5 big freight rail themes in 2020

Effects of COVID-19 pandemic reverberate across freight rail

To say that 2020 was a roller-coaster year might be an understatement. From COVID-19 to congestion, here are five themes that dominated the freight rail industry in 2020.

Coronavirus causes volume volatility

Perhaps the dominant theme of 2020 could be the impact of the coronavirus pandemic on rail volumes and the freight rail industry overall because the industry is still feeling the pandemic’s impact 10 months since the outbreak first began in North America.

Rail volumes crashed in April and May, and then they rebounded. Some commodities fared well, such as grain, because of lifted export restrictions. Intermodal volumes have also been higher year-over-year in the second half of the year. Meanwhile, freight rail companies and the rail unions sparred over what should be rail’s response to safety measures at the workplace.

E-commerce elevates to a new level

With large swaths of the U.S. and Canadian population homebound for much of the year because of shelter-in-place or social distancing restrictions, e-commerce activity shot up, startling supply chain stakeholders and forcing them to speed up the timelines for plans to make supply chains more efficient. And during the holiday seasonal crush of November and December, the U.S. Postal Service struggled to get parcels delivered in a timely fashion.

Congestion around ports cause headaches

As e-commerce surged, so did U.S. imports, creating congestion at the ports that rippled across the transportation modes. Third-party logistics companies warned of delays, while the railroads used surcharges to limit how much intermodal traffic they could take.

A side effect from increased port activity was that ocean carriers rushed to get empty containers from inland and back out to sea again so that they could use those containers to ship U.S. imports. Groups that use the empties — some grain shippers, for instance — have cried foul over the ocean carriers’ preferences, prompting the U.S. government to investigate their claims.

Railroads consider deploying more longer trains

Although rail volumes largely rebounded from the pandemic-induced lows of April and May, the Class I railroads are hoping to continue their deployment of longer trains, with companies such as Kansas City Southern (NYSE: KSU) and Union Pacific (NYSE: UNP) taking steps to build out their infrastructure to support longer trains. The railroads lengthened trains to help control operational costs and also to meet precision scheduled railroading objectives.

Surface Transportation Board gets active

The Surface Transportation Board (STB) continued to be active in 2020, receiving public input and making determinations on a wide range of issues, from questions about class exemption to demurrage and accessorial charges

The heightened activity comes as the board prepares to add two new members to reach its full complement of five members. Some shippers hope the new board members will provide fresh eyes to outstanding issues. Meanwhile, as the Staggers Act celebrated its 40th anniversary this fall, industry observers questioned whether the STB’s role should be modified to account for changing market conditions.

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.