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Canadian Rail Volumes Rise Again While U.S. Volumes Fall


Canadian rail volumes rose again year-to-date for the week ended May 11, while U.S. rail volumes continued downward amid U.S. tariff uncertainty and a fuzzy economic picture.

Freight rail operations in Canada have originated 2.84 million carloads and intermodal units year-to-date, a 2.4 percent increase from the same period in 2018, according to data published weekly by the Association of American Railroads.  

Of that total, Canadian rail operations moved 1.54 million carloads year-to-date, which is 2.7 percent more than the same period last year, and 1.3 million intermodal units, which is a 2 percent increase from a year ago. The carloads include the U.S. carloads of Canadian National (NYSE: CNI) and Canadian Pacific (NYSE: CP).

A 6.2 percent increase in grain carloads year-to-date, a 5.8 percent increase in coal and a 22.8 percent increase in petroleum and petroleum product carloads have helped lift Canadian carloads. So far this year, grain carloads have totaled 165,937, while coal totaled 147,921 and petroleum products totaled 178,902. Grain, coal and petroleum represented 10.8 percent, 9.6 percent and 11.6 percent, respectively, of Canadian carloads.

Canadian rail volumes represent 21 percent of overall North American rail traffic.

Meanwhile, U.S. rail volumes year-to-date dipped again, falling 2 percent to 9.83 million carloads and intermodal units. U.S. freight rail operations have originated 4.76 million carloads, a 2.4 percent drop compared with the same period in 2018, while intermodal units fell 1.7 percent to 5.07 million intermodal containers and trailers.

U.S. rail volumes year-to-date represent about 74 percent of overall North American rail traffic.

Rail executives still positive on economy but tariffs talk weighs

Canadian rail executives and their U.S. counterparts at investor conferences this week affirmed their views that the North American economy was still growing, which could support volume growth as the year progresses.

"We haven't seen the effects of a negative macro[-economic] environment. The underlying macro environment is still pretty robust" and broad-based across several commodities, said CPI chief financial officer Nadeem Velani at an investor conference this week. Velani pointed to his company's "strong" volumes for April.

Norfolk Southern (NYSE: NSC) chief financial officer Cindy Earhart also said customers remain positive on the U.S. economy.

Manufacturing indexes such as those from the Institute for Supply Management are still showing some economic expansion, Earhart said.

But rail executives also noted that the tariff uncertainty between the U.S. and China is clouding the economic outlook for the remainder of the year, which could affect volumes, particularly for those with access to ports on the western U.S. and Canada, such as CP, CN and Union Pacific (NYSE: UNP).

"We're not out of the woods of what [the tariffs] could mean but we're cautiously optimistic for the next six to nine months," Velani said.

Canadian National chief financial officer Ghislain Houle told investors at another investor conference that tariff impacts would affect imports coming into the ports of Prince Rupert and Vancouver for goods bound for destinations in the middle of the U.S.

Union Pacific chief financial officer Rob Knight told investors that the U.S. tariffs were a "wildcard."

"Our confidence and guidance remains unchanged [but]...The tariff issue, the temperature on that one is certainly up rather than cooling down" and is a factor that could impact volumes, Knight said.

Meanwhile, even though rail executives said they were still confident about the U.S. economy, a FreightWaves' analysis of economic indicators for April shows that the economy could still be trying to find its way. Data from the U.S. Census Bureau showed a 0.2 percent drop in retail sales from March to April, with year-to-date growth down 3.1 percent. Manufacturing production fell 0.5 percent between March and April, with year-over-year growth below 1 percent for the first time since early 2017.

Image sourced from Pixabay

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