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2/14/2011



Rail News: Rail Industry Trends

Chemical, coal and intermodal demand to drive rail traffic growth this year, Baird says


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Although rail volumes so far in 2011 have been mixed, there is underlying stability evident and the traffic outlook remains favorable, according to the February edition of Robert W. Baird & Co. Inc.’s “Domestic Truck, Intermodal and Rail Trends” report.

“Despite the [severe] weather disrupting volumes and train speeds, encouraging signs still exist with seasonal trends from chemicals (a leading indicator), accelerating coal exports, intermodal growth opportunities and industrial volumes that are still 15 percent off peak levels (thus expecting catch-up demand in 2011),” Baird analysts said in the report. “The demand outlook remains solid given expectations for continued economic recovery, secular intermodal growth and solid industrial end-market demand.”

In the chemical sector, average weekly U.S. rail volumes were at record levels in January, following a strong December. Solid basic chemical and petroleum demand support a chemical volume trend in line with average seasonal expectations, despite recent severe winter weather, the report states.

Although winter storms also have impacted coal traffic of late, the near-term outlook is promising “given robust prospects for international coal exports, U.S. utility coal stockpiles nearing normalized levels, the increase in industrial activity and potential for increased weather-related electrical demand,” Baird analysts said.

The prospects for intermodal traffic growth are encouraging, too, as demand remains solid, though moderating slightly, the report states. Year-to-date intermodal volumes are up 5 percent, with U.S. volumes up 6 percent, and most intermodal carriers are anticipating double-digit domestic volume growth in 2011, Baird analysts said.

“Tight capacity in the truckload market will support intermodal pricing and demand in 2011, but expect pricing growth rates in intermodal to lag truckload given marketshare growth aspirations from both larger intermodal marketing companies … and from expanded intermodal offerings among truckload carriers,” they said.


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