Market Overview

North American Rail Volumes Continue Downward Trend

North American Rail Volumes Continue Downward Trend

North American year-to-date rail volumes drafted lower again for the week ending August 14, according to the Association of American Railroads

Rail traffic slumped in the U.S. and Mexico but rose in Canada when comparing volumes to the same period in 2018. Overall North American rail traffic fell 2.3 percent year-to-date to 22.6 million carloads and intermodal units. Of that total, carloads fell 2 percent to nearly 11.4 million carloads, while intermodal units fell 2.6 percent to 11.3 million intermodal containers and trailers.

By country, total Canadian rail volumes were up 2 percent to 4.8 million carloads and intermodal units, while Mexcian rail volumes were down 3.3 percent to 1.2 million carloads and intermodal units.

Meanwhile, U.S. rail volumes, which consist of about 73 percent of total North American rail traffic, were down 3.5 percent year-to-date to 16.6 million carloads and intermodal units. Of that, U.S. carloads fell 3.2 percent to 8.1 million, while U.S. intermodal units dropped 3.7 percent to 8.5 million.

Some rail industry observers expect U.S. rail volumes to be flat or down in the second half of the year compared to the same period in 2018 because of factors such as U.S. trade uncertainty, a competitive truck market and some lingering shippers' concerns about rail service. 

But signals remain mixed about the U.S. economy, which can in turn influence demand for freight transportation. Media reports on August 14 spoke of an indicator signaling a potential U.S. recession. The inverted yield curve, which happens when interest rates for U.S. Treasury short-term bonds are higher than long-term bonds, occurred briefly on the 15th, resulting in the Dow Jones Industrial Average tumbling 800 points and stoking concerns that a recession is looming.

However, trucking demand appears to be rising on the West Coast, albeit at the expense of rail intermodal. But even rail intermodal could see demand grow in certain regions in the second half of the year, Norfolk Southern (NYSE: NSC) alluded last month.

"We've got the most powerful Intermodal franchise in the east, which is married to the consumption part of the U.S. economy and the economy continues to move in the direction of the consumer, and the consumer-related economic indicators are still relatively strong. We've got a diverse merchandise franchise, which offers many opportunities for growth in the second half of the year," NSC chief marketing officer Alan Shaw said during his company's second quarter earnings call on July 24.

He continued, "Our intermodal franchise outlook is very consistent with what we're hearing from our channel partners."

Image Sourced from Pixabay

Posted-In: Freight Freightwaves Logistics rail volumes Supply ChainNews Markets General


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