March Sadness

Railroad Weekly March 3, 2025

courtesy: Steel Wheels Photography

Inside This Issue

· March Sadness: RR Trends in Early 2025 Haven’t Been Happy

· Rate Drop Wishes Coming True: So Why Are RRs Feeling Blue?

· Tuesday Doomsday? Canada, Mexico Bracing Again for U.S. Tariffs

· Worry Up: A Growing Unease About the U.S. Economy

· Docks of Hazard? Not Anymore. RRs Welcome Port Labor Calm

· Steel of Fortune: At Least One Steelmaker Feeling More Bullish

· Shocking Conclusion: AAR Slams Idea of Mass RR Electrification

Track Talk

“Railroads are a key pillar of American commerce, powering our supply chains and driving economic growth nationwide. With billions invested annually and a highly skilled workforce, railroads generate economic activity that extends from major industries to small businesses across the country.”

- AAR President and CEO Ian Jefferies

The Latest

· Welcome to the month of March, the last in 2025’s first quarter. Has it been a good first quarter for North America’s railroads so far? Weather-wise, no, with snow, ice, and extreme cold disrupting operations even more than usual this time of year. Nevertheless, train networks in general are running pretty fluidly—railroads are experts in managing bad weather; what typically hurts much more are challenges like labor shortages and sudden surges in volume. The latter is definitely not a problem currently.

· The AAR’s latest volume data runs through Feb. 22^nd, and yes, it does show a 2% y/y increase across North America. But that’s almost entirely intermodal driven, with container volume growth especially high at America’s west coast ports. Welcome though that is, international container imports are among the least profitable things railroads transport. There’s still no definitive evidence of a pricing revival in the long-struggling domestic intermodal business. And dispiritingly, non-intermodal traffic through late February is down 3% continent-wide. Some of this is freight delayed but not denied by the bad weather—some delayed February shipments will show up as volume moved this month. But that’s hardly the only factor driving the early 2025 carload declines. The fact is, markets like coal, steel, housing, and autos are not performing well for the industry. Might that change as the year progresses? Maybe, with coal for one showing better prospects as natural gas prices and energy demand increase. The steelmaker Cleveland-Cliffs (you might recall its support for Ancora in last year’s Norfolk Southern board battle) is sounding more bullish, as you’ll read below. At the same time, the latest ISM index showed manufacturing sector expansion in January, after 26 consecutive months of contraction. Railroads, meanwhile, still insist that volume growth beckons for 2025 and beyond, driven by tailwinds ranging from easier y/y comparisons to more meaningful new business development and service improvements.

· Don’t look now but railroads are also getting their wish for lower long-term interest