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Rail News: Rail Industry Trends

Baird: U.S. rail volume forecast favorable for export coal and domestic intermodal, adverse for ag


Excluding coal and agricultural products, U.S. rail carloads rose 8 percent in July, but year-over-year traffic growth has slowed to about 5 percent in August’s first two weeks — a reflection of “near-term impacts from recent economic uncertainty,” according to Robert W. Baird & Co. Inc.’s “Domestic Truck, Intermodal and Rail Trends” report for August.

Industrial volume growth remains solid, but is moderating. Following above-seasonal improvement in July, Week No. 31 volumes were below seasonal averages, the report states.

In the coal sector, traffic growth has resumed as flooding-related disruptions subside in the nation’s midsection. Norfolk Southern Railway and Union Pacific Railroad remain bullish on second-half domestic coal prospects and export coal growth expectations still are solid, “but global economic uncertainty creates incremental risk to [export] demand,” Baird analysts said in the report.

Intermodal volume growth has been impacted by weaker international imports on expectations for a later, more compressed peak season. Yet, recent weeks’ volumes only modestly were below seasonal averages when compared to second-quarter averages, the report states.

“July's diverging ocean freight import and domestic intermodal trends likely reflect available West Coast truckload capacity early in the third quarter,” Baird analysts said. “But during second-quarter reporting, leading domestic intermodal marketing companies remained confident about seasonal improvement in domestic intermodal trends during the late third quarter and fourth quarter, and full utilization of industry capacity. We expect improved domestic intermodal volumes and equipment utilization in upcoming weeks.”
However, the outlook isn’t as promising for agricultural products. A recent reduction in the projection for harvesting core U.S. crops (such as corn, wheat and soybeans) and a “further existing stock drawdown” could pressure ag volume growth, the report states.

Contact Progressive Railroading editorial staff.

More News from 8/18/2011