Grim Prognosis for Rail Freight Recovery

Transportation analysts speaking on a webcast this week said it is too early to tell if railroads will lose market share to trucks as they recover from the recession induced in part by the COVID-19 pandemic.

Analysts said during the webcast, which was sponsored by FRT Transportation Intelligence, there is evidence that trucking companies are getting back to the volume of business they had before the pandemic began last spring but rail volume remains subdued.

Todd Tranausky, vice president of rail and intermodal at FTR, said some shippers who were upset with Class 1 railroads before the pandemic might have taken advantage of a “loose” trucking market to shift some business there.

But Tranausky said it is still too early to say if railroads will lose market share to truckers as they did following the Great Recession of 2008.

He said railroads will rebuild market share if they can continue to provide consistent service of a quality similar to what they are offering now.

Rail freight carloads have risen since May but remain at about 85 percent of their pre-pandemic levels.

One advantage truckers have is they can haul industrial materials and consumer products. The latter are less likely to travel by rail.

Until manufacturing picks up, rail carload volumes will continue to lag. FTR analysts do not expect rail carload volume to recover through the rest of 2020 because industrial production has been slow to return.

Another factor is that truck capacity is expected to continue to be below capacity through at least May 2021, something that is not good news for railroad intermodal business.

“That’s going to make it harder for intermodal to be competitive,” Tranausky said.

Looming on the horizon may be another wave of business shutdowns and dimming consumer demand due to surging COVID-19 infection rates in several states.

Those could threaten the U.S. economy and hurt freight volumes.

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