Railroads target efficiency amid shifting demand

North American intermodal demand softened toward the end of 2025, with early 2026 beginning slightly below prior year levels. This reflected imports having been pulled forward as shippers accelerated imports ahead of potential tariff changes, effectively borrowing from early-2026 volumes.

By mid-January, domestic intermodal began posting consecutive weeks of year-over-year (y/y) growth. While a sharp rebound is unlikely, demand in 2026 is expected to remain modestly positive and broadly in line with overall freight market conditions.

Seasonal positioning in the year ahead

Following a muted high season, southern California has largely returned to normal operating conditions as the U.S.-China trade environment stabilises. With improved tariff visibility, seasonal freight flows are expected to normalise, creating an opportunity for shippers to reassess West Coast outbound intermodal strategies. Those able to secure volume commitments during the first quarter should be well positioned for more reliable coverage later in the year.

Nationally, market signals point to a renewed focus on intermodal service. While the recovery is expected to be gradual, planning for another flat year may underestimate upside risk. Shippers entering bid and renewal cycles should anticipate a more balanced market in the second half of the year, making early rail pricing commitments an effective hedge against broader transportation cost inflation.

Spot market and mode dynamics

Railroads continue to price competitively in the spot market, closely tracking truckload rates. Rail spot pricing is expected to remain relatively stable through early 2026, while forecasted truckload rates are expected to increase more meaningfully as capacity tightens later in the year. This widening cost gap is likely to enhance intermodal’s value proposition across a broader set of lanes.

Rail carriers are also targeting shorter-haul corridors in the 550-1,500-mile range that migrated back to truckload during the rate downturn. At the same time, tightening truckload capacity, driven by regulatory pressures, further supports intermodal’s appeal as a reliable alternative.

Railroad merger developments

Union Pacific’s proposed merger with Norfolk Southern was rejected by the U.S. Surface Transportation Board on 16 January, 2026. The board indicated that the merger application was incomplete, citing the absence of several critical elements.

These included a comprehensive market-impact analysis, forward-looking projections demonstrating how the combined railroad would compete with trucking and other rail carriers and portions of the merger agreement itself, including provisions that could allow Union Pacific to exit the deal without paying the $2.5 billion breakup fee.

The board emphasised that its decision was procedural in nature and not a judgement on the merits of the merger itself. Still, the response highlights the level of scrutiny the proposal faced and makes clear that approval is far from automatic. Union Pacific announced on their January earnings call that they will refile their application but still need to file a formal letter of intent before the deadline of 17 February 2026.

Intermodal pricing outlook

Committed intermodal pricing entering 2026 varies by region. West Coast outbound rates are stabilising, with many contracts resetting in April or later, while other regions are seeing modest y/y increases generally in line with inflation. For shippers entering their RFP cycle, including providers that have strong rail relationships will be key to capturing available savings.

Intermodal should be approached as a strategic planning tool rather than a contingency option. Effective 2026 strategies include identifying appropriate lanes, evaluating total landed cost, blending transportation modes and piloting new intermodal routings early in the year to secure capacity ahead of anticipated truckload tightening.

Service performance

Class I railroads continue to demonstrate solid operational performance, with improvements in train velocity, terminal dwell time, locomotive utilisation and overall network fluidity. While significant latent capacity remains in the system, effective equipment positioning will be critical as demand patterns shift and regional imbalances emerge throughout the year.

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