Watch out trucking, industrial sector has a pulse

Chart of the Week: Total Rail Carloads, Chemical Rail Carloads, Motor Vehicle Rail Carloads – USA  SONAR: RTOTC.USA, RTOCH.USA, RTOMV.USA

The latest rail carload data is showing that the industrial side of the economy, which is the backbone for a large amount of freight movement in the U.S., has finally started to recover after hovering on the floor for over three months. Increasing carload volumes for raw materials like chemicals and motor vehicles are good leading indicators of future truckload volumes. This could mean an incredibly strong late third and fourth quarter for transportation providers but much tighter capacity for shippers. 

Rail carloads typically transport the building materials for mass-produced goods. The finished products are usually transported on trucks and rail containers. It is important to note that carloads are not intermodal containers or boxes that typically transport finished goods. Carloads are generally filled with bulk non-palletized items, loosely loaded in either a liquid tank or open top hopper or gondola for ease of loading and unloading at production facilities. 

Chemicals shipped on the rails are processed into anything from household cleaners to petroleum-based plastics. Total carload volumes are a barometer of the industrial sector of the economy, which is connected to energy and production. Total carload volumes include chemicals and motor vehicle parts as shown in the chart above, but it also includes items like coal, grains and petroleum products. 

Rail carload volumes were trending lower prior to the COVID-19 outbreak, showing negative year-over-year weekly comps through most of 2019. While the year-over-year numbers are still dismal at -22%, they are improving over the -30% that was the bottom in May and showing a strong upward trajectory after the Fourth of July, increasing almost 6.5% last week. 

While there is still a long way to go to call it a recovery, this is a very positive sign of other surface transportation. So far the freight market has been thriving on supply chain dislocation and unexpected shifts in consumption without any help from the industrial sector. If the industrial economy continues to improve, this could lead to another surge of freight moving on top of an already strong amount moving across the country.

Capacity has tightened to levels not seen since 2018 as the national Outbound Tender Reject Index (OTRI) topped 17% this week, having measured over 15% for the entire month of July. The highest value of 2019 was 14.25% on Christmas. It only exceeded 10% for the two weeks surrounding Christmas.

Ocean shipment bookings are outperforming 2019 over the next 7 days.

Combine this with the fact we are nearing peak season for ocean container imports and FreightWaves’ newly introduced Ocean Shipments Index, which measures bookings, is indicating over a 35% y/y increase in maritime bills being booked over the next seven days. 

Keep in mind consumption still has not recovered to pre-COVID levels either, and with another stimulus bill on the table, we may have yet to see the tightest freight market of the year.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.

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