Photography by Frederick Manfred Simon © www.steelwheels.photography
Inside This Issue
· A Better Fall Haul: Q3 Rail Freight Shrinks. But Signs of Life in Sept.
· A Peak Season, After All: Intermodal Market Trending Back to Normal(ish)
· Más Mexico: UP Offers Yet Another New Cross-Border Intermodal Service
· Porty Pooper: CN’s Q3 Traffic Plummets from West Coast Port Strike
· Grain Pain: For UP and BNSF, a Rough Summer on the Farms
· Can’t Bring Home the Basin: PRB Coal Another Weak Area for UP, BNSF
· Gray’s Anatomy: Commentary from the AAR
· Tech Wreck: NS Experiences More IT Problems
Track Talk
“Intermodal had the best volume month of the year in September, showing, after three years, that “peak season” still exists although much more reserved and occurring somewhat later than past peaks.”
-AAR Senior Vice President John T. Gray
Read American Places, a book with deep insights into the most important trends and developments throughout the U.S. economy -Jay Shabat, Publisher, Railroad Weekly
The Latest
· Welcome to 2023’s fourth quarter, which follows a difficult third quarter—for railroad freight volumes, anyway. Third quarter earnings season for railroads is now just weeks away, promising to shed more light on the true state of the rail sector. But as the chart below shows, all six of North America’s Class Is saw y/y declines in volume last quarter. Some highlights:
o Canadian National fared worst, hit hard by the western port strike. CSX fared best, with Q3 carload traffic (in other words, non-intermodal traffic) actually up 2% versus a year ago. Clearly, Norfolk Southern’s East Palestine hangover was still a factor in Q3, shifting some business to CSX. There were other factors helping CSX too, including its own service improvements and more output from the coal mines it serves. In addition, its export coal terminal in Baltimore was partly out of service a year ago.
o Western grain shipments on BNSF and Union Pacific dropped sharply from last summer, though Canadian grain volumes continued their solid gains.
o Western coal shipments, mostly tied to the prolific Powder River Basin, were also down significantly despite elevated power demand caused by summer heat waves—more of that power was generated with natural gas as prices dropped.
o The intermodal market, still the largest market by far measured in volume, was the biggest driver of y/y traffic declines. Intuitively, with the U.S. economy still growing at a healthy pace and railroad service metrics much improved, one would think that intermodal might be having a good year. Instead, it’s been victimized by consumers spending more on services than goods, companies holding excess inventory, truck rates becoming more competitive, lost market share to trucks during the pandemic, and so on.
o The chart makes clear that auto shipments deserve this year’s MVP award for growth, contributing more than any other sector toward increasing railroad traffic. The UAW strike threatens to cool the momentum, though the impact to railroads has been limited so far thanks to well-stocked inventories (vehicles built before the strike ready to ship to dealers). Shipments from North America’s many foreign-owned auto factories, meanwhile, continue uninterrupted.
· As bad as those Q3 intermodal figures appear, the quarter ended on a positive note. AAR explained that September was the best month of 2023 for intermodal, in terms of total volume. That marks a return to somewhat normal seasonal trends, in which
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