Norfolk Southern (NYSE: NSC) is planning to add more intermodal service products in the Southern U.S. as a way to take volume away from the trucking market, executives said during the company’s second-quarter earnings call on Wednesday, July 29.
Those products, which could be launched as early as the third quarter of this year, include products between the U.S. Southwest and the U.S. Southeast, as well as between the U.S. Southeast to the U.S. Northeast, said NS Chief Marketing Officer Alan Shaw.
“They are a new level of product that is not out there in the marketplace right now, or had not been. We’re confident that…it’s going to help us grow moving forward,” Shaw said.
Railroad executives said NS is seeking to take advantage of higher spot truck prices and tight truck markets in some U.S. regions.
NS’ July volumes are “a pretty strong sequential improvement over June,” and June was a month that experienced high retail spending and rising truck rates and truck tonnage, Shaw said.
Although export activity has been slow in July, there is a “heavy demand” for imports because of low inventories, Shaw said. Since more goods are being sent to West Coast ports instead of East Coast ports, that has created some transloads into 53-foot containers, which in turn opened up some domestic intermodal opportunities, he said.
NS expects volumes to increase sequentially in the second half of 2020 after the COVID-19 pandemic battered rail volumes in April and May. However, the rate of increase is unclear because of political and economic uncertainties. The severity and scope of the COVID-19 pandemic is also another uncertainty.
“The risks that we see going forward are increasing cases of COVID-19 and the unsettled situation with fiscal policy and the stimulus, and the impact that that could potentially have on fourth quarter volume and revenue,” Shaw said.
NS is still looking to reduce terminal footprint
NS’ TOP21, its version of precision scheduled railroading, coupled with the impacts of COVID-19 this spring, contributed to NS’ decision to shed assets to make the company leaner. That included idling two large hump yards at the Linwood terminal in North Carolina and Bellevue at Ohio, in addition to idling two other hump yards over the past year. NS also closed one of two locomotive heavy repair shops.
“The second quarter saw an unprecedented amount of operating change, as we ceased hump operations at two yards and responded to major volume shifts with a keen eye, towards making many of our crew start reductions permanent,” said NS Chief Operating Officer Mike Wheeler. He also said NS reduced the headcount levels of its train and engine staff and cut the number of active locomotives on its network to match network capacity needs with demand.
As volumes rebound, NS will continue to seek ways to reduce its terminal footprint.
“We’re not letting off the gas. We’ve got several things we continue to look at that are in the hopper, and we’ll roll out as appropriate based on the volumes in the business,” Wheeler said. “But like I’ve said before, we are going to continue to push ourselves to find ways to reduce our structural costs out there and the terminals that we can do without, while still providing service products that we’ve committed to. So, we still have things we’re working on and you’ll see those roll out in the future.”
NS’ second-quarter financial results, go here.
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