The unpredictable nature of international trade hangs like a sword over the logistics industry, as global economic complexities present unprecedented challenges. Against this backdrop, the North American intermodal market is undergoing subtle transformations. At the recent RailTrends conference, renowned intermodal expert Larry Gross provided crucial insights, suggesting that domestic intermodal may hold the key to future growth.
International vs. Domestic: A Tale of Two Markets
Gross's analysis reveals stark contrasts between international and domestic intermodal markets. International freight volumes have plummeted dramatically, largely due to the "pull-forward" effect caused by early-year tariff policies. Many businesses rushed to complete orders ahead of potential tariff implementations, resulting in subsequent demand weakness.
Domestically, however, the picture appears more optimistic. Gross noted that October's peak in business days artificially inflated figures, but steady growth since June reflects positive seasonal activity.
Cross-Border Trends: Canada Weakens While Mexico Strengthens
In cross-border intermodal, U.S.-Canada trade shows significant tariff impacts, while U.S.-Mexico transportation demonstrates robust growth. Gross observed that since mid-year, the intermodal market has begun showing normal seasonal patterns for the first time since 2019, signaling a potential return to pre-pandemic market rhythms.
2025 Outlook: Early Peak, Persistent Challenges
The 2025 intermodal peak season is projected to arrive early around week 35, contrasting with the delayed peaks of 2023-2024 caused by tariff effects. Gross anticipates negative year-over-year comparisons for U.S. domestic intermodal through late 2025 or early 2026.
Domestic Intermodal: The Critical Battleground
"Where intermodal can truly control its destiny is in the domestic market," Gross emphasized. This arena represents the primary competition zone between intermodal and trucking. Since 2016, intermodal's market share has stagnated at about 6% of the U.S. long-haul dry van and refrigerated markets, following a decline from 7%.
Long-Term Challenges: Freight Recession and Market Share
Gross connects the current three-year freight recession to post-pandemic trucking capacity expansion, viewing this as merely the surface of deeper issues. While GDP has grown 21% since 2015, trucking growth slightly trails due to service sector expansion and shorter hauls. Intermodal performance lags behind GDP growth across all segments, with freight volumes only 4-5% higher than a decade ago.
"We're not facing just a three-year problem," Gross warned. "Waiting for market improvement won't solve fundamental issues. Without significant changes, we shouldn't expect meaningful growth or market share recovery."
Breaking Through: Unlocking Domestic Growth Potential
The path to market share growth lies in domestic intermodal, Gross contends. Current domestic share remains stagnant, with notable disparities in performance across different route lengths. The "donut hole" phenomenon—where 1,000-2,000 mile routes (typically involving two railroads) underperform compared to shorter and longer hauls—presents particular challenges.
"If we could raise donut hole and ultra-long route shares to previous levels, U.S. freight volumes could grow about 8%," Gross explained. "Achieving midpoint market share between 750-1,000 and 2,000-2,500 mile routes could drive 25% growth—substantial numbers by any measure. Consolidation offers one solution, but certainly not the only approach."
External Factors: Challenges and Opportunities
Gross highlighted several external variables that could impact intermodal:
- Global Shipping Routes: Full reopening of Red Sea and Suez Canal routes could make East Coast shipping from Asia cheaper and faster, potentially shifting import volumes from West Coast and creating new intermodal opportunities.
- Trucking and Driver Supply: U.S. immigration and commercial licensing policies may affect driver availability, potentially tightening truck capacity and raising prices.
- Other Uncertainties: Panama Canal restrictions, Section 301 tariffs, and ongoing trade tensions with China and Canada require close monitoring.
Additional key intermodal themes include: peak season likely ending; continued international freight pressure; stagnant domestic truck demand; potential modest intermodal rebound if driver shortages tighten truck capacity; difficult year-over-year comparisons through late 2025/early 2026; and generally flat or slightly declining 2026 freight outlook.
In this era of uncertainty, domestic intermodal holds significant growth potential. Only through confronting challenges and driving innovation can the industry position itself for future success in an increasingly competitive marketplace.