US Rail Volumes Flat Amid July Fourth Holiday

The Fourth of July holiday weekend resulted in weaker U.S. volume comparisons year-over-year, but the overall trend for 2021 is still upward for intermodal volumes.

Meanwhile, rail observers anticipate the start of the earnings seasons and the Class I railroads' responses to how they handled supply chain congestion in the second quarter (see below).

U.S. rail volumes for the week ending last Saturday were 451,825 carloads and intermodal units, according to the Association of American Railroads. This total was a 0.6% increase from the same period in 2020 and a 11.9% decrease from the prior week.

Of that, U.S. carload volume totaled 210,297 carloads, up 4.3% year-over-year but down 11.2% sequentially, while U.S. intermodal traffic was 241,528 containers and trailers, a 2.4% decrease from a year ago and a 12.5% decrease sequentially.

But despite the uneven comparisons because of the Independence Day holiday weekend, the overall trend in U.S. rail traffic is still higher compared with 2020. According to AAR volume data graphed by FreightWaves SONAR, intermodal container volumes are at their highest within the last five years, while trailer traffic is also higher but not quite reaching 2019 levels.

U.S. carloads year-to-date in 2021 are higher than 2020 but still on the lower end of the last five years as the Class I railroads seek to replace dwindling coal volumes.

U.S. carloads (in blue: RTOTC.USA), intermodal containers (in orange: RTOIC.CLASSI) and intermodal trailers (in green: RTOIT.CLASSI) graphed on a relative basis over the past five years. (FreightWaves SONAR) To learn more about FreightWaves SONAR, click here.

Northwestern University study highlights railroads' contributions to supply chain fluidity

Earnings season kicks off this week for the Class I railroads, with Kansas City Southern KSU reporting second-quarter earnings this Friday, followed by CN CNI, CSX CSX, and Union Pacific UNP next week.

Among the themes that could be explored in earnings commentary is what the railroads did to improve network flows amid a congested supply chain.

The railroads' contributions to ensuring a steady flow of containers in and out of terminals and ports find support in a recent study by the Northwestern University Transportation Center entitled "The U.S. Railroads and COVID-19: Keeping Supply Chains Moving."

The Northwestern report, which received some data and guidance from AAR, commended the Class I railroads for managing the sudden volumes shifts that have occurred over the past year, from the volume troughs at the onset of the COVID-19 pandemic to the quick rebound in the third quarter and then to the current situation of market tightness across the supply chain.

"The shock brought on by the pandemic showcased the need for the reliable movement of freight, an undertaking handled well by the rail industry. … The choke points that stifled the supply chain industry in 2020 — congestion at West Coast ports, chassis shortages, and truck freight load rejection, among others — caused service disruptions that were detrimental to consumers and could impede future demand growth," the report's executive summary said. "Nonetheless, the reliability of the freight rail network played an essential role in ensuring critical needs for all sorts of goods were met."

With e-commerce poised to support intermodal volumes in the near future, stakeholders interviewed for the report see opportunities for railroad performance improvements through continued operational innovations, the realization of full benefits from precision scheduled railroading and positive train control, and the use of Internet of Things technologies to track shipments and support management, the report said.

The release of the report comes at a time when the freight rail industry is facing scrutiny from the Biden administration and several Democratic members of Congress for how operational changes have affected rail service and headcount.

"Ultimately, public policy will play a key role in the future of the logistics industry and the ability of freight rail to continue its reliable performance that is at the core of the nation's supply chains," the report said. "The public sector can facilitate the development of inland terminal capacity to better support regional commerce and economic development. There are opportunities for collaborations in port and terminal development to increase capacity — bringing together railroads, developers, local and state governments.

"Governments at all levels need to understand the environmental, efficiency, and resilience advantages of rail freight and make informed decisions about transportation investments and regulatory policies. New consumer demands, including the rise of e-commerce, are likely to persist. Regulatory and investment policies should keep these long-term shifts in mind and remain neutral in the competition among freight modes, focusing on safety, performance, and fairness rather than specifying how service should be delivered."

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