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May U.S. Intermodal Volumes Drop 5.9 Percent

FreightWaves

U.S. intermodal volumes fell 5.9 percent in May, while carloads fell 2.1 percent amid economic uneasiness and uncertainties surrounding U.S. trade between Mexico and China.

U.S. railroads originated 1.3 million containers and trailers in May, down 5.9 percent from May 2018, according to the Association of American Railroads. Meanwhile, U.S. carloads fell 2.1 percent to 1.3 million carloads for that same time period.

Combined, May intermodal and carload volumes slumped 4.1 percent to 2.6 million from May 2018.

"The current weakness in the rail traffic numbers is due to a combination of factors," said John Gray, AAR senior vice president of policy and economics. "These include flooding in the Midwest that's been hindering the operations of railroads and many of their customers. More important is heightened economic uncertainty that's being made worse by increased trade-related tensions; higher tariffs leading to reductions or disruptions of international trade, and lower industrial output."

"In addition, some rail markets are undergoing rapid change. For example, locally sourced frac sand in Texas is displacing sand that used to be shipped in by rail. Just by themselves, these reduced sand movements are having a material negative impact on total rail carloads," Gray said."

Year-to-date, U.S. rail volumes totaled nearly 11.4 million caloads and intermodal units for the week ending June 1, down 2.4 percent from the same period in 2018. U.S. carloads fell 2.4 percent to 5.5 million carloads. U.S. intermodal units also fell 2.4 percent to 5.8 million containers and trailers.

While trade and economic uncertainties continue to loom as the second half of the year approaches in July, U.S. railroads anticipate rail volumes to rise in the third and fourth quarters, in part because of better weather.

Norfolk Southern's (NYSE: NSC) lines in Kansas City are "underwater," NSC chief executive officer Jim Squires said on June 5 at the UBS Global Industrials and Transportation conference. Norfolk Southern said in a June 4 advisory note that it continues to experience service disruptions between Decatur, Illinois, and Kansas City, Missouri, due to flooding of the Mississippi and Grand Rivers. With forecasts calling for even more rain in the days ahead, the railroad was unable to give an estimate for when service might be restored.

Union Pacific (NYSE: UNP) told customers in a June 3 note that heavy rainfall and flooding continue to impact operations in Kansas, Oklahoma, Missouri and Arkansas, resulting in "new, prolonged and expanded subdivision outages."

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