Despite tariff-induced volume fluctuations, the system - including Los Angeles/Long Beach ports - has handled flows smoothly, benefiting from uncongested supply chains.
V. Intermodal in the Trade War: Challenges and Opportunities
Gross analyzes trade war impacts through two lenses: direct tariff effects and broader uncertainty. The traditional peak season (typically weeks 39-40) has failed to materialize for two consecutive years, with early buying creating distortions. He compares current trade tactics to aggressive real estate negotiation strategies that create substantial collateral damage.
Investment is frozen as businesses await clarity. While the U.S. economy remains resilient, Gross cautions against overlooking broader issues beyond tariffs. He notes intermodal's 4% growth over 10 years trails trucking's 19%, suggesting fundamental challenges beyond market conditions.
Tariff implementation details remain unclear and rapidly changing, creating disruptive uncertainty. Gross warns that unless tariffs reach levels prompting production reshoring (unlikely at 15%), they may simply become regressive consumption taxes disproportionately affecting lower-income households - a revenue source governments would be reluctant to relinquish.
VI. Peak Season Outlook: Mini-Peak Fades Amid Ongoing Uncertainty
What some interpreted as 2019's peak season appears instead as a California-focused mini-peak following tariff announcements, now fading with declining rates. July's volume bump may prove temporary as data lags behind rapid changes, with indicators suggesting softening ahead.
Through this comprehensive analysis, Larry Gross illuminates intermodal rail's complex challenges and opportunities. In an uncertain environment, understanding these dynamics becomes essential for competitive adaptation.