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US Rail Traffic Starts Off New Year In A Slump

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U.S. rail volumes kicked off the new year by continuing a monthslong slump, with traffic down 5.1% compared with the same period a year ago.

U.S. rail volumes totaled 414,014 carloads and intermodal units for the first week of the year that ended on Jan. 4, according to the Association of American Railroads. Of that, U.S. carloads slipped 2.8% to 215,564 carloads, while U.S. intermodals units fell 7.4% to 198,450 containers and trailers. The wider drop in intermodal units could be due in part to the pull-ahead in volumes as a result of U.S. tariffs on certain goods from China.

North American rail traffic totaled 569,673 carloads and intermodals units for the week ending Jan. 4, a 4.4% drop from the same period in 2019. Of that, North American carloads were down 3.3% to 303,410 carloads, while North American intermodal units slipped 5.6% to 266,263 containers and trailers.

U.S. carloads have been trending lower in 2019. Source: SONAR Surf

The Class I railroads and rail equipment manufacturers will start releasing their fourth-quarter results next week, with CSX (NASDAQ: CSX) and Kansas City Southern (NYSE: KSU) among the first to report their results. Many of the railroad executives at investor conferences late last year expected volume softness to continue into 2020, although recent U.S. actions on trade issues with China, Canada and Mexico could color how the rail industry views the upcoming year.

Year-over-year volume comparisons might be easier because rail volumes in 2020 might be more in line with rail volumes in 2019. Still, "the rails may give less specific guidance than they typically do because of the uncertainty related to tariffs and because there was so much negative variance in 2019 relative to expectations," said FreightWaves market expert Mike Baudendistel.

Meanwhile, rail equipment manufacturers and lessors have felt the effects of lower rail volumes through slowing renewal rates. Equipment manufacturer Greenbrier (NYSE: GBX) said Wednesday that it's accustomed to managing through cyclical periods of low and high demand for equipment. The company is looking at its models to see how its assets affect marketplace supply and demand, but Greenbrier "will not ramp up and down at the drop of a hat," said Chief Operating Officer Lorie Tekorius.

Image Sourced from Pixabay


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