United States rail carload and intermodal volumes see annual declines in 2016, reports AAR

Following the trend lines on both a weekly and monthly basis for throughout 2016, which largely saw United States rail carload and intermodal volumes falling, it was not surprising that data recently issued by the Association of American Railroads (AAR) showed annual 2016 volume declines for each segment.

2016 U.S. rail carloads were down 8.2 percent annually at 13,096,860, compared to 2015’s 14,266,012. And four of the ten carload commodity groups tracked by the AAR saw annual gains, including grain up 7.3 percent at 1,182,914 carloads and motor vehicles and parts up 2.1 percent at 925,237 carloads. Coal dropped 20.1 percent, coming in at 4,096,848 carloads, and petroleum and petroleum products fell 21.4 percent at 567,800 carloads.

On the intermodal side, U.S. container and trailer volume decreased 1.6 percent annually to 13,490,491 units compared to 2015’s 13,710,662. 2015’s tally marked a new all-time high for U.S. intermodal volume, with the previous high prior to that being 2013’s 12,831,692.

Total 2016 U.S. rail carload and intermodal units––at 26,587351––was down 5 percent, or 1,389,323 carloads and intermodal units, compared to 2015. 

“Last year was challenging for freight railroads," said AAR Senior Vice President of Policy and Economics John T. Gray.  "Rail carloads were down for the second consecutive year, due mainly to a weak manufacturing economy and turmoil in energy markets, while intermodal failed to set its fourth straight annual record.  That said, there are signs that the economy may be gradually returning to a period of growth.”

Various factors contributed to the 2016 volume declines for both rail carload and intermodal.

The first half of 2016 saw struggling carload volumes, followed by a partial recovery over the remainder of the year, which FTR senior consultant Larry Gross changed the overall performance from “what would have been catastrophic to not ideal.”

He explained that the carload volume shortfall was due to a large extent by the large declines in coal and crude-by-rail volumes, which were somewhat offset by grain volumes and a solid fall harvest. And as far as future carload growth is concerned, Gross noted that volumes could remain close to current levels at least for the early part of 2017.

“We are not expecting anything dramatic [in 2017], things will putter along at current levels, and annual numbers will look great for the first quarter, because things were relatively lousy in 2016.”

Tony Hatch, principal of New York-based ABH Consulting, observed that 2016 carload volumes will hopefully reflect the last year of the major reshuffling of the railroad freight mix, which he said is the byproduct of the massive transition in how the U.S. powers itself as a nation, with coal representing half of all carload movements in 2008 to less than one-third today, due to the shift to natural gas.

“Even when coal is removed, volume is still down,” he said. “Coal had two drops, one in 2010 when the economy was still reeling from the recession and another from 2014-2016. In past years when excluding coal and grain, you would see an increase, but now, as BNSF CEO Matt Rose said, the U.S. and the entire North American continent in 2016 was in an energy depression, an industrial recession, with only the consumer keeping heads above water. Various things were winding through, with most of them not positive, save for automotive traffic, while housing was below expectations even for post-recovery, and chemicals started to build but is really a 2018-19 issue. 2016 was a sluggish year but not as bad as it looks.”

As for intermodal, Hatch noted that its annual decline was odd as that was the first time it had occurred in a year when the economy grew. One factor for that, he noted, was a reversal of globalization in some cases, uneven consumer spending, and excess trucking capacity.