U.S. rail volumes for consumer-related goods could fall even further in the coming weeks as the coronavirus pandemic, which causes COVID-19, takes hold, warned an executive with the Association of American Railroads (AAR).
“It wouldn’t be surprising to see rail volumes … soften in the weeks ahead as steps taken to limit the spread of COVID-19 continue to impact producers, both here and abroad, particularly those of consumer goods or intermediate products from which those goods are produced,” said AAR Senior Vice President John T. Gray.
Gray pointed to declining automotive volumes as an example. Weekly U.S. carloads of motor vehicles and parts were down 7.1% last week to 15,887. In contrast, year-to-date carloads of motor vehicles and parts are only 1% lower, at 191,201.
“Demand for rail service depends on the demand further down the chain for the products railroads haul and on the ability of firms they serve to produce what is demanded,” Gray said. “Autos are a good example. What with job uncertainty and either voluntary or enforced social distancing for many people, this isn’t a great time to visit new car showrooms, so demand for autos is down. Further, most automakers have suspended manufacturing operations for the time being. As a result of both these factors, rail carloads of autos and auto parts fell considerably this past week.”
FreightWaves market expert Mike Baudendistel agreed, “Autos are among the most vulnerable rail segments given the correction in the stock market, newfound job concerns and the current aversion to travel and commuting. Accordingly, this week numerous auto manufacturers announced shutdowns of their Mexico assembly facilities.
“Mexico has become the ‘New Detroit,’ both for U.S. consumption as well as North American exports. That negatively impacts rail volumes both due to auto parts moving south across the border and finished vehicles moving back north or to the ports,” Baudendistel said in a note to SONAR subscribers.
But there are a few brighter spots. U.S. carloads of chemicals and farm products including food products but excluding grain are up on both a weekly and year-to-date basis, while increased imports at the West Coast ports could benefit rail intermodal.
“The good news is that the intermodal volumes of the railroads serving the West Coast ports that receive the bulk of imports from China appear to have plateaued over the last four weeks, indicating that we may have seen the worst of the COVID-19 impacts on the Asia trade,” Gray said.
Meanwhile, U.S. chemical carloads were up 12.2% on a weekly basis and 3.7% on a year-to-date basis to 34,471 and 394,888, respectively. U.S. carloads of food products and farm products (excluding grain) were 3.3% higher on a weekly basis and 2.1% higher on a year-to-date basis, to 15,984 and 189,984, respectively.
Overall weekly U.S. rail volumes totaled 459,966 carloads and intermodal units for the week ending March 21, down 8.6% from the same period in 2019. On a year-to-date basis, U.S. rail volume totaled 5.7 million carloads and intermodal units, a 7.2% drop from the same period in 2019.