Posts Tagged ‘railroad freight traffic’

Rail Traffic Picture is More Complex Than it Often is Made Out to be by Pundits

October 10, 2021

A common refrain in discussions of U.S. rail freight traffic in recent years has been how railroads are losing market share to trucking companies.

“It is clear that rail carriers have lost market share to trucks over the last five years and the ongoing service issues threaten to increase that shift,” said Todd Tranausky, vice president of rail and intermodal at freight forecasting firm FTR Transportation Intelligence.

Consulting firm Oliver Wyman found that rail is losing share in the fastest-growing freight segments, which includes such traffic as autos, which can move by truck or rail.

The consulting firm concluded that if current trends hold, the truck versus rail gap will widen and railroads will lose $177 billion in revenue by 2030.

Class 1 railroads that adopted the precision scheduled railroading operating model have come under fire from some quarters for reducing their work forces and, some critics have said, seeking greater profits by ceding market share of some shipments to trucks.

Among the critics has been U.S. Surface Transportation Board Chairman Martin J. Oberman.

Oberman cited STB waybill data that shows that between 2006 and 2019, “adjusted carloads” fell 1.3 percent.

Yet some in the railroad industry say that’s not a complete view. They point to traffic data from the Association of American Railroads showing that rail ton-miles grew 10 percent between 2006 and 2019.

The AAR data also shows that since 2006 terminating carloads and intermodal units rose nearly 8 percent through 2018 and 4 percent through 2019.

Looking at terminations and not just originations captures traffic generated on short lines as well as the significant shift of U.S. West Coast international container volume to ports in British Columbia.

Whether you use the figures Oberman is using or the AAR data, the figures exclude coal traffic. Railroad supporters also argue that some rail traffic was lost due to trade wars instigated during the Trump administration.

Yet Oberman said during an interview with Trains magazine that no matter what data you examine, the larger point is that railroad freight traffic has shown no meaningful growth.

As Oberman sees it, the influence of Wall Street is at work pressuring railroads to focus on their operating ratio, which measures the percent of revenue that is devoted to paying operating expenses.

“The railroads’ emphasis has not been on growth,” Oberman said in a speech to a shipper group. “Rather the emphasis has been on cutting in pursuit of the almighty O.R. down to below 60 percent.”

During the interview with Trains, Oberman acknowledged that many factors and not just pressure from Wall Street investors, has led to railroads losing market share to trucks.

Some of those factors involve economic changes unrelated to railroads, such as a dramatic drop in the shipment of crude oil by rail and declining shipments of frac sand used to extract oil.

Some industry observers also note that railroads have hurt themselves by failing to deliver shipments on time and by failing to be as easy to do business with as trucking companies are.

Jason Miller, associate professor of logistics at Michigan State University’s Eli Broad College of Business, told Trains that slower rail traffic growth has more to do with changes in the economy than anything railroads have done.

He said studying data from the Bureau of Economic Analysis shows that railroads and trucking companies alike have had ebbs and flows to traffic growth.

Between 1997 through 2003 truck traffic was rising while rail traffic was flat.

Yet in the mid 2000s rail traffic had a boost that corresponds with an increase of industrial production.

Rail and truck alike also lost business during the Great Recession that began in 2008. Rail traffic began growing again until falling in 2015 due to a loss of traffic from coal mining and hydraulic fracking.

“As such, the slower growth seems more a function of the changing nature of economic activity,” Miller said.

He said similar patterns can be seen in data of intermodal traffic versus trucks that haul consumer goods.

Intermodal grew faster immediately after the Great Recession, and then grew in tandem with trucking until 2015 when trucks began to dominate.

Miller said the gains by trucking companies were rooted in low truck rates between 2016 and 2017.

Then in 2019 railroads began allowing some intermodal loads to move to the highway while at the same time West Coast ports lost market share to East Coast ports, where international containers are far more likely to travel by road than rail.

The Trains analysis of traffic data also shows that rail traffic excluding coal, intermodal and automotive, reveals a gap between eastern railroads and western railroads.

Between 2006 and 2019, carload volume was down 16 percent in the East and up 5 percent in the West.

Most U.S. manufacturing is located in the East, but that region of the country has had truck competition inflict a bigger hit because of the shorter hauls involved, which favor trucking companies.

The analysis also suggested that policy decisions made by individual railroads play a role, citing how BNSF has long sought traffic growth while Union Pacific has long favored profit margins.

Consequently, between 2006 and 2019 BNSF carload traffic grew by 12 percent while at UP carload volume was down 1 percent.

The Oliver Wyman study concluded that to retain traffic  railroads need to be more reliable, provide shipment visibility, and become easy to work with while becoming supply chain partners.

Nick Little, director of railway education at Michigan State’s Center for Railway Research & Education, agrees.

“The sooner the Class Is change their culture to think and behave like a key part of their customers’ supply chains, the better chance they will have of helping the nation, and the world, by enabling the switch to rail that Marty Oberman really wants to see as his legacy in his STB role.”

3rd Quarter Offered Mixed Rail Traffic Picture

October 9, 2021

Half of North America’s Class 1 railroads posted traffic gains in the third quarter of 2021 but the other half saw their traffic volume fall.

BNSF posted 4.1 percent traffic growth in the quarter, which ended Sept. 30, led by 7.1 percent growth in its carload traffic thanks to strong gains in coal and chemicals.

Canadian National on the other hand saw its traffic fall 1.7 percent overall with intermodal volume declining by 7.1 percent.

Canadian Pacific’s traffic volume was up nearly 1 percent with intermodal volume growing by 8.5 percent.

CSX posted a traffic gain of 1.8 percent while Norfolk Southern had a 1 percent overall traffic loss. NS carload volume rose 5.2 percent but its intermodal traffic fell 4.9 percent.

Union Pacific’s carload volume was up 5 percent but experienced a 7 percent decline in intermodal. Overall, UP’s traffic was down 1 percent.

All railroads reported seeing gains in coal traffic spurred by rising natural gas prices. The Class 1s all had plunges in automotive traffic due to automakers reducing production due to computer chip shortages.

Third quarter financial reports are due to be released this month with CN releasing its report on Oct. 19, CSX releasing its report on Oct. 20 and NS releasing its report on Oct. 27.

Class 1 Systems Saw Traffic Gains in 1st Quarter

April 9, 2021

Impressive gains in intermodal traffic helped North America’s Class 1 railroads systems post volume gains during the first quarter of 2021.

Industry observers say a surge in retailers seeking to restock shelves has boosted interemodal volume.

That was welcome news for railroads because the first quarter saw them see suffer slight declines in carload volume.

Among the seven Class 1 systems, Canadian National came out on top with an 8.2 percent increase in overall volume compared with the same period in 2020.

However a mitigating factor in CN’s case is that it looks good compared with last year because this year it didn’t have to deal with illegal blockades of its tracks that lasted for weeks.

Norfolk Southern posted a 5 percent volume gain fueled largely by 8 percent intermodal growth and a nearly 5 percent rise in coal traffic.

At CSX traffic was up nearly 3 percent, led by a 12.3 percent boost in intermodal business.

CSX and NS alike enjoyed increased traffic from East Coast ports as well as parcel traffic related to e-commerce.

Traffic gains for other Class 1 railroads included BNSF, 7.3 percent and Union Pacific, 1 percent. Canadian Pacific’s first quarter traffic traffic was flat compared with last year’s first quarter, when it had a 10 percent gain partly due to picking up some traffic that could not move on CN during the blockades.

 “When much of the economy shut down around this time last year, rail volumes plummeted too. We have to take that into account when comparing rail traffic this year to last year,” said Association of American Railroads Senior Vice President John T. Gray.

“That said, rail traffic has clearly rebounded from last year’s depths. Looking ahead, rail volumes are highly correlated with manufacturing output, so recent signs of strength in manufacturing are good signs for railroads too.”

All Class 1 Railroads Lost Traffic in 2020

January 5, 2021

All North American Class 1 railroads lost traffic volume in 2020, but some lost more than others.

Weekly carload reports issued by the Association of American Railroads show that Canadian Pacific suffered the least loss of traffic.

CP’s volume fell 2.2 percent compared to the average 6.8 percent decline of the big six systems.

CSX posted a 5.7 percent decline in overall traffic in 2020 but also had the industry’s largest intermodal gain for the year at 1.5 percent.

Canadian National had overall volume decline of 6.1 percent. Other traffic declines posted by Class 1 carriers included Union Pacific, down 7 percent; BNSF, down 7.6 percent; and Norfolk Southern, down 11.9 percent.

NS sustained the steepest declines among Class 1 carriers in intermodal, carload, and coal traffic.

Intermodal Continued its Hot Streak

December 31, 2020

Intermodal continued to lead the way in the latest weekly U.S. rail freight statistics released by the Association of American Railroads.

For the week ending Dec. 26 intermodal traffic rose 20.8 percent. AAR said the railroads last week handled 220,082 containers and trailers.

At the same time, the carriers moved 185,029 carloads for the week, a decline of 3.4 percent compare with the same week in 2019.

Bolstered by intermodal, total carload and intermodal traffic was 405,111 units, an increase of 8.4 percent.

Four individual carload commodities posted gains led by grain, which was up 40.2 percent while motor vehicles and parts rose 19.2 percent.

Coal fell by 9,611 carloads to 50,742; metallic ores and metals were down 1,589 carloads to 18,330, and chemicals were down 1,394 carloads to 27,479.

Intermodal Continues Driving Freight Traffic

December 24, 2020

Intermodal traffic continued to drive U.S. freight volume for the week ending Dec. 19.

The Association of American Railroads reported this week that railroads handled 520,305 carloads and intermodal units. which was up 2.5 percent compared with the same week in 2019.

Total carloads were 230,838, down 5.8 percent compared with the same 2019 period, while U.S. weekly intermodal volume was 289,467 containers and trailers, up 10.3 percent compared with 2019.

Two of the 10 carload commodity groups posted gains compared with 2019 period.

Grain was up 4,274 carloads to 25,860, while chemicals was up 879 carloads, to 33,276.

Commodity groups seeing declines included coal, down 9,907 carloads to 62,110; nonmetallic minerals, down 4,300 carloads to 25,840; and petroleum and petroleum products, down 2,416 carloads to 11,701.

For the first 51 weeks of 2020, U.S. railroads reported cumulative volume of 11,094,786 carloads, a 13.2 percent decline from the same point last year; and 13,235,629 intermodal units, a 2.3 percent decrease from last year.

Total combined U.S. traffic for the first 51 weeks of 2020 was 24,330,415 carloads and intermodal units, down 7.6 percent compared with last year.

Intermodal Growth Seen Continuing into 2021

December 13, 2020

A railroad industry consulting firm has predicted that intermodal traffic will continue growing in 2021 but carload traffic will continue to struggle to recover from the COVID-19 pandemic.

FRT Transportation Intelligence predicted that intermodal traffic will increase by 5.4 percent in 2021 with most of that growth attributed to retailers restocking their inventories due to consumer demand.

Domestic container volume will rise by 6.2 percent while trailer volume is expected to hold steady.

The latter has been in decline in recent years but has received a boost in recent weeks by tight capacity in the trucking industry and a shortage of truck drivers.

FRT projects international intermodal volume to increase by 5.4 percent in 2021.

Todd Tranausky, vice president of rail and intermodal at FTR, said last week that those who still have jobs have shifted their discretionary spending from services to consumer goods as a result of pandemic-related factors such as social distancing.

Intermodal volume in past years has declined after its fall peak, but that had not been the case this year, Tranausky said.

Tranausky said a variable that could affect intermodal volume is the distribution of COVID-19 vaccines.

If vaccines help led to a diminishing of the pandemic in the second half of next year that could prompt consumers to begin spending again on such services as restaurants, theaters and cultural events.

In the meantime, FTR expects intermodal volume for 2020 to be 2.5 percent below 2019 levels despite increases in recent months in intermodal traffic.

As for carload traffic, it is tied to industrial production, which has lagged during the pandemic as it struggles to reach pre-pandemic levels.

Except for coal, agriculture and anything tied to crude oil, FRT expects carload traffic in 2021 to be flat.

The consulting firm sees some recovery in the first quarter and that second quarter year-over-year numbers will show large gains due to being compared to the pandemic-related traffic levels of 2020. 

Tranausky said carload volumes in the third and fourth quarters of 2021 will hinge on how the pandemic and consumer spending unfold, as well as whether there’s a federal stimulus and what shape it takes.

Grain Shows Slight Gain Over 2019 Levels

October 29, 2020

U.S. rail freight traffic for the week ending Oct. 24 showed a slight increase due to rising intermodal volumes.

The Association of American Railroads said total traffic was 522,653 carloads and intermodal units, a 1.9 percent increase over the same week in 2019.

However, the 227,543 carloads represented a decline of 6.5 compared to the same week last year.

The 296,110 intermodal containers and trailers handled by the railroads was a 9.4 percent gain.

Five of 10 carload groups posted increases over 2019 levels, led by grain, up 23.2 percent.

Of the five categories that fell, the biggest losses were petroleum and petroleum products (down 21.8 percent) and coal (down 21.5 percent).

The 20,164,031 carloads and intermodal units to date is a 9.6 percent decline from 2019.

Grain traffic shows a gain over 2019 of 0.2 percent.

All other commodity groups remain down, led by coal (minus-26.4 percent) and motor vehicles and parts (minus-22.6 percent).

Panelists See Slow Freight Rebound

August 27, 2020

Railroad industry analysts predicted this week that the COVID-19 pandemic will cause fundamental changes in the U.S. economy that will result in limited railroad freight traffic growth over the year.

The prediction was made during a webcast sponsored by the Midwest Association of Rail Shippers with panelists saying the pandemic has caused a great deal of economic uncertainty and the recovery that began in June remains fragile.

“We are not even close to getting back to equilibrium,” said Eric Starks, CEO of FTR Transportation Intelligence.

Straks expects the economic downturn will linger until there is an effective COVID-19 vaccine available.

Another member of the FTR firm, Todd Tranausky, said that in recent weeks intermodal traffic has gotten a boost from the need of retailers to restock their inventories.

Intermodal traffic also has benefited from tightening truck capacity, prompting shippers to turn to rail to move goods.

This has included parcel shippers seeking a relief valve for moving their packages.

For now, importers are routing more good via West Coast ports in order to get them to consumers faster.

However, he said that carload volume will be much slower to rise because industrial inventories are already at high levels.

FTR expects carload traffic to lag through at least the first quarter of 2021.

“It’s going to be a very slow, very uneven slog back to growth in the carload sectors,” Tranasuky said.

Loss of Coal Traffic Drove Class 1 Freight Volumes Downward During 2nd Quarter of 2020

July 3, 2020

Loss of coal traffic was a major driver in sharp volume declines for North America’s Class 1 railroads in the second quarter of 2020.

The carriers posted an aggregate 19 percent decline during the period with Norfolk Southern taking a 56 percent hit.

From a historical perspective, coal traffic was down 34 percent when compared to the volumes posted in the second quarter of 2019.

NS also suffered a steep 26 percent drop in overall traffic during the second quarter of 2020 due to shut downs of automotive plants amid the COVID-19 pandemic.

Automotive plants were closed during April and much of May but have since reopened.

Intermodal traffic was down a collective 11 percent for the Class 1 railroads during the quarter.

It also presented a sharp contrast. On one hand parcel shipments increased as consumers relied more heavily on e-commerce during stay home order periods.

But that was more than offset by the closure of numerous retail stores and falling international intermodal shipments because retailers maintained high levels of inventory during their shutdowns.

Carload traffic for the Class 1 railroads was down 22 percent collectively with NS suffering the greatest loss at 30 percent. This category excludes coal and intermodal shipments.

Second quarter financial results for publicly traded Class I railroads will be released later this month.