Partners J.B. Hunt and BNSF Railway Co. on Wednesday said they plan to add thousands of shipping containers and improve rail equipment at key facilities to address capacity issues in the intermodal marketplace.
Demand for intermodal services, a combination of truck and rail shipping, has grown in recent years as companies try to secure capacity, while cutting costs and their carbon footprint.
To meet customer needs, J.B. Hunt has plans to grow its intermodal fleet to as many as 150,000 containers in the next three to five years, more than a 40% increase from its count at the end of 2021.
As part of the joint effort, BNSF, the largest freight railroad network in North America, agreed to update railcar equipment and modify several locations around intermodal hubs in Southern California, Chicago and other key markets for the anticipated increase in container capacity.
As e-commerce, online retail and rapid delivery models grow, shippers are looking for reliable freight services to meet customer demand. Labor issues, including a truck driver shortage, coupled with supply chain disruptions from the covid-19 pandemic, prompted many to rely on rail services when trucks weren't available or efficient enough. To overcome capacity constraints, analysts are anticipating significant segment growth in the coming years.
Intermodal shipping is more affordable and requires four times less fuel than truck-only shipping, notable for shippers who want to reduce their carbon emissions or fuel costs, said analyst Justin Long, of Stephens Inc.
"I think there is an opportunity to grow substantially, with carriers doubling or tripling the intermodal market in the next five years," Long said.
The collaborative efforts from J.B. Hunt, based in Lowell, and BNSF come after industry changes left room for others to bring more trailer capacity online. Carriers Schneider and Knight-Swift recently agreed to leave BNSF and partner with Union Pacific for intermodal services.
"I suspect Hunt is partly looking to take advantage of incremental capacity made available by Knight-Swift and Schneider," Morningstar analyst Matthew Young said in an email Wednesday. "It may also be expecting an up-tick to rail conversions as rail service improves and due to rising fuel" prices.
Long estimated that Knight-Swift, who left in January, and Schneider, expected to leave next year, comprised 7% of total capacity operated by BNSF.
J.B. Hunt and BNSF said they plan to leverage technology and invest in real estate and equipment upgrades to make rail transport more efficient. Over the years, both companies have invested billions of dollars into the segment.
"Intermodal has been disrupted by increased demand and tight capacity, resulting in poor container velocity and long dwell times," John Roberts, J.B. Hunt president and chief executive officer, said in a written statement. "Together, J.B. Hunt and BNSF will enhance their work to bring back the consistency and reliability customers expect with intermodal services."
The two companies disrupted the transportation industry in 1989 when they developed a double-stack shipping solution that would complement both rail and trucking services. It started with a handshake agreement that has since blossomed into billions of dollars in revenue each year for the companies.