US weekly intermodal traffic goes positive for first time in months

A photograph of trains at a rail yard. There are tall city buildings in the background.

U.S. weekly intermodal volumes were nearly 2% higher last week, ending a months-long slump where traffic was lower compared with year-ago levels.

The U.S. operations of the freight railroads originated 277,054 intermodal containers and trailers for the week ending August 8, according to the Association of American Railroads (AAR). The total is a 1.9% increase from the same period in 2019 and a 2.5% increase from the week ending August 1.

However, weekly carloads still posted double-digit percentage losses, with U.S. carloads falling 15.6% to 220,343 carloads. On a weekly sequential basis, carloads were up by 1.2%.

Combined, U.S. rail traffic on a weekly basis was 6.7% lower, at 497,397 carloads and intermodal units.

U.S. rail volumes over the past year. Blue are carloads (RTOTC.USA), intermodal trailers are in orange (RTOIT.CLASSI) and containers are in green (RTOIC.CLASSI).

Meanwhile, weekly North American traffic totaled 673,611 carloads and intermodal units, a 7.2% drop from the same period a year ago.

Intermodal: the bright spot for 2H?

The uptick in weekly U.S. intermodal comes as the rail industry and various stakeholders are eyeing a potential volume rebound in the third and fourth quarters. While the pace and the scale of any volume growth is uncertain, rail executives in recent weeks have been cautiously optimistic that they’ll benefit from higher volumes this fall and winter.

“I think you’re going to see an increase of some activity…across the industry” in the next several quarters, said FreightCar America (NYSE: RAIL) President and CEO Jim Meyer during the company’s second-quarter earnings call on August 11. He also cited during the call improved grain loadings and intermodal volumes approaching pre-COVID levels. “We anticipate converting a number of these inquiries into orders without getting into specifics.”

The Class I railroads also continue to believe that volumes could improve in the back half of the year, a sentiment that they expressed during the second-quarter earnings season of late July.

The “demand discussion felt slightly more constructive than a few weeks ago,” with “rising demand enthusiasm from both rail and trucking management on the back of seasonal-plus volumes into August,” said transportation analyst Bascome Majors of Susquehanna Financial Group. Majors’ firm hosted Class I rail executives as well as leaders in logistics, light truck, less-than-truckload and capital equipment in a private investor conference on Tuesday, August 11.

However, the optimism is tempered by ongoing concerns of the COVID-19 pandemic’s effects on the U.S. economy, not just in the short-term but as stakeholders watch how this year’s peak season unfolds. 

Peak season for retailers, which according to the National Retail Federation (NRF) runs from July to October, could be subdued this year because retailers appear to be ordering less merchandise. 

Retailers typically order more merchandise during this time as they stock up for the winter holiday season. But this year, the pandemic has led U.S. container imports at the ports to fall 10.2% to an estimated 1.76 million twenty-foot equivalent units (TEUs) in July, according to NRF’s monthly report on port volumes.

“The economy is recovering but retailers are being careful not to import more than they can sell,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Shelves will be stocked, but this is not the year to be left with warehouses full of unsold merchandise.” 

Indeed, January was the highest month for import volumes so far, at 1.82 million TEUs, NRF said. NRF also estimates that container volumes at the ports totaled 9.5 million TEUs for the first half of 2020, a 10.1% decline from the same period in 2019.

“This year, peak season seems to have been thrown off by the coronavirus pandemic along with just about everything else we consider normal,” said Hackett Associates Founder Ben Hackett. Hackett Associates develops the monthly report with NRF. “We’ve probably already had our busiest month. And with the pandemic taking a hit on the economy ever since then, peak season is likely to be a disappointment by comparison.”

Another question is how the rails will perform service-wise as volumes grow, particularly as the Class I railroads readjusted their lanes amid precision scheduled railroading (PSR) efforts, according to FreightWaves Passport Research.

“We expect continued intermodal volume growth through the back half of the year, recurring problems with network balance and more rate inflation… The newly streamlined and rationalized intermodal networks of the PSR era have not yet been tested in a positive year-over-year volume environment; we’re watching especially Union Pacific’s Chicago terminals, reduced from six to three,” according to Wednesday’s FreightWaves Passport research note.

Click here for more FreightWaves articles by Joanna Marsh.

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