• DATVF.ATLPHL
    1.854
    0.021
    1.1%
  • DATVF.CHIATL
    1.953
    0.079
    4.2%
  • DATVF.DALLAX
    1.359
    0.030
    2.3%
  • DATVF.LAXDAL
    1.313
    0.007
    0.5%
  • DATVF.SEALAX
    1.022
    0.071
    7.5%
  • DATVF.PHLCHI
    1.111
    0.032
    3%
  • DATVF.LAXSEA
    2.152
    0.030
    1.4%
  • DATVF.VEU
    1.640
    0.045
    2.8%
  • DATVF.VNU
    1.521
    0.038
    2.6%
  • DATVF.VSU
    1.336
    0.019
    1.4%
  • DATVF.VWU
    1.587
    0.051
    3.3%
  • ITVI.USA
    9,744.810
    -280.970
    -2.8%
  • OTRI.USA
    8.910
    -1.620
    -15.4%
  • OTVI.USA
    9,761.370
    -267.420
    -2.7%
  • TLT.USA
    2.710
    -0.010
    -0.4%
  • WAIT.USA
    151.000
    -8.000
    -5%
  • DATVF.ATLPHL
    1.854
    0.021
    1.1%
  • DATVF.CHIATL
    1.953
    0.079
    4.2%
  • DATVF.DALLAX
    1.359
    0.030
    2.3%
  • DATVF.LAXDAL
    1.313
    0.007
    0.5%
  • DATVF.SEALAX
    1.022
    0.071
    7.5%
  • DATVF.PHLCHI
    1.111
    0.032
    3%
  • DATVF.LAXSEA
    2.152
    0.030
    1.4%
  • DATVF.VEU
    1.640
    0.045
    2.8%
  • DATVF.VNU
    1.521
    0.038
    2.6%
  • DATVF.VSU
    1.336
    0.019
    1.4%
  • DATVF.VWU
    1.587
    0.051
    3.3%
  • ITVI.USA
    9,744.810
    -280.970
    -2.8%
  • OTRI.USA
    8.910
    -1.620
    -15.4%
  • OTVI.USA
    9,761.370
    -267.420
    -2.7%
  • TLT.USA
    2.710
    -0.010
    -0.4%
  • WAIT.USA
    151.000
    -8.000
    -5%
BusinessIntermodalNewsRailTrucking

Commentary: What is the long-term outlook for rail carloads?

The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.

Over the past decade, U.S. rail freight carload volume hasn’t met strategic expectations. Railcar traffic appears to be declining as a competitive share of U.S. freight service.

Freight rail traffic grew significantly between 2000 and 2006, but then it plummeted during the Great Recession. And 2009 was a very bad year for the major North American railroads in terms of rail carloads. Coal, which at that time made up nearly half the railroads’ carloads, was down 11.1%, and the second-largest category, chemicals, fell 11.2%.

A photograph of boxcars and tank cars parked on rail tracks. The tracks are next to some town buildings. A tree-covered mountain is behind the buildings.
Railcars sit on track. (Photo credit: Shutterstock)

Carload freight recovery started as the overall economy slowly recovered – but then coal led two declines in 2012 and again around 2015 and 2016.

Intermodal – which is not covered in this column – is the sort of glamorous rail mode to follow. However, hands down, carload traffic typically has higher traffic margins than intermodal. Here are the best yield carload units to watch:

  • Chemicals
  • Plastics
  • Hazardous materials
  • Liquified natural gas and crude oil
  • Metallurgical coal and certain types of thermal coal are still very profitable in selected markets
  • Automobiles and small trucks (moved on bi-level and tri-level side-shielded railcars)

Traffic like coal might continue to decline in annual volume. But the last coal shipments are decades from now. There is still a large mass being moved each year.

(Photo credit: Jim Allen/FreightWaves)

The history of past rail traffic shows, importantly, that railroad traffic can often be sustained profitably even as the volume and market shares drop. The real danger is that occasional unplanned and badly overlooked events like the Great Recession can result in significant downturns that last for several years.

A strategic volume decline can actually be sustained over perhaps a two- to three-decade period. In part, this is because even as traffic drops the track structure has a long physical life if prudent maintenance is performed.  

Few railroad economists see a repeat like the very sudden collapse of the mighty Penn Central five decades ago. Yet, considering logistics changes in our nation’s economy, it is prudent to consider the outlook for rail carload traffic.

Evidence suggests that carload freight doesn’t serve a lot of the changing economy.

That includes general merchandise products like:

  • Electronic components
  • Ecommerce and parcel and express traffic (more truck and intermodal)

This type of freight grew typically by more than one-third over the past decade. Carloads are not the usual mode.

On the bulk commodities level, recent volume losses included:

  • Metallic ores and concentrates
  • Waste and scrap
  • Printed products and paper products
  • Lumber

Some of these carload groups lost between 25% and almost 40% of volume. On the plus side, crude oil moved by rail tank cars increased significantly beginning a little over a decade ago.

Environmentalists and some public policy planners still ask – “Could there be a coming massive expansion away from trucking into carload rail?”

Physically, and financially, that might be impractical. Why? There are just too many places where industrial and heavy commercial land development has occurred over the past 50+ years that are not serviced by rail tracks. 

Furthermore, few railroads or governments are currently funding capital expenditure projects to build out those tracks. Such building runs about $4 million per track mile for what is often viewed as a speculative carload benefit.

Someone must sign the checks for such a track connectivity program.

(Photo credit: Union Pacific Railroad)

Have they? The environmental benefits for society have been documented. Yes, some projects like Chicago CREATE and the Alameda Corridor have been built. But other proposed large-scale projects from the Houston urban rail restructuring at more than $3 billion to the I-95 Corridor recommended rail freight projects are not funded.

Table 1 shows both actual historical traffic volume changes (as ton-miles) and growth prospects for several projections out towards 2025. The growth rates are very small.

Table 1 – Comparison using 10-year growth outlooks for rail freight expressed in ton-miles 

SOURCEPeriodActual or ForecastTon-Mile % Change
Class 1 RR data1990 – 2000Actual4.2%
Class 1 RR data2000 – 2010Actual1.5%
FAF US government  (no Intermodal) 2015 – 2025 Forecast 1.5%
AEO (NEWS) Scenario2015 – 2025Forecast1.0%

Despite some positive 2025 outlooks, the reality is that between 2003 and 2007, most rail industry outlooks expected rail ton-miles in the U.S. market to significantly expand; expand much more so than the 2015-2025 outlooks in Table 1.

The most recent evidence shows that actual ton-miles are dropping.

Table 2 – Selected years – changes in railroad U.S. freight in trillions of ton-miles  

2008200920102011201220132014201520162017
1.7771.5321.6911.7291.7131.7411.8511.7381.5851.675

Source: U.S. government BTS data tables  

Without returni+ng coal traffic, the outlook for rail ton-miles is a continuing gradual decline in ton-miles instead of the decade-ago increasing pattern above two trillion ton-miles.

The economic challenges of intermodal growth via short-haul distances between traffic markets less than 500 miles apart were previously covered:  https://www.freightwaves.com/news/commentary-will-short-haul-intermodal-rail-ever-work and are not repeated here.

Wrap up market view and challenges/opportunities

Given the carload uncertainty, it is possible that between 2025 and 2030 that all-in intermodal market forms might reach near 60% or better of total revenues as well as units.

The impact on ton-miles is harder to calculate. Overall rail ton-miles are expected to decline. Environmental goals that expect rail ton-miles to reach towards 2.5 to 3 trillion ton-miles are not realistic without breakthrough traffic change. 

A photograph showing two rows of tank cars and two rows of empty railcars.
Railcars and tank cars sit in a railyard. (Photo credit: Dreamstime)

However, there are still some in public agencies that have an outlook for rail ton-mile growth (shown in the following graph): 

Figure 2 – Actual and projected long-range freight ton-miles by mode and selected rail commodities. The outlook needs to be reassessed.

Source: TRB report – 2015. See references at end of this commentary

Figure 2 shows that railroad freight ton-miles were projected to increase at a rate of just 1.3%. In contrast, truck ton-miles were expected to increase at a rate of 2.6%.  Hybrid intermodal, or transloading, was projected to grow at a rate of 2.9%.

Regardless of which outlook one favors, at these rates rail carloads will lag badly compared with trucking growth.

(Photo credit: FreightWaves/Jim Allen)

Of strategic importance, we are not seeing evidence of a large enough traffic drop to suggest a “going out of business” pattern for rail carload volume. Railroads still move a lot of cargo.

Table 3 – Year-to-date as of December units moved in U.S. market (in millions) & % changes 

  2015 2016 2017 2018 2019 % 18-192019% versus 2015
Total Carloads14.2013.0313.4013.6412.97-4.9%-8.7%
Carloads excluding coal 9.07 8.93 8.99 9.23 8.97 -2.8% -1.1%
 Total carloads & intermodal  27.62  26.24  27.12  28.11  26. 71  -5.0%  -3.3%

  Source: AAR January 10th Rail Indicators

Fred Frailey, a retired Trains Magazine investigative reporter, pointed out recently what a critical step function traffic loss might look like. He selected Union Pacific routes for his comparison.

Table 4 – Estimated changes on selected UP main line routes – not all corridors shown here

 Example Corridor Previous Daily Trains High Reduced Daily Trains% Market Demand Change
Chicago – Clinton, Iowa  5841-29%
Nebraska 3-track coal region13777-44%
Central California1414Same
LA – El Paso, Texas4439-11%
Denver – Salt Lake via Moffat182>85%

Source: Trains Magazine Rail Blog in 2019

This data speaks in an easier to understand business language of trains per day changes. If there is to be rail growth, track capacity isn’t as big of a hurdle as once thought.

Carloads are still good business, but only selectively growth-prone. Be observant about the challenges please. 

As always, what is your rail carload outlook? 

A photograph of railcars passing through a railroad crossing. A railroad crossing sign is in front of the railcars and is signaling that the intersection can't be crossed by vehicular traffic.
Railcars pass through a rail crossing. (Photo credit: Russ Ward/Unsplash)

Selected references:

  • Transportation Research Board – Special Report #318 – Modernizing Freight Rail Regulation – Washington, D.C., 2015.
  • For projections of national rail freight traffic, consult: eight Analysis Framework (FAF); http://faf.ornl.gov/fafweb/Extraction1.

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Jim Blaze

Jim Blaze is a railroad career economist with an engineering background and a strategic analysis outlook. Jim’s career spans 21 years with Consolidated Rail Corporation (CONRAIL), 17 years with the rail engineering firm Zeta Tech Associates, 7 years with the State of Illinois Department of Transportation in Chicago urban goods movement research, and two years studying what to do with the seven bankrupt and unrecognizable Northeast railroads at the federal agency USRA. Now primarily a teacher and writer, Jim likes to focus on contrarian aspects of the railroad industry.

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