US Rail Traffic Maintains Slump Amid Global Trade Uncertainties

Continued trade headwinds are putting pressure on year-to-date U.S. rail volumes, with overall traffic down nearly 6% from the same period in 2019.

Traffic for the first six weeks of this year totaled nearly 2.9 million carloads and intermodal units for the week ending last Saturday, a 5.8% drop from the same period a year ago, according to the Association of American Railroads.

Of this total, U.S. carloads year-to-date are 5.6% lower than a year ago, at 1.4 million, while intermodal units are down 6% to 1.5 million intermodal containers and trailers.

U.S. rail carloads over the past five years are graphed in SONAR as the blue line (RTOTC.USA). Intermodal units are graphed on a relative basis to carloads. The orange line is intermodal trailers originated by the Class I railroads (RTOIT.CLASSI), and the green line is intermodal containers originated by the Class I railroads (RTOIC.CLASSI). Source: SONAR Surf/AAR

Meanwhile, year-to-date North American volumes, at nearly 4 million carloads and intermodal units, are 3.9% lower than last year despite weekly gains for both Canadian and Mexican rail volumes last week.

The drop in intermodal volumes comes amid a prolonged shutdown of factories in China. The Lunar New Year had stopped operations initially, but then the coronavirus kept those factories closed, with the effects of closures starting to ripple through the global supply chain. For instance, ocean liners have cut back their sailings, although the full effect on all supply chain stakeholders — including the railroads — is still unknown and may not be seen for several weeks.

In the U.S., the drop in manufacturing output in China could translate to a drop in container volumes at U.S. ports this month and tougher port volume projections for the year, the National Retail Federation (NRF) said on Monday.

"Many Chinese factories have already stayed closed longer than usual, and we don't know how soon they will reopen. U.S. retailers were already beginning to shift some sourcing to other countries because of the trade war, but if shutdowns continue, we could see an impact on supply chains," said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold.

The Global Port Tracker, a monthly survey of U.S. port volumes produced by NRF and consulting firm Hackett Associates, estimates that January volumes will be down 3.8% year-over-year to 1.82 million twenty-foot equivalent units (TEUs), while February's volumes could fall 12.9% to 1.41 million TEUs and March's volumes could drop 9.5% to 1.46 million TEUs. The Global Port Tracker's pre-outbreak forecasts for February and March were 1.54 million TEUs and 1.7 million TEUs, respectively. A TEU is one 20-foot-long cargo container or its equivalent.

The survey also calculated that U.S. ports handled 1.72 million TEUs in December, up 1.8% from November but down 12.4% from December 2018. The pull-ahead in container volumes because of U.S. tariffs on China contributed to the sharp year-over-year comparisons in December.

White House unveils proposed budget for Federal Railroad Administration

As rail industry observers are on the lookout for how the coronavirus could impact their side of the supply chain, Washington continued with business as usual. The White House on Monday unveiled a proposed budget for the U.S. Department of Transportation's (DOT) for fiscal year 2021. The budget will go through congressional debate over the next several months.

Of DOT's budget, the White House is requesting $2.03 billion for the Federal Railroad Administration (FRA), down from the $2.79 billion approved by Congress and enacted for fiscal year 2020.

The biggest cuts are aimed at passenger rail. Funding for Amtrak would be cut to nearly $1.49 billion, compared with $2 billion in 2020. 

Funding to Amtrak's national network grants would fall from $1.3 billion to $610 million. Funding for a new grant program would be $550 million from zero in 2020. The new national network transformation grants program would be open to state and local applicants, as well as to Amtrak.

The White House expects Amtrak's long-distance routes to receive funding from the new grant program. But the administration also plans to phase down the funding to the grant program over the next four years.

Amtrak's long-distance network "has not changed from its original iteration more than 40 years ago. It does not provide efficient services in areas where passenger rail is a competitive form of transportation, and inadequately serves low population areas through which they travel with infrequent and inconvenient service," the White House said.

It added, "Over time, Federal support for Amtrak would be significantly reduced as Amtrak is able to right-size its network and States play a larger role, as they do now for State-supported and Northeast Corridor services."

Meanwhile, grants to Amtrak's northeast corridor would be more than halved, with projected funding at $325 million compared with $700 million in 2020. The White House said the $325 million is equal to what was enacted in 2017 and would "encourage Amtrak to increase efficiencies across all asset lines."

The administration is also seeking to reduce funding to FRA's programs to $546 million from the nearly $794 million enacted for 2020. The reduction comes primarily from practically eliminating State of Good Repair funding. That program received $200 million in funding in 2020 but is slated to receive zero funds in 2021 should this iteration of the budget be approved. The program is a grant program for capital projects aimed to repair, replace or rehabilitate the assets of intercity passenger rail.
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