Rail and warehouse congestion limits J.B. Hunt quarterly intermodal growth (updated)

Company says issues kept it from handling at least 20,000 more loads in third quarter
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A string of J.B. Hunt intermodal containers head west on a BNSF Railway train at Lemont, Ill., in December 2019. The firm estimates rail and warehouse issues kept it from handling an additional 20,000 intermodal loads during the third quarter.
TRAINS: David Lassen

LOWELL, Ark. — J.B. Hunt Transport Services could have handled at least 20,000 more intermodal loads in the third quarter had it not been for congestion at railroad terminals and customer destinations, executives said during the company’s earnings call on Friday.

“I think that's a soft conservative estimate,” Hunt’s intermodal president, Darren Field, told investors and analysts.

Hunt’s intermodal business grew 2% in the quarter, with loads in the East up 3% and Transcon business that originates or terminates on BNSF Railway up 2%. Overall, Hunt handled 529,709 intermodal loads in the quarter.

“Volumes in the quarter were heavily constrained by rail congestion and service issues stemming from a large and sudden increase in demand and intermittent labor challenges in both the rail and truck networks,” Hunt said in its earnings presentation.

Intermodal volume on BNSF in Southern California surged by as much as 30% early in the summer. BNSF was short of people and equipment in Southern [see “BNSF, UP struggle to meet surging intermodal demand …,” Trains News Wire, July 28, 2020] and in July had to resort to limiting capacity at its Hobart terminal in Los Angeles and diverting some traffic to its terminals in San Bernardino and Barstow, Calif.

In August, BNSF Executive Vice President Operations Kathryn Farmer told an intermodal conference that the railway had largely caught up with demand after pulling equipment out of storage [see “BNSF catches up with intermodal surge …,” News Wire, Aug. 8, 2020]. The railroad flew terminal personnel to Southern California from elsewhere on the system, and added parking spaces at its terminals.

“We have seen improvements in our rail service and our operating teams are focused on aligning resources as effectively as possible with higher freight shipment demand,” BNSF spokeswoman Amy Casas says.

Norfolk Southern tells Trains News Wire, “We value our relationships with our trucking partners and are working to meet the increasing demands of the rebounding economy. We will continue to make adjustments as needed while maintaining safety and efficiency.”

Field did not expect rail congestion issues to clear this year.

“When the trains get out of the terminals, they're moving, but terminal congestion is not a part of that velocity measure that you see, and that has been a significant impact on our ability to drive volume growth,” Field says.

Hunt and railroads are talking about improving terminal productivity. “It's very difficult to implement significant changes in that area during the course of this really unusual rapid climb in demand that occurred over the course of the summer,” Field says.

Hunt at its rail partners — BNSF in the West, and primarily Norfolk Southern in the East — are discussing ways to improve capacity in the rail system without expanding terminals or building new ones. Hunt containers also ride CSX Transportation, Kansas City Southern, Canadian National, and Florida East Coast trains.

“The long-term value for railroads can't just be that they're going to expand and buy more parking in order to accommodate intermodal growth,” Field says.

Railroads were not alone in being swamped by the sharp uptick in volume that came after the quick downturn in volume that accompanied the onset of the COVID-10 pandemic. Delays in unloading trailers and containers at customer destinations also contributed to a slowdown that meant Hunt couldn’t get as many loads out of its existing fleet of equipment, Field says.

The common theme across the rail, trucking, and warehouse sectors, Field says, was labor shortages.

Field called the third quarter “the most difficult environment from a network balance and fluidity perspective I have seen during my career.”

— Updated at 11:20 a.m. with comment from BNSF spokeswoman Amy Casas; updated at 1:40 p.m. with statement from Norfolk Southern.

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