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U.S. Rail Volumes Continue To Drop

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U.S. Rail Volumes Continue To Drop

Year-to-date U.S. rail volumes fell again amid a loosening truck market, receding floodwaters in the Midwest and overall economic uncertainty.

The U.S. operations of the Class I railroads originated 12.9 million carloads and intermodal for the first 25 weeks of this year, down 2.9 percent from the same period in 2018, according to data from the Association of American Railroads (AAR). Of that, U.S. carloads fell 2.9 percent to 6.3 million carloads, while U.S. intermodal containers and trailers dropped 3 percent to 6.66 million intermodal units.

On a weekly basis, U.S. rail traffic totaled 525,116 carloads and intermodal units for the week ending June 22. Of that, U.S. carloads fell 4 percent to 257,836 carloads, while U.S. intermodal units tumbled 7.5 percent to 267,280 containers and trailers.

Competitive truck pricing and economic uncertainty might be affecting rail volumes, as are other factors, such as flooding in the Midwest. Locks have started to open on the Mississippi River, enabling grain exports to travel down to the Gulf Coast, but rail operations are still facing residual delays. Union Pacific (NYSE: UNP) said in a June 24 customer notice that some subdivisions might reopen by the week's end, but the railroad warned of continued potential delays. 

Meanwhile, the decision by eastern Class I railroads CSX (NYSE: CSX) and Norfolk Southern (NYSE: NSC) to abandon some intermodal lanes could be impacting year-over-year comparisons, according to Jason Seidl, senior transportation analyst for investment firm Cowen. In a June 27 research note, Seidl also pointed out that the decline in overall rail traffic volumes might not provide the fullest picture of the rail market, since the Canadian railroads are posting higher volumes year-over-year, while sizeable declines for intermodal and non-metallic minerals reflect specific headwinds for those respective markets.

As a result, the quarter-to-date volume decline "may look worse than it is," Seidl said.

AAR reported that year-to-date Canadian rail volume is 2.1 percent higher, at 3.76 million carloads and intermodal units. Canadian carloads are up 2.5 percent from the same period in 2018, at 2.05 million carloads, while Canadian intermodal trailers and containers are 1.5 percent higher, at 1.7 million units. 

Still, even though a competitive truck market might be weighing on rail volumes, the trucking and intermodal sectors are also subject to some of the same economic pressures as the rail market. Some transportation analysts have lowered their second quarter outlooks for trucking and intermodal companies, citing lackluster demand, bad weather and trade uncertainty.

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Posted-In: Freight Freightwaves logistcs Railroads Industry Supply ChainNews Markets General

 

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