CSX’s Intermodal Container Traffic Fell in Week Ended May 7
North American Rail Traffic Saw Double-Digit Slump
CSX’s intermodal
In the week ended May 7, 2016, CSX’s (CSX) total intermodal traffic fell by 2.1%. The overall traffic went down from ~56,000 units in the week ended May 9, 2015, to 54,000 plus units in the reported week of 2016. Container volumes fell by 2% in the same week on a year-over-year basis. Trailer traffic also went down by 12.2% in the same week on a year-over-year basis. However, the fall in CSX’s trailer traffic was only one-fourth of the fall that rival Norfolk Southern’s (NSC) trailer traffic saw.
Why intermodal matters for CSX
Railroads are four times more fuel efficient than trucks, and the driver shortage in trucking is also fueling intermodal growth. While about half of the US’s rail intermodal volume consists of imports and exports, railroads are more environmentally desirable than the heavy reliance on highways for freight transport. In 2015, intermodal accounted for ~20% of revenue for major US railroads.
Why does this matter? Class I railroads are looking at their intermodal businesses to subsidize their shrinking coal businesses. Intermodal volumes were roughly 42% of CSX’s total volumes in 2015, and its share of the company’s 2015 revenues was ~15%.
Key factors affecting intermodal traffic
Intermodal traffic is largely dependent on factors such as access to major seaports, highway-to-rail conversions, exclusivity to certain ports, and retail sales. AAR (Association of American Railroads) has observed a strong positive correlation between retail sales and rail intermodal in recent years. The Association of American Railroads (or AAR) has noted that the intermodal growth came through highway conversions rather than consumption. However, according to AAR, the rise in intermodal doesn’t completely translate into retail sales growth.
All major freight rail carriers such as Norfolk Southern (NSC), Union Pacific (UNP), Genesee and Wyoming (GWR), BNSF Railway (BRK-B), and Kansas City Southern (KSU) have focused on improving intermodal volumes and pricing in the recent past.
The transportation and logistics sector forms part of the industrial sector. The ProShares Ultra S&P 500 ETF (SSO) invests ~7.6% of its holdings in the industrial sector.
For information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 30: North American Rail Traffic Falls, Mexico Up. In the coming part, we’ll look into the direction of railcar traffic for Union Pacific.
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