Class 1 Executives Sees Signs of Rising Traffic

Class 1 railroad executives speaking this week at an investor conference said there are signs of recovery of freight volume from the economic recession triggered in paret by the COVID-19 pandemic.

CSX CEO Jim Foote credited some of the recovery to the reopening of auto assembly plants. There have been related increases in traffic involving chemicals, plastics, and steel.

“As we have moved over the last four weeks or so we have clearly seen what I think at this point in time is the bottom of the volume decline,” Foote said.

“And we have been inching up week after week after week as we have moved through May and now into June. Clearly the increases are slight but the trend line is promising.”

Foote sought to frame the recession as a time to gain market share by getting more merchandise business from existing customers who also ship by truck from their rail-served facilities.

He said that was because CSX has lower rates than truckers who could offer shippers the opportunity to save money.

Canadian National Chief Financial Officer Ghislain Houle cautioned that the recovery will be slow and choppy with uneven improvement from week to week.

He also credited the revival of auto production with helping provide a boost to traffic.

Houle said CN traffic hit bottom in May when revenue ton-miles were down 20 percent compared to 2019. Thus far CN’s June revenue ton-miles are down 17% to date.

Union Pacific expects traffic in the second quarter to be down 20 percent compared with the same period in 2019.

Chief Financial Officer Jennifer Hamann said that through June 2, volume is off by 22 percent but has been improving to around 135,000 carloads and intermodal units per week off a low of around 124,000 carloads.

“We’ve come off the volume lows we experienced back in April and are starting to see a more positive trend,” Hamann said.

She said it is too soon to say that UP has bit bottom but business is starting to look better with gains in merchandise business in several areas, including shipments of tomato paste, sweeteners, steel pipe and recycled glass.

Kansas City Southern’s May volume was lower than expected due to a delay in reopening Mexican auto assembly plants.

But week-over-week volumes rose 13 percent as of June 6 as all but two of the assembly plants KCS serves in Mexico resumed production. Two other plants will reopen next week.

Tags: Canadian National, Class 1 railroad freight traffic, CSX, freight volumes, James Foote, Kansas City Southern, Union Pacific