* Intermodal to take more share from truckers
* Long haul, eastern U.S. to help growth
* Truckers to shift focus to regional growth
By A.Ananthalakshmi
BANGALORE, Nov 11 (Reuters) - Intermodal shipping, a means
of using standardized containers that can be shifted from truck
to ship to train, is taking market share away from truckers as
it is cheaper and more fuel-efficient over longer distances.
Among the prime beneficiaries of this trend are companies
like JB Hunt Transport Services, Knight Transportation and
Werner Enterprises -- traditional truckers that have gradually
eased into the intermodal realm.
Freight management firms such as Hub Group also stand to
gain, as do railroads, according to analysts.
Analysts say truckers will lose market share in the $90
billion long-haul business -- transportation of freight over
550 miles -- where intermodal and rail are most effective.
This could result in truckers moving away from being
coast-to-coast haulers to focusing more on the $26 billion
regional short-haul business.
Major railroads such as Union Pacific, Burlington Northern
Santa Fe and Norfolk Southern have recently been expanding
intermodal services, striking deals with logistics and trucking
companies.
One reason for the popularity of intermodal is the
depressed state of the trucking industry, plagued by excess
capacity and aggressive pricing, Longbow Research analyst Lee
Klaskow said.
"It is also more attractive to shippers because intermodal
is more environmentally friendly than pure truck," Klaskow
said.
Shipping freight via intermodal takes about a third less
fuel than shipping by truck alone, Klaskow said -- a factor
that could significantly reduce costs in long-distance hauling.
Another promising growth area is the relatively densely
populated eastern United States, where urban congestion has
prompted railroads and the government to look for ways to make
rail transport more accessible.
"The truck-to-rail conversion story continues, particularly
in the eastern United States, where intermodal services are at
an early adoption phase," BMO Capital Markets analyst Jason
Granger said.
EARLY SIGNS OF RECOVERY
Intermodal has performed relatively well compared with
truckers during the recession, and has in fact started showing
signs of improvement.
According to the Association of American Railroads, U.S.
rail intermodal traffic was down 14.6 percent in September from
a year earlier, smaller than the 16.4 percent decline in
August.
The average number of intermodal containers shipped in a
week in September was the highest since November 2008.
Although demand is not expected to pick up sharply till the
economy recovers, Wall Street Strategies' David Silver said
intermodal will see sequential improvement through the end of
this year and the first three months of 2010.
"From quarter to quarter, even month to month, as the
economy begins to bounce back, I expect the intermodal traffic
to be one of the first commodity segments to bounce back,"
Silver said.
TRUCKERS SHIFT FOCUS
Truckers may eventually try to expand into the growing
intermodal industry through acquisitions, but intermodal is an
expensive business to enter and requires strong partnerships
with railroads.
Truckers are more likely to shift their focus to regional
operations and continue to keep a bigger share of the
short-haul trucking market than intermodal carriers.
BMO Capital Markets' Granger said regional trucking is
showing the fastest growth in the industry, as retailers such
as Wal-Mart Stores Inc and Home Depot Inc focus on regional --
rather than national -- distribution centers to reduce shipping
costs.
Con-Way, primarily a less-than-truckload carrier, and
Schneider National recently announced initiatives to beef up
their regional business.
"Carriers look to build their regional business. It is the
fastest-growing area in trucking, and that's where an estimated
80 percent of freight in trucking happens," Granger said.
(Reporting by A.Ananthalakshmi in Bangalore; Editing by Anne
Pallivathuckal)
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