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US intermodal traffic recovers from severe winter weather

SONAR charts reflect year-over-year differences for carload volume, intermodal traffic

U.S. intermodal traffic rebounded last week. (Photo: Jim Allen/FreightWaves)

U.S. intermodal traffic has bounced back to double-digit, year-over-year percentage gains after extreme winter weather conditions caused volumes to slip in late February.

Intermodal volumes for the week ending last Saturday rose 11.6% to 271,248 intermodal containers, according to the Association of American Railroads (AAR). The increase helped boost overall U.S. rail traffic to grow 1.7% from the same period in 2020 to 486,429 carloads and intermodal units.

Indeed, according to this SONAR chart, loaded domestic intermodal volumes recovered to above year-ago levels following a severe weather-related dip.

(Source: SONAR: U.S. loaded domestic intermodal container volume, which includes 53-foot and 48-foot containers, shown as a daily seven-day moving average)

For information on SONAR or to request a demo, please click here.

But carloads are still lower compared with a year ago. U.S. carloads totaled 215,181, down 8.5% amid lower volumes for chemicals, nonmetallic minerals and petroleum and petroleum products.

The lower volumes for chemicals and petroleum products may be due in part to production returning to normal after the winter storms. 

Many of Kansas City Southern’s (NYSE: KSU) customers with facilities on the U.S. Gulf Coast are still seeking to get production fully back online after February’s brutal weather conditions, according to Kansas City Southern (KCS) Chief Financial Officer Mike Upchurch. He was speaking at the Raymond James investor conference on Tuesday.

The extreme bitter cold and the snowy conditions of mid and late February impacted the operations of all the U.S. Class I railroads, including KCS, according to Upchurch.

Upchurch estimated that February’s polar vortex cut its rail volumes by 8% year-over-year, with revenue down by 9% year-over-year.

Other factors are also contributing to a 4% reduction in rail volumes quarter-to-date, according to Upchurch. Although a 59-day teacher protest blocking one of KCS’ lines in Mexico ended before the start of 2021, KCS was still recovering from the protest in January. 

Meanwhile, the global microchip shortage has led to automotive production cuts, with production at automotive plants in Mexico not anticipated to resume until as late as April or May, according to Upchurch.

Heavy snowfalls and bitter cold muffle February rail volumes

U.S. rail volumes in February slipped 4.4% to 1.84 million carloads and intermodal units, with a 1.8% gain in intermodal units unable to offset an 11.1% decrease in carloads.

February intermodal traffic totaled nearly 1.02 million containers and trailers, while U.S. carloads totaled 824,636.

“During February, snow and ice covered wide swaths of the country, including many areas that rarely see harsh winter weather, wreaking havoc on all forms of transportation, including rail,” AAR Senior Vice President John T. Gray said. “In fact, the total U.S. rail carloads in the third week of February were the lowest for any week in AAR’s records that go back to 1988.”

Year-to-date U.S. Class I rail carload originations are down 6.8% year-over-year, according to the SONAR chart below.

(Source: SONAR; U.S. Class I carload originations for 2021, 2020, 2019 and 2018 shown in blue, yellow, green and orange, respectively.)

For information on SONAR or to request a demo, please click here.

“While carloads rebounded during the last week to a more typical level, February ended with noticeably lower total volumes. On the positive side, both intermodal and grain traffic remained relatively strong through three of the four weeks of the month,” Gray said.

Intermodal traffic gets a boost from retail sales

Although the pace of growth for U.S. intermodal traffic may have slowed in February, the trend toward higher intermodal volumes in 2021 continues to show merit.  

The National Retail Federation (NRF) last week estimated that retail sales would grow by between 6.5% to 8.2% in 2021 to more than $4.33 trillion as more individuals get vaccinated and the economy reopens. That figure excludes sales from automobile sales, restaurants and gasoline stations, and it’s in contrast to a growth level of 6.7% in 2020.

However, the group also cautioned that the COVID-19 pandemic still remains as the wild card that could challenge the extent of retail’s growth. 

“There is no doubt the economy is positioned for growth in 2021, but how much growth comes down to a single noneconomic force – the coronavirus,” NRF Chief Economist Jack Kleinhenz said in a statement coinciding with the group’s release of its monthly economic review.  

“I am optimistic about improving macroeconomic conditions as COVID-19 infections decline and distribution of vaccines becomes more widespread. Yet the road is never straight, and we have challenges ahead. The pandemic remains the largest uncertainty and the biggest risk the economy faces in 2021,” Kleinhenz said.

Economic factors such as strong personal savings levels, high stock volumes, increasing home prices and low interest rates are contributors to strengthening consumers’ purchasing powers, NRF said. Higher wages are also helping, the group said. It estimated that online shopping grew by 21.9% in 2020, and it expects online shopping to increase by between 18% and 23% in 2021. 

Indeed, in this SONAR chart, intermodal volumes, like retail sales, pulled back last year before surging. 

(Source: SONAR; the blue line shows retail sales on the right axis; the green line shows intermodal container originations, both international and domestic, on the left axis)

For information on SONAR or to request a demo, please click here.

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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.