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North American intermodal traffic takes a hit

A train hauls intermodal containers. Image: Flickr/SounderBruce

Weekly North American intermodal traffic has fallen nearly 10% as the coronavirus dampens volumes.

“Intermodal, rather than other rail sectors, is likely to see the earliest impacts from the coronavirus because large amounts of intermodal traffic go to or come from ports – roughly half of U.S. intermodal is exports or imports,” said John T. Gray, senior vice president for the Association of American Railroads (AAR).  “Unfortunately, extensive flooding and harsh winter weather last year at this time complicate comparisons between this year and last year.” 

North American intermodal volumes totaled 312,938 intermodal containers and trailers for the week ending March 14, a 9.8% drop compared with the same period in 2019, according to AAR.

Of that, U.S. weekly intermodal units fell 9.1% to 236,978 intermodal units, Canadian intermodal volume tumbled 12.8% to 60,886 intermodal units and Mexican intermodal units slipped 8.9% to 15,074 intermodal units.

A six-month comparison of U.S.-originated intermodal container volumes (RTOIC.USA), Canadian-originated intermodal container volumes (RTOIC.CAN) and Mexican-originated intermodal container volumes (RTOIC.MEX). The figures exclude intermodal trailers. Source: SONAR/AAR

On a year-to-date basis, North American intermodal units totaled 3.6 million intermodal containers and trailers, down 6.5% from the same period in 2019.  

“The fact that overall intermodal originations last week were the lowest for the same week since 2013 is strong evidence that the coronavirus is impacting intermodal volumes. Four of the five carriers of intermodal traffic from West Coast ports, the principal gateways serving the Chinese trade, saw declines in their intermodal business handled. Similar declines in the East also suggest that the problem has begun to spread to other regions of the supply chain,” Gray said.     

Meanwhile, North American carloads slipped 3% on a weekly basis to 332,044 carloads, while year-to-date carloads were down 4.1% to 3.6 million carloads. U.S. carloads, which represent roughly 68%-70% of North American volume, fell 5.9% on a weekly basis and 6.2% on a year-to-date basis to 226,039 carloads and 2.5 million carloads, respectively.

Could carloads decline even more this year?

Talk about a pandemic-induced recession in the U.S. has been fueling media reports recently amid volatile Wall Street activity. Kansas City Southern (NYSE: KSU) executives said on March 17 that the railroad could update its guidance for 2020 depending on how the macroeconomics play out between now and its first-quarter earnings report in mid-April. The company has also been developing scenarios around what the rail environment might look like in the back half of the year, and some of those scenarios include the U.S. in an economic recession.

Investment firms are speculating that the outbreak could benefit e-commerce but could hurt other sectors. Credit ratings firm Moody’s Investor Services expects the passenger airlines, shipping and lodging and leisure sectors to be among those hardest hit by the global pandemic. 

The global automotive sector is under pressure because of its reliance on international supply chains, while the decline in foot traffic might hurt gaming and non-food retail in certain regions, Moody’s said.

“Sectors reliant on trade and the free movement of people are most exposed, such as passenger airlines, shipping, and lodging & leisure, which includes cruise lines and restaurants,” said Benjamin Nelson, Moody’s vice president and senior credit officer. He and another Moody’s executive authored a report about the kinds of companies that are more equipped to withstand an economic downturn as a result of the coronavirus pandemic. The report’s baseline scenario is a normalization of economic activity in the second half of the year. How companies withstand this spring’s challenges will depend on how long the pandemic lasts.

Other sectors, such as the housing and construction industries, are also tied to consumer buying and could see some softness this spring.

“As indicated by some of the softening in builder confidence in March, housing construction faces significant headwinds as we enter the spring season,” said Robert Dietz, chief economist for the National Association of Home Builders. The association released its February figures on housing starts, housing production and permits on March 18. “With a rising number of economic sectors on a partial or full pause due to coronavirus mitigation, housing demand and the ability to continue full construction of homes is at significant risk.”

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.