Rail Traffic Down Across North America

Written by Andrew Corselli
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The Association of American Railroads (AAR) reported U.S. rail traffic for the week ended Feb. 22, 2020, and, for this week, total U.S. weekly rail traffic was 482,690 carloads and intermodal units, down 7.6% compared with the same week last year.

Total carloads for the week ended Feb. 22 were 232,869 carloads, down 9.3% compared with the same week in 2019, while U.S. weekly intermodal volume was 249,821 containers and trailers, down 6% compared to 2019.

Even the recently surging Mexico saw its weekly carloads decline year-over-year.

Four of the 10 carload commodity groups posted an increase compared with the same week in 2019. They included commodities such as chemicals, up 2,366 carloads, to 33,284; petroleum and petroleum products, up 1,217 carloads, to 13,401; and motor vehicles and parts, up 1,193 carloads, to 17,898. Commodity groups that posted decreases compared with the same week in 2019 included commodities such as coal, down 23,225 carloads, to 63,540; grain, down 2,785 carloads, to 18,909; and nonmetallic minerals, down 1,628 carloads, to 29,854.

For the first eight weeks of 2020, U.S. railroads reported cumulative volume of 1,858,165 carloads, down 6.5% from the same point last year; and 1,999,804 intermodal units, down 6.2% from last year. Total combined U.S. traffic for the first eight weeks of 2020 was 3,857,969 carloads and intermodal units, a decrease of 6.4% compared to last year.

North American rail volume for the week ended Feb. 22, 2020, on 12 reporting U.S., Canadian and Mexican railroads totaled 329,343 carloads, down 6.7% compared with the same week last year, and 324,723 intermodal units, down 7.3% compared with last year. Total combined weekly rail traffic in North America was 654,066 carloads and intermodal units, down 7%. North American rail volume for the first eight weeks of 2020 was 5,278,276 carloads and intermodal units, down 4.7% compared with 2019.

Canadian railroads reported 76,331 carloads for the week, up 1.9%, and 56,299 intermodal units, down 14.9% compared with the same week in 2019. For the first eight weeks of 2020, Canadian railroads reported cumulative rail traffic volume of 1,121,322 carloads, containers and trailers, down 1.7%.

Mexican railroads reported 20,143 carloads for the week, down 6.4% compared with the same week last year, and 18,603 intermodal units, up 1.1%. Cumulative volume on Mexican railroads for the first eight weeks of 2020 was 298,985 carloads and intermodal containers and trailers, up 8.9% from the same point last year.

Railroad economist and Railway Age Contributing Editor Jim Blaze offers the following commentary on 2020 traffic so far, with supporting graphics and insight by Bascome Majors at Susquehanna International Group, utilizing AAR data:

“During parts of last year, BNSF topped Union Pacific in the long-term market volume growth battle for being relevant in the western states. As 2019 ended, BNSF’s top line decline of –6% was 3.5 percentage points better than UP’s –9.5%. Looking at yields, both railroads saw revenue per unit increase by about 1% in 4Q19. That’s relatively weak price leverage. (Note that BNSF had a favorable arbitration hearing outcome, with J.B. Hunt paying more for intermodal capacity.)

“4Q19 operating ratios improved at both railroads, with BNSF improving ~285bps Y/Y to 63.9%, helped by ‘lower volume-related costs and cost controls,’ vs. UP’s 190bps improvement to 59.7%. 

“UP’s de-marketing in the race for the lowest OR does not really translate into volume or market share growth. Some notable auto and chemical volume growth has been seen in the weekly trends, along with crude oil—but for how long as CBR struggles, given recent events in Canada. But mostly negatives show across other commodities.

“At some point, there are likely to be implications for downstream impacts on domestic truck and rail capacity if receivers run low on stocks on hand across the U.S. This may potentially tip the scales in 2Q20 and 3Q20. The cycles could ultimately reverse. To the extent that U.S. manufacturing and retail inventories become fully destocked (and China production starts to come back online in earnest), we may see a situation where there is a rush of imports/shortages of raw materials, parts, and supplies.

“If that’s true, then North American ports could become congested, and container shortages and equipment imbalances are likely. That could result in a tightening of domestic truck capacity. Then, shippers might increasingly turn to rail intermodal to get products to inland destinations.

“Therefore, while freight demand is likely to be weaker than expected in the next few months, there is the potential for a more meaningful recovery in 2H20. But will PSR railroad de-marketing and to-the-bone type cuts in trained labor and surplus locomotives restrict railroad surge capacity?”

Following are weekly carloadings for Union Pacific, CSX, Norfolk Southern and Kansas City Southern. Of the four, KCS is the only railroad showing volume growth so far.

Categories: Class I, Freight, Intermodal, News, Short Lines & Regionals Tags: , ,