Market Overview

US Rail Volumes Still Falling

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US Rail Volumes Still Falling

Year-to-date U.S. rail volumes continue to be lower compared with the same period in 2018 amid persistent economic uncertainty.

For the week ending October 12, the U.S. operations of the Class I railroads originated 21.3 million carloads and intermodal units year-to-date, which is a 4.1% drop from the same period a year ago, according to weekly data released by the Association of American Railroads. Of that, U.S. carloads fell 4% to nearly 10.4 million units while U.S. intermodal containers and trailers fell 4.2% to 10.9 million units.

On a weekly basis, U.S. rail volumes tumbled 7% to 510,820 carloads and intermodal units. 

Looking at North America overall, year-to-date rail volumes totaled nearly 29.1 million carloads and intermodal units, a 2.9% drop compared with the same period in 2018. Carloads slipped 2.9% to 14.5 million units, while intermodal containers and trailers fell 3% to 14.5 million intermodal units.

The Class I railroads started to report their third-quarter earnings this week, with both CSX (NYSE: CSX) and Union Pacific (NYSE: UNP) saying that they reached record low operating ratios. When the operating ratio percentage gets lower, it implies that the company has increased its profitability.

But despite these records, both railroads are cautious in how they view 2020 because there is still plenty of uncertainty over how the North American economy will fare next year and how that state of health will affect rail volumes, which have been trending lower practically all year compared with 2018.

"As we get nearer to the end of the year, hopefully we can have a little more light shown on the pathway beyond the end of this year, and we'll be better [able] to opine on it," said CSX chief executive officer Jim Foote in describing CSX's guidance and expectations for 2020. Foote made his remarks during CSX's third-quarter earnings call on October 16.

Meanwhile, the broader freight transportation market is also seeking clarity over how 2020 might go. The U.S. industrial economy's weakness may persist until the second quarter of 2020, although that could change depending on how companies cut costs between now and then, analysts with Goldman Sachs Group Inc (NYSE: GS) said earlier this week.

Image Sourced from Pixabay

Posted-In: Freight Freightwaves rail volumes Railroads IndustryEarnings News Markets General

 

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