Infrastructure Fuels J. B. Hunt Intermodal

by Andrew Jensen  on Monday, Apr. 7, 2008 12:00 am  

A study commissioned by the American Association of Railroads released last September estimates the cost in 2007 dollars of making the necessary improvements to rail infrastructure by 2035 at more than $148 billion.

The share to be borne by the Class I railroads is $135 billion, of which they estimate $96 billion will be paid for by growth in revenue, higher volume and productivity improvements.

Improvements range from simple maintenance to laying parallel tracks to heightening tunnels on east coast routes to allow for double-stacking rail cars.

Norfolk Southern handles most of J.B. Hunt’s east coast intermodal freight and as west coast ports like Long Beach continue to be backed up with a flood of Asian-made goods, their counterparts on the Atlantic are seeing an increase in volume.

“Long Beach isn’t declining, but some of that import growth has shifted to the east,” Bergant said.

The rise of east coast port and intermodal volume is one reason why Bergant can confidently predict operating revenue from the division will continue to grow at “high single-digit, low double-digit” rates.

“That’s doable, that’s sustainable,” he said.

In the early- to mid-1990s, Bergant said, west-coast partner BNSF built four state-of-the-art terminals that allowed intermodal volume to grow without exceeding capacity at what can be the chokepoint for freight.

“They did a great job staying ahead of the curve,” he said.

Infrastructure expansions aren’t the only thing contributing to intermodal growth. With diesel prices surpassing $4 per gallon, the independent trucker is an endangered species and Bergant said 50 percent of intermodal growth in 2008 will be over traditional short-length OTR trips of 650 miles to 1,200 miles.

“We are pegging our current plan and future plans on more and more truck conversion,” he said.

The cost-effectiveness of a transcontinental haul is obvious with rails averaging three to four times the fuel efficiency of trucks, but diesel has become so expensive that benefits now apply to short hauls.

 

 

Please read our comments policy before commenting.