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Rail News: Rail Industry Trends

Ag, coal and intermodal carloads should climb in second half, Baird says


With the year's first half nearing an end, North American rail volume is up 17 percent year over year. Yet, second-half traffic could be a tad stronger, according to a “Domestic Truck, Intermodal and Rail Trends” report issued Friday by Robert W. Baird & Co. Inc.

Railroads' traffic-growth expectations are high for most commodities, save for housing input-related goods because of that market’s uncertainty, the report states. Housing-based inputs continue to remain weak and near 2009 levels, and demand is uncertain for such goods as lumber and glass.

The outlook for ethanol and animal feed demand is positive and should drive year-over-year growth in agricultural product volumes through most of 2010, the report states.

“However, a favorable South American winter harvest outlook and weak future prices have likely weighed on recent trends,” Baird analysts said in the report. “Notably, grain futures have improved modestly in the past week and could potentially encourage stored grain into the market.”

Coal volumes appear to have stabilized after faster-than-seasonal deceleration in May, they said. CSX Transportation and Norfolk Southern Railway have registered modest increases in utility coal loadings in recent weeks as natural gas prices have risen to more than $5 per BTU. The utility coal outlook should improve in the second half pending a strong summer burn and increased industrial electricity consumption, the report states.

Meanwhile, intermodal capacity remains tight. Intermodal box capacity “remained virtually sold out in headhaul lanes in May and early June,” Baird analysts said. In the international sector, ocean lines are drawing back their containers to Asia, which likely is prompting transloading — another positive for domestic intermodal, they said.

“Pricing will turn positive in the second half, but will lag truckload freight rate growth,” Baird analysts said. “Overall, we expect a very strong domestic and international intermodal shipping season.”

Contact Progressive Railroading editorial staff.

More News from 6/21/2010