The North American intermodal market is undergoing unprecedented transformation. The unpredictable nature of international trade, coupled with long-term growth stagnation, has created powerful headwinds challenging the industry's foundation. Facing these formidable obstacles, can North American intermodal find new pathways to growth by transforming domestic operations into a powerful engine for future expansion?
International Intermodal: A Winter of Trade Friction
At the recent RailTrends conference in New York, Larry Gross, president of Gross Transportation Consulting and an intermodal expert, provided deep analysis of the complex and nuanced state of the North American intermodal market. His presentation highlighted how international and domestic intermodal operations respond differently to various economic drivers.
The Tariff Impact: Precipitous Decline in International Volumes
Tariff policies created an artificial surge in early-year international intermodal volumes as shippers rushed to avoid potential duties. This "front-loading" effect created temporary spikes that soon gave way to dramatic declines as tariff policies took full effect and the artificial demand subsided. The resulting downturn has cast a shadow over the industry, leaving operators facing unprecedented challenges.
Cross-Border Dynamics: US-Canada Friction vs. US-Mexico Growth
Cross-border intermodal faces its own set of challenges. Trade tensions between the U.S. and Canada have directly impacted transportation demand between the two nations. In contrast, cross-border movements between the U.S. and Mexico have shown remarkable resilience, emerging as a bright spot in an otherwise challenging environment.
Mexico's proximity, competitive labor costs, and favorable trade conditions have attracted increasing manufacturing investment, driving corresponding transportation demand. This trend presents new opportunities for intermodal operators serving these trade lanes.
Seasonal Patterns Return: A Glimmer of Stability
Since mid-year, intermodal volumes have begun following more traditional seasonal patterns—a welcome development after the extreme volatility of pandemic and post-pandemic years. This normalization allows for better forecasting and strategic planning across the industry.
Peak Season Shift: Early 2025 Peak Raises Concerns
Gross noted that the 2025 peak season appears likely to arrive earlier than historical patterns would suggest, contrasting sharply with the delayed peaks seen in 2023 and 2024 due to tariff-related demand shifts. This compressed peak period will require operators to adapt quickly to maximize opportunities.
Long-Term Challenges: Negative Growth Forecast Through 2026
Looking ahead, Gross projects negative year-over-year growth for U.S. domestic intermodal continuing through at least late 2025 and into early 2026—a sobering forecast that underscores the need for strategic adaptation across the industry.
Domestic Intermodal: The Decisive Battleground
"Domestic intermodal represents the sector where operators truly control their own destiny," Gross emphasized. "This is the arena where intermodal competes directly with truckload transportation." With international intermodal facing numerous uncertainties, domestic operations take on even greater importance.
Market Share Stagnation: Persistent Challenges
Since 2016, intermodal's market share has remained stagnant. In the U.S. long-haul dry van and refrigerated markets, intermodal's share has declined from a peak of 7% to approximately 6%, failing to gain ground against truck competition.
Freight Recession and Truck Capacity: Compounding Pressures
A three-year freight recession combined with post-pandemic truck capacity oversupply has exacerbated intermodal's challenges. Declining freight rates have compressed margins, while abundant truck capacity has enabled truckload carriers to offer more competitive pricing and service.
Unsustainable Import Growth: Structural Vulnerabilities
Reliance on import growth creates long-term vulnerabilities. "We will see some contraction," Gross predicted, citing both tariff impacts and broader external factors. This dependence makes intermodal particularly sensitive to global trade fluctuations.
Overcoming the "Donut Effect": Unlocking Growth Potential
Gross identifies domestic intermodal as the key to market share growth, particularly by addressing the "donut effect"—where intermodal struggles to compete on mid-length hauls (1,000-2,000 miles) that typically require two railroad handoffs.
He proposes two potential solutions:
- Solution 1: Raise market share in existing lanes to match performance levels seen in other distance bands, potentially generating 8% volume growth.
- Solution 2: Achieve intermediate market share levels between short and long-haul performance, which could drive 25% volume increases.
While mergers represent one path to achieving these gains, they are not the only option. Operational improvements, technological innovation, and enhanced railroad coordination offer alternative routes to growth.
External Factors: Critical Variables to Monitor
Several external developments could significantly impact intermodal's trajectory:
- Global Shipping Routes: Resolution of Red Sea/Suez Canal disruptions could shift Asian imports to U.S. East Coast ports, creating new intermodal opportunities.
- Trucking Capacity: Potential regulatory changes affecting driver availability could tighten truck capacity and raise rates, benefiting intermodal.
- Trade Policy: Ongoing uncertainties around Panama Canal operations, Section 301 tariffs, and U.S. trade relations with China and Canada require close monitoring.
Conclusion: Strategic Adaptation in Uncertain Times
Key takeaways from Gross' analysis include:
- The peak season may have already passed
- International volumes will continue facing pressure
- Domestic truck demand shows little likelihood of improvement
- Potential for modest intermodal rebound if truck capacity tightens
- Challenging year-over-year comparisons expected through early 2026
- Flat to slightly declining overall volumes projected for 2026
In this environment of significant challenges, whether domestic intermodal can overcome structural barriers to become a true growth engine remains an open question—one with implications extending far beyond intermodal to the broader North American freight transportation landscape.