First Quarter Disorder

Railroad Weekly April 21, 2025

Inside This Issue

· First Quarter Disorder: For CSX, Profit Drops On Messy Ops

· Coal Cuts: CSX’s Coal Revenues Plunge

· A Mix of Cheer and Fear: U.S. Firms Say Demand Still Good… For Now

· Box Against the Wall: Uncertain Times for J.B. Hunt, IM Shipping

· Sales Rip: U.S. Retail Sales Jump in Advance of Tariffs

· Aluminum Foiled: Alcoa Foresees $100m Annual Hit From Tariffs

· Vesseling Match: Maritime Trade Threatened as U.S. Taxes Chinese Ships

· This Week: Q1 Reports from UP and NS

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Track Talk

“Consistent, reliable, excellent service is what strengthens our relationships with customers, expands our markets, and ultimately drives profitable growth. We did not fulfill that commitment this quarter.”

-CSX CEO Joe Hinrichs

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

· We’re now in first quarter earnings season for railroads, with CSX performing the opening ceremonies last week. There in fact wasn’t too much for the railroad to celebrate. Profit margins dropped significantly from last year’s Q1, mostly because of operational strains tied to construction work, made worse by disruptive weather. Low coal prices didn’t help. Believe it or not, versus last year, CSX’s Q1 coal revenues plunged 27%! Besides lower market prices in the export market, coal’s steep decline resulted from several mine outages, lower fuel surcharges, and coal that couldn’t be moved because of the operational woes just mentioned.

· Investors weren’t pleased, sending CSX’s stock down by about 1% last week. That’s despite a mostly calm week for financial markets, relative to the volcanic volatility of the preceding weeks anyway. The overall U.S. stock market did decline again as the White House announced new restrictions on exporting semiconductors to China. President Trump also reawakened concerns about the Federal Reserve’s independence.

· CSX was clear, however, that its lousy start to the year was operations-related, not demand-related. True, demand was soft in areas like steel, autos, and housing-related forestry products. And pricing was weak for coal and containers. But the overall demand outlook appears healthy, never mind the economy’s elevated tariff uncertainty. Tariffs, CSX said, will likely lead to more North American business for railroads—CSX says it’s already seeing some increased output from U.S. steel mills. As for the many industrial projects blossoming along the CSX rail network, well, it’s mostly full speed ahead; no signs of pullback. That’s reflective of broader strength in constructive activity across the U.S., a plus for railroad demand. At the same time, trends in chemicals, plastics, and agriculture are positive.

· Other firms across the North American economy are starting to report their Q1 results as well. The general sentiment so far is one of nervousness about tariffs, yes, but also equanimity about business conditions so far. The seas are still mostly calm, in other words. But firms can see some dark clouds on the horizon—dark clouds that may or may not produce a storm.

· To be clear, many smaller firms are feeling a great sense of unease. To get a feel for this, have a look at the New York Fed’s latest survey of service firm executives in the New York City area. You’ll see the quote from Fed researcher Richard Deitz: “The business climate was much worse than normal, and firms were the most pessimistic they’ve been about the outlook since 2020.”

· This week, we’ll hear from both Union Pacific and Norfolk Southern. How was business last quarter? What do they see for this quarter and beyond? Some key industry suppliers will report too, including the locomotive maker Wabtec and the railcar lessor GATX.

Other Developments

· As expected, the Office of the U.S. Trade Representative announced new fees on