Rail volumes could rebound in the second half of the year, but the pace of a rebound will depend largely on consumer confidence, executives from several Class I railroads cautioned at recent investor conferences.
Politically, the U.S. and China are barely on speaking terms. Trade-wise, they’re still very much in bed together. Cargo from China is accounting for an even greater share of inbound container volumes than before the coronavirus crisis, according to the latest U.S. Customs data.
The Port of Savannah is poised to expand service and rail capacity as the Mason Mega Rail project meets a production milestone.
Carloads for grain and motor vehicles have risen in recent weeks, a sign that the rail volumes could potentially be past their bottoming out, according to Union Pacific (NYSE: UNP) CEO Lance Fritz.
After “blanking” (canceling) around 20% of Asia-to-U.S. capacity in May and June, it now appears likely that container-ship carriers will cut fewer sailings in July, possibly as low as 10%.
The Class I railroads are closely watching the restart of North American automotive production, hoping that the slow ramp-up will not only grow motor vehicle volumes but also improve demand for supplies such as steel and plastics, according to executives at recent investor conferences. However, a key unknown variable is whether consumer demand will lift volumes for automobiles and other goods, executives said.
Numerous factors are impairing intermodal volume growth. These include blanked sailings, a shift in overall freight demand toward refrigerated, an uncertain outlook for consumer demand and, of course, competition from the highway.
U.S. container imports are on a wild ride. They plunged in March after the initial coronavirus outbreak in Wuhan, China. They bounced back in April when delayed bookings were loaded after China came back online. Beginning in May, they sank again as container carriers “blanked” (canceled) sailings. Now, it looks like there could be at least some momentum in the positive direction.
