Antwerp matches record annual volume despite supply chain woes
19.01.2022
Modest growth expected for US imports from Asia after record-setting 2021
19.01.2022

Schneider to leave BNSF for Union Pacific in 2023

Schneider National, the third-largest asset-owning US intermodal marketing company, owns more than 25,000 containers. Photo credit: Ari Ashe/JOC.com.

Schneider National will leave BNSF Railway to partner with Union Pacific Railroad in the western US next year, the third major intermodal marketing company (IMC) to announce a swap of railroad partnerships in the past six months.

Schneider’s move, announced Wednesday, will have a bigger impact because it owns more than 25,000 containers — more than APL Logistics and Swift Intermodal combined. APL and Swift switched to UP this month, although Swift had been gradually moving traffic to UP since last summer, according to a source close to the situation.

Schneider, which also services more than 45 rail ramps in the US, is the third-largest US asset-owning IMC behind J.B. Hunt Transport Services and Hub Group. Schneider will become the largest company-owned dray fleet hauling freight on UP.

“The Union Pacific rail creates more opportunities for Schneider and our customers,” Schneider CEO Mark Rourke said in a statement.

The move is not necessarily a surprise because Schneider is a long-term partner of CSX Transportation in the eastern US and has touted the benefits of precision scheduled railroading (PSR), an operating model focused on effective utilization of assets and concentrating on high-margin business while shedding low-volume lanes. UP transitioned to PSR in 2020, while BNSF does not fully embrace PSR principles.

BNSF must now determine how to react to the loss of business, as APL, Schneider, and Swift own a combined 40,000 containers, which accounts for 700,000 to 850,000 intermodal loads annually, based on a JOC.com analysis of historical data. It’s a sizeable blow that represents nearly 15 percent of BNSF’s intermodal volume.

“BNSF’s service and innovation have allowed us to develop the leading intermodal business by a large margin,» BNSF wrote in a statement to JOC.com. «We are partnered long-term with the industry’s top carriers and cargo owners that will continue to redefine the intermodal service product. Our partnership with our customers and our service will be what maintains our industry-leading position going forward.»

New opportunities for other IMCs

Schneider’s decision will create several questions and new opportunities in 2023 for other intermodal providers.

Non-asset owning IMCs who depend on rail-owned UMAX and EMP 53-foot containers will battle for space on UP with APL, Hub, Schneider, Swift, and XPO. Some non-asset IMCs have been concerned UP is no longer committed to the UMAX and EMP container pool and would rather lean toward intermodal providers with their own containers. UP announced last year, however, it was equipping the UMAX and EMP fleets with GPS technology.

BNSF doesn’t participate in the UMAX and EMP program, which is why non-asset IMCs use UP for most of their West Coast intermodal loads. Space on trains may be difficult to procure in 2023 for non-asset IMCs and their shippers.

That will present an opportunity for J.B. Hunt Transport Services, a BNSF Railway partner and the largest US intermodal provider. J.B. Hunt will take possession of the second half of a 12,000-container order before June, the company revealed Tuesday, capacity that can move an additional 230,000 and 250,000 intermodal loads annually, according to a JOC.com analysis of J.B. Hunt’s financial data.

Darren Field, president of J.B. Hunt’s intermodal division, said during the company’s fourth-quarter conference call on Tuesday that the departures of APL and Swift from BNSF “certainly presents an opportunity” to grow his company’s business with BNSF.

Schneider mentioned J.B. Hunt’s agreement with BNSF in its annual report to federal regulators in 2020.

“One of our competitors has a preferential contractual arrangement with BNSF, which limits the market share and relative profitability of the services we provide through BNSF,” Schneider wrote in a 10-K filing with the US Securities and Exchange Commission. “In certain markets and rail corridors, rail service is limited to a few railroads or even a single railroad due to the lack of competition.”

For BNSF, one option in the wake of the APL, Swift, and Schneider departures is courting Hub Group or XPO Logistics. Landing Hub Group, for example, would essentially wash away the impact of losing the three companies because Hub Group owns approximately the same number of containers as the three combined, although BNSF and Hub had a rough breakup more than a decade ago that may still be a factor.