Posts Tagged ‘North American railroads’

Railroads Continue to Feel Effect of Trade War

August 28, 2019

As the United States and China engage in a war of words and dueling tariffs in a trade war, the effects continue to be felt by North American railroads.

The carriers are hauling fewer aircraft, plastic products, chemicals and agriculture products among other commodities due to the effects of the tariffs that each country has imposed on the exports of the other.

“China’s announcement of imposing additional tariffs on $75 billion of U.S. imports signals more trouble for American agriculture,” said Zippy Duvall, president of the American Farm Bureau Federation.

Thus far in 2019 soybean exports to China are nearly half as much as they were at this point in 2018, U.S. Department of Agriculture statistics show.

In a news release, the American Soybean Association said farmers still have unsold product from last year and are worried about where they will be able to sell the crops that are in the ground this year.

Auto exports to China have also felt the pinch of tariffs. Last year, auto exports from the U.S. to China totaled nearly $10 billion, but rail shipment of motor vehicles and parts are off 2.3 percent this year while intermodal traffic is down 3.8 percent.

Although President Trump called on U.S. companies to move operations that are now in China back to the United States, much of the production that is being shifted out of China is being moved to Malaysia, Mexico, Vietnam, India and Thailand.

That has led to changes in the world’s supply chains although those changes are not necessarily harmful to North American railroads if it simply means that items once made in China for export to the United States are now being imported from other counties.

Nonetheless, one large container shipper, Maersk, has projected that if all of the announced tariffs are implemented, worldwide container volume next year could fall by up to 1 percent, a loss of 7.5 billion TEUs (20-foot equivalent units).

Moody’s Downgrades Railroad Outlook

May 19, 2016

Falling freight traffic has prompted Moody’s Investor’s Service to downgrade its outlook for North American railroads from “stable” to “negative.

train image2Moody’s said in a news release that railroads are facing deep and long-lasting declines in freight volume that will likely continue at least through the third quarter.

“Volumes of coal, the second-largest freight group in the North American railroad industry, plunged by an unprecedented 37 percent in April amid persistently low natural gas prices and high stockpiles at utilities after a warm winter,” said Vice President and Senior Analyst Rene Lipsch.

Moody’s expects revenue growth to fall below zero, the firm’s minimum for a stable outlook, Lipsch said.

Total freight volume is projected to decline 3.5 percent to 4.5 percent this year, driven in particular by an expected 20 percent to 25 percent decline in coal shipments.