U.S. rail volumes on a weekly basis rose nearly 2% as intermodal traffic pushed volumes higher.
The U.S. railroads originated 520,452 carloads and intermodal units for the week ending last Saturday, according to the Association of American Railroads. Of that, intermodal traffic rose by 8.4% to 289,488 intermodal containers and trailers, while carloads were down 5.2% to 230,964.
Lower energy volumes drove carload traffic lower, while other commodities posted year-over-year gains. Coal volumes fell nearly 16% to 62,229 carloads and volumes for petroleum and petroleum products slipped 19% to 10,259 carloads. Together, these commodities represent 31% of overall weekly traffic. But grain volumes, representing 12% of overall weekly traffic, rose 31% to 27,434 carloads.
Year-to-date U.S. volumes totaled 19.1 million carloads and intermodal units, which is 10% lower than the same period in 2019.
Earning season looms
The Class I railroads and rail equipment manufacturers are kicking off earnings season this week, with Kansas City Southern (NYSE: KSC) reporting its third-quarter financial results on Friday.
Given the uptick in intermodal traffic, rail observers will be watching how the railroads are handling the increase in volumes. All of the Class I railroads except privately held BNSF (NYSE: BRK) have adapted leaner operations not only because of precision scheduled railroading but also because they were responding to the lower volume environment of the coronavirus pandemic. During second-quarter earnings calls, executives said they were planning to maintain some of the measures that helped them to rein in costs during the pandemic.
Rail observers might also want to know companies’ views on how long they can ride the intermodal wave. The trucking market has been tight and spot prices have spiked, which has helped push intermodal volumes higher. U.S. imports have also risen recently. How the railroads plan to hold onto those intermodal volumes could be another theme explored during third-quarter earnings calls.
“From KCS, we want to learn from Pat Ottensmeyer and his team what, in their view, is holding Mexico carloads and intermodal volumes back when the United States-Mexico-Canada Agreement (USMCA) and disruptions on trans-Pacific trade lanes should be benefiting the Mexico-U.S. trade relationship. …. As earnings season progresses, analysts and industry watchers will read the tea leaves of railroad management commentary to try and gauge the rails’ appetite for further and, dare we say, permanent intermodal volume growth,” said Tony Mulvey, a FreightWaves research associate, in a Wednesday FreightWaves Passport note.
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