Carload and intermodal volumes are down in October, reports AAR

United States rail carload and intermodal volumes both saw annual declines for the month of October, according to data issued this week by the Association of American Railroads (AAR).

Carloads were down 5.1 percent, or 57,800 carloads, to 1,066,944 annually, the AAR reported. And only four of the 20 carload commodities tracked by the AAR saw increases, including grain, up 6 percent or 6,014 carloads; waste and nonferrous scrap, up 9.9 percent or 1,349 carloads; and miscellaneous carloads, up 2.2 percent or 535 carloads. Among the commodities that saw declines were: coal, down 7.6 percent or 29,621 carloads; petroleum and petroleum products, down 24 percent or 12,849 carloads; and chemicals, down 3.1 percent or 3,660 carloads. When coal is removed from total U.S. carload volumes, the AAR said that carloads were down 3.8 percent, or 28,179 carloads, annually.

On a year-to-date basis through the first 43 weeks of 2016, the AAR said that U.S. carloads are down ten percent, or 1,200,705, to 10,804,210.

"Railroads continue to face a difficult macroeconomic environment that's negatively impacting their traffic volume," said AAR Senior Vice President of Policy and Economics John T. Gray in a statement.  "Grain is doing well and autos are hanging on, but many other commodity categories that depend on a vibrant industrial sector - things like steel, petroleum products, and crushed stone - are not doing as well as railroads would like.  Hopefully that changes in the months ahead."

Intermodal container and trailer volume in October saw a 1.2 percent annual, or 13,096 unit, decline to 1,075,820 and is down 3 percent, or 346,715 units, through the first 43 weeks of 2016 at 11,159,432.

For the week ending October 29, carloads were down 2.8 percent at 271,576, and intermodal containers and trailers were up 1.3 percent at 273,421.

Both rail carload and intermodal volumes have not seen material signs of growth throughout 2016, which is in line with the theme of the general and freight economies continuing to see sideways or declining growth over all.

Earlier this year, the AAR pointed out that rail volumes, specifically coal, are declining due in large part to low natural gas prices and high coal stockpiles at power plants. What’s more, the AAR says that coal currently accounts for around 26% of non-intermodal traffic for U.S. railroads, which is decidedly down from 33% a year ago and 45% in late 2011.

AAR expects non-coal carloads to strengthen when the economy improves, while intermodal’s decline is probably at least partly a function of high business inventories that need to be drawn down before new orders—and thus, new shipments—are made.

Tony Hatch principal of New York-based ABH Consulting, noted earlier this year that a lot of the carload declines are due to what he called “terrible energy and mediocre industrial numbers.”

“Over the last several years, we thought that as energy prices came down, there would be gains in consumer numbers,” says Hatch. “But intermodal is only doing OK at the moment, and that shows in the growth rates.”

Hatch stresses that these lower volumes are not the byproduct of railroads doing something wrong. Instead, he cites how some Class I railroads have very good earnings results amid the market challenges in the first quarter, which is reflective of the carriers ability to manage variable costs and more productive service levels as well.