Rail Traffic UP: Is the Industrial Economy Robust? [AAR Data]

Speaker 1 [0:00] Today it is the best day of the week. Not only are we halfway through the week, we are at our weekly segment sponsored by Trinity Rail, which it is the AAR Weekly Report. And our editor from Trains Magazine, which everyone should subscribe to, amazing publication, Bill Stevens with us. How you doing, Bill?

Speaker 2 [0:20] I am well. How are you, Craig and Julie?

Speaker 1 [0:23] How are the railroads? Are they putting up good numbers? Is the rally continuing?

Speaker 2 [0:28] They are if you set aside coal and chemicals.

Speaker 1 [0:31] Coal is in a perpetual decline. It’s not coming back.

Speaker 2 [0:39] Sorry, my French has forgiven me. It is, but it had a pretty big impact on the carload numbers today. So we’ll go over those, including coal and not including coal. When you start at the top of the list and look at North American rail traffic, Carload traffic was up 0.5%, so basically flat. Intermodal was up 4.3%, which gives us a total increase of 2.5% North American rail traffic for the week. That is a bit of a slowdown compared to the prior 4 weeks where it was up a little over 4%. And in the US, 7 of the 10 commodity groups tracked by the AAR posted gains. But still, carload was down 0.4%. That’s compared to the 4-week trend of up just a little bit under 1%. Intermodal was up 4.8%. That’s also a little bit of a slowdown from the 6.4% increase over the prior 4 weeks. So that gives us a total increase for week 30 US rail traffic of 2.5%. And that is, again, a slowdown from the 3.8% over the prior 4-week period. However, if you subtract coal from that total, and coal is the largest carload segment still, carloads were up 2.1%. And that compares to a 3.1% 4-week trend in the prior 4 weeks and up 4% year to date. Uh, we drilled down a little bit further. Chemicals, uh, which is often the second largest traffic segment, that was down 2.2%. Um, year to date, it’s up 2.4%. So a little bit of a blip there. Um, when we look at grain, the other, the, uh, other top 3 traffic commodity, that was up 4% in line with its trend for the past 4 weeks. Um, and then, you know, steelmaking apparently is still on a tear according to the AAR data. Metallic ores were up 16% this week. Well, scrap iron and steel was up 20%. And both of those are higher than their prior 4-week trend. So that—

Speaker 1 [3:01] Real solid, Bill. I mean, the industrial economy continues to be robust. Take coal out of it, 4.2%. That’s real strong. I mean, it’s interesting. out that it’s 4% growth on X, and immediately, I got the naysayers that are like, that’s not a lot. But I’m like, this is hardcore GDP growth right here.

Speaker 2 [3:23] Yeah, the carload numbers really closely track with industrial production. And industrial production doesn’t really— it’s not a hockey stick, right?

Speaker 1 [3:34] It doesn’t grow 4% a year. That’s a real strong number.

Speaker 3 [3:36] Yeah.

Speaker 1 [3:36] I mean, we’re also getting other data points. Julie reported on the LMI today, the ISM yesterday. which are both affirming that the industrial economy is doing quite robust. ISM was at the highest level since 2022. LMI, a little bit of, I would call, softening, but not— I mean, it’s still very robust. When you’re at an extreme high, it cools a little bit. But I think it’s telling us that the economy is doing quite well right now.

Speaker 2 [4:05] The freight economy. Yeah, that’s what the data suggests, that the underlying economy, industrial economy, is strong based on this broad commodity growth, 7 out of 10 commodities that the AIR tracks.

Speaker 3 [4:18] So, Bill, I like to look at the year-to-date numbers too compared to 2025 rather than just week over week. And when you look at the US rail traffic, carloads up 2.7%, tonal units up 3.8%, total traffic up 3.3%, and literally everything is up year-to-date except coal on the US railroads.

Speaker 1 [4:37] And the coals have cooled a bit.

Speaker 3 [4:38] Mexico way up.

Speaker 1 [4:39] What about chemicals, though? They came on real strong in the first quarter. They have cooled a bit. Bill, any read into that? Is that just because of commodity inflation due to energy and oil? I mean, oil is such a big input into chemicals. Is there anything to read into that, or is this just a little bit of softening?

Speaker 2 [4:58] It could be a little bit of softening. It could be a little bit of noise in the numbers.

Speaker 1 [5:03] Last year, you had the Liberation Day tariff. Kind of, I don’t know what you call that, but noise that’s in it. So Bill, earlier this, what day is this? Was it last week? It was last week, wasn’t it? The days are blurred for me, but we had the BNSF Chief Strategy Officer. Was that last week? No, it was this week. No, that was this week. It was Monday. You watch the show. You know what I’m talking about, Bill. Thank you. Probably arranged the interview. We had the Chief Strategy Officer of BNSF on, He obviously is not supportive of the merger, really said it’s bad for consumers. I don’t know if you got a chance, it sounds like you did watch that interview. Any thoughts there?

Speaker 2 [5:42] Yeah, I mean, that he really boils down the anti-merger argument, and it is of course night and day difference from what UP and NS say their merger will bring. And we are gonna see this debate play out over the next 12 months as the Surface Transportation Board reviews the deal. Uh, important note there though is that this is being held in abeyance until the STB fully reviews the 400-plus pages of supplemental information that UP and NS filed a week ago Monday. And we don’t know if or when that schedule, procedural schedule, will be set and when it will resume. And once it does, there will be a flurry of inbound comments to the board pro and con about the merger.

Speaker 1 [6:31] Did we learn anything in that interview? Because I just felt like he was talking his own book. And I’m not knocking BNSF. Their position is pretty assertive in terms of how they believe and feel about it. But it feels like he was talking his book about positions. I mean, in fairness, so was UP and NS. But it didn’t feel like I learned a lot in that interview.

Speaker 2 [6:51] Well, that was consistent. And he did speak to That supplemental information that UP and NS filed, BNSF has been particularly critical of the committed gateway projections that UP and NS are offering. UP and NS said that, hey, we just doubled it and, you know, the number of shipments that are eligible, and we brought in bulk trains like of grain into the program that weren’t there before. BNSF still looks at it and says, well, that’s such a small number, or it has an expiration date on it, why wouldn’t it be full-time? And so that’s, that’s, you know, one of their big concerns is what happens to the interchanges that BNSF currently has with Norfolk Southern or at other gateways. How do those hold up after, after a merger?

Speaker 1 [7:46] We had Gene Seroka on yesterday, Port of LA director. He was very supportive I think that makes sense. That arguably benefits the West Coast ports, because if you do get faster intermodal service across from the West Coast of the United States through the US, should benefit shippers to leave their containers through the Port of LA.

Speaker 2 [8:12] That’s right. There’s this battle between the East Coast and West Coast ports, In the center section of the country, in the Ohio Valley, in the Mississippi Valley, even places like Chicago, if you can reach it equally well from the West or from the East, this would give the West Coast ports perhaps a leg up compared to their East Coast competitors if one railroad can handle the move from the West Coast all the way to the through the watershed to places like Detroit, Pittsburgh, Buffalo, Cincinnati, you name it, that is currently on the eastern side of the east-west divide between the US Class I railroads.

Speaker 1 [9:01] Bill, have we seen a shift in sentiment in terms of, has there been any party that perhaps has shifted its support or has contracted its support of the merger, or is it pretty much the same parties that you would expect to be supportive are supportive, and the parties that don’t. Has there been a shift in the last couple of months? Any public narrative that shifted the way people are thinking about this?

Speaker 2 [9:24] No, really the only shift has been Canadian National reaching a deal with Union Pacific for access to Mexico. Union Pacific in exchange gets better access through Chicago over Canadian National. And then Canadian National also if the merger were approved, would gain access to St. Louis and Kansas City and serving customers between those points across Missouri, where UP would pick up some Norfolk Southern routes and therefore would have some duplicate parallel routes. And CN says, hey, this eases our concerns that we had about this merger’s competitive impact on the CN network, and so we will now drop our opposition to this merger. Remains to be seen. We whether UP and NS can cut similar deals with other railroads that remain opposed to the merger, and we’ll just have to wait and see.

Speaker 1 [10:19] Does the administration or STB really care what the Canadians think? And I don’t mean any disrespect to our Canadian friends, but like, this administration is all Make America Great, very America First. Is there really an audience for Canadian opinion in these transactions?

Speaker 2 [10:35] There definitely is, because, you know, Canadian National’s lines come into the US at the Michigan border, and then up in Minnesota. They come down like a Y, they join in Chicago, and then they go all the way south to Memphis and New Orleans. And so that’s an important route. And, and the STB takes a look at competition within the US and within the US rail network. And that is an important section of it.

Speaker 1 [11:06] So, yes, I think the Canadians— That’s kind of the prettiest. The CPKC, the Big Red, I actually love. I think it’s the most gorgeous train. And some of the cinematography— I don’t know, cinematography— photography of those trains in Vancouver, in British Columbia, just something about the scenery of that. I know you’re a big train library guy, Bill, and you love beautiful photography of trains. What is your favorite library?

Speaker 2 [11:33] Oh boy. See, now that’s like asking me to name my favorite kid. I can’t do it. And, uh, that’s— they were— they are all, uh, interesting and, and, and in some cases historic. You look at CN, they have the CN noodle, it’s called, that was, uh, developed in the ’60s. That’s kind of this iconic logo. Um, Union Pacific’s logo has remained pretty much unchanged since 1862. So if you like history, there’s that. Um, you know, Canadian Pacific brought in its history. It really was the railroad that created Canada. And so, you know, they’ve got the beaver, the Canadian symbol, uh, as part of their logo. Um, so they all have their, their pluses and, and their minuses. Um, but what I’m really excited about is this America 250 locomotive celebration that we’ll be having later this month at the North Carolina Transportation Museum in Spencer, North Carolina, where we’ll have about 3 dozen America 250 locomotives painted up in red, white, and blue and assorted other colors in some cases. And we’ll also have some bicentennial locomotives there that were painted up for the 200th back in 1976.

Speaker 1 [12:45] Now, are there going to be any surprises, any liveries we haven’t seen? Have these been kept in secret, or is it they’re all coming together to rally but we’ve seen them out before? I know that a lot of the railroads have come out with some of the more patriotic livery, not unusual. You know, we’ve seen the different railroads throughout history sort of honor presidents and honor historical factors, but is there anything unusual or new that you have not seen that you’re looking forward to?

Speaker 2 [13:10] I haven’t seen any of them in person, so I’m looking forward to seeing all of them. As a kid, I remember seeing, you know, bicentennial units come through town, and one of those, the Norfolk and Western 1776, will be there at the event. So looking forward to seeing that for the first time in 50 years.

Speaker 1 [13:30] Amazing. Well, it’s so cool.

Speaker 3 [13:32] Are you a big railroad fan? So while we’re on the—

Speaker 1 [13:34] You don’t really like libraries? Airplane libraries and now train libraries. After the transaction with Comback where we got trains, I became— I’ve become a huge— you know how much I love the railroads.

Speaker 3 [13:45] I mean, love it.

Speaker 1 [13:46] I talk about it all the time.

Speaker 3 [13:47] I mean, I feel that same sense of history and nostalgia around it. I was not a big railroad geek. But I was not as close to it as you are.

Speaker 1 [13:52] I was not a big railroad geek, but I am now. I mean, I love the railroads, and we talk about it all the time, how much we love the— I love the railroads.

Speaker 3 [13:59] So while we’re on the topic though, I’ve been wondering, Bill, behind your shoulders, obviously you’ve got 2 gorgeous pieces of art. One of them looks like more like a passenger train in Europe, but what is the other one?

Speaker 1 [14:09] Well, what are they? Well, it’s not a passenger train.

Speaker 3 [14:11] Okay, I don’t know what it is.

Speaker 2 [14:12] What is it? Yeah, they are both passenger trains. The one right here is—

Speaker 1 [14:18] there we go.

Speaker 3 [14:19] Yeah, that one.

Speaker 1 [14:19] What is that one, Bill?

Speaker 2 [14:21] That one is the Canadian Pacific, the Canadian.

Speaker 1 [14:24] Boom.

Speaker 2 [14:25] On its original route, that equipment dates to the mid-1950s, the dome observation car, still in use today on Via Rail Canada.

Speaker 1 [14:34] I didn’t say it wasn’t passenger. I just like, yeah.

Speaker 2 [14:37] And that, uh, and that I highly recommend riding Via Rail Canadian. It now runs on Canadian National, but fantastic service, uh, food, and, and awesome scenery.

Speaker 3 [14:52] Um, probably the most gorgeous views, like That would be amazing.

Speaker 1 [14:57] We should do a remote.

Speaker 3 [14:58] Okay. Can we?

Speaker 1 [15:00] We need to get a Starlink.

Speaker 3 [15:00] I will take a lot of motion sickness medicine.

Speaker 1 [15:01] Maybe we should cut— Bill, you need to call your friends at CP to see if we can do a remote Freightways Today.

Speaker 3 [15:08] We need—

Speaker 1 [15:08] we’ll put a Starlink antenna on the top and we will broadcast live. I think it’ll be pretty epic.

Speaker 3 [15:14] So fun.

Speaker 2 [15:15] That would be cool from the dome car. Yeah. The other one’s in the Hudson Valley of New York. That is Back in late 1980s or now, I’m trying to look.

Speaker 1 [15:25] It’s hard to see on screen. Is that a is that an NS CSX? What is that?

Speaker 2 [15:29] Oh, that’s Amtrak.

Speaker 1 [15:30] Amtrak. Okay, that’s cool. Yep. All right, we’re gonna go on this passenger.

Speaker 3 [15:36] That would be awesome.

Speaker 1 [15:36] There’s also the Star Train that’s in Santa Fe, New Mexico. Feels like an astronomy crossover. Bill, have you been on this one where you can go out in the middle of the stars?

Speaker 2 [15:47] I have not, and the Alaska Railroad does that as well. And and I think I did that anyway.

Speaker 1 [15:52] I did. We went through Denali National Park. It was the— I think it actually is the Polar— it’s either called the Polar Express or nicknamed the Polar Express. But we went right through Denali National Park, 8 hours from Anchorage to Fairbanks. I did it 25 years ago.

Speaker 3 [16:08] I bet it was cool.

Speaker 1 [16:09] It was really cool. But the problem was we did it over the winter. It gets so dark so early. that it, it was a— it was really incredible, but the Northern Lights on that particular trip were not out. Now, later in that week, we, we were able to see the Northern Lights from Fairbanks, but wasn’t, uh, wasn’t as cool as I hoped it would be. Probably better to go through the, you know, during the summer when it’s light all the time.

Speaker 2 [16:34] Unless you want to see the Aurora Borealis, which is what they have one of those trains too.

Speaker 1 [16:39] Uh, well, I got to see them when we were up in Fairbanks. So we got the Aurora, we went on top of a mountain, Aurora came out. Weirdly enough, we’ve had the aurora in Chattanooga, Tennessee the last couple years. So we’ve had nice solar storms.

Speaker 2 [16:49] Yes, there’s strong activity.

Speaker 1 [16:51] Not supposed to happen, or historically hasn’t happened. Well, Bill, every week we love having you on. I’m looking forward to this CPKC across Canada. And he’s right, the Canadian railroads, that east-west traffic built all of those major provinces. Because if you look at the Canadian populations, it’s all on the US border. But really what CP, you know, they did was built the whole southern border.

Speaker 3 [17:17] Yeah, it makes so much sense, right? Like that it truly helped develop those areas based on—

Speaker 1 [17:25] Yeah, and by the way, a little bit of history, a little bit of geography. You can’t build in most parts of Canada. It’s a huge, huge country, but because of the Canadian Shield, you can’t build. And so a lot— that’s the reason that it’s a law on the population.

Speaker 3 [17:39] Yeah, I’m gonna have to do some research on Canada. I’ve been reading a lot of like, when I’m not working, I read like fiction, chick lit fiction, and they’ve all been set in Canada lately. And I have been like, just dying to like see—

Speaker 1 [17:51] Something happen in Canada?

Speaker 3 [17:53] No, they, it just, it talks about how gorgeous the scenery is, like, and how beautiful the landscape is. And it’s making me want to go ride this train now.

Speaker 1 [17:59] And we got to do it. My son, by the way, my 7-year-old son, he watches these geography YouTube shows.

Speaker 3 [18:05] Yeah.

Speaker 1 [18:05] And he, like, he’s become this encyclopedia of geographical knowledge. That’s how I get some of my information.

Speaker 3 [18:12] Me too.