North American rail volumes are still slumping amid expectations that fourth-quarter rail traffic will remain subdued through the end of the year.
Year-to-date North American rail volumes slipped 3.1% to 29.7 million carloads and intermodal units for the week ending October 19, according to data from the Association of American Railroads. Of that, North American carloads totaled 14.9 million carloads, down 3% compared with the same period in 2018, while North American intermodal units fell 3.1% to 14.9 million intermodal containers and trailers.
Meanwhile, year-to-date U.S. rail volumes, which represent 73% of overall North American traffic, were down 4.2% to 21.8 million carloads and intermodal units. Of that, U.S. carloads slipped 4% to 10.6 million units while U.S. intermodal units fell 4.3% to 11.2 million intermodal containers and trailers.
The reporting Class I railroads and some rail equipment manufacturers have announced their third-quarter results by now, and one of the themes that company executives expressed during the earnings calls was that rail volumes are likely to remain soft in the fourth quarter and even into the first part of 2020.
The fourth quarter “will be a challenging quarter,” said Canadian National (NYSE: CNI) Chief Executive Officer JJ Ruest during his company’s third-quarter earnings call on October 22.
Ruest and his peers pointed to existing macroeconomic factors that are lowering rail volumes and putting pressure on company margins, such as global economic uncertainty, the lack of a trade resolution between the U.S. and China, and a softer U.S. industrial economy.
“I say it all the time, I don’t have that crystal ball and I’m a pretty lousy economist, but we do track what our customers are saying and how they’re acting. You can see that demand is still good and it’s reflected in our extremely high fleet utilization, but I will say in the last quarter or so, it’s starting to feel like it’s losing some steam,” said GATX’s (NYSE: GATX) Chief Executive Officer Brian Hancock during his company’s third-quarter earnings call on October 22.
Even if the economic headwinds clear out sometime in 2020, one question will be whether the railroads will be successful in attracting and maintaining relationships with shippers whose operations may have been disrupted by the railroads’ deployment of precision scheduled railroading. Railroad executives outlined their wish to boost their intermodal segments and court shippers away from the trucking market, but the trucking market can also be a fierce competitor, speakers said at a recent conference.
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