US rail traffic falls again

A train travels on train tracks. Behind the train are mountains.

Year-to-date U.S. rail traffic fell 4.9% last week, marking another consecutive week of year-over-year declines.

U.S. rail volumes totaled 26.3 million carloads and intermodal units for the week ending Dec. 21, a 4.9% drop compared with the same period in 2018, according to the Association of American Railroads. Of that, U.S. carloads fell 4.8% to 12.8 million carloads, while U.S. intermodal units slipped 5.1% to almost 13.6 million intermodal containers and trailers. 

North American rail volumes were also lower year-to-date, falling 3.9% to nearly 36 million carloads and intermodal units. 

U.S. rail carloads have trended lower throughout 2019. Source: SONAR Surf

The slump in rail volumes in 2019 hasn’t affected only the railroads and rail lessors but also the banks that lease rail assets. Banks such as Citigroup, CIT Group, PNC Financial Services Group and Wells Fargo also lease railcars, but the banks are seeing fewer leases amid the downturn in rail volumes, The Wall Street Journal reported Dec. 26. The systemic decline in U.S. coal volumes is also resulting in lower leasing activity for the banks.

“The industry is suffering, there’s no two ways about it,” David Nahass, president of Railroad Financial Corp., was quoted as saying in the article. Nahass advises railroads and lessors. “Lease rates are down and there’s not a source of hope about when it will start to improve.”

FreightWaves Market Expert Mike Baudendistel said in a Dec. 27 note exclusive to SONAR subscribers that railcar leasing rates can vary according to demand for certain types of cars. Looking at two data series in SONAR for railcar lease rates (SONAR chart RCL) and railcar storage rates (RCSP), Baudendistel found that tank cars lease rates have been holding up “relatively well” at $500 a month, while rates for other types of railcars, such as large-cube covered hoppers, are “depressed.” 

Tank car leasing rates have held up because of “the commodities they haul, rising safety standards which have taken some of the older cars out of the market and chemicals and petroleum volume outperforming other categories of rail traffic this year,” Baudendistel said.