And now, there’s the next brake shoe to drop.
Total US freight rail traffic, as measured in carloads and intermodal units, fell 6.1% in the week ended October 8, from the same week last year, the Association of American Railroads reported today. It was down 10% from the same week two years ago!
Both of its components were down: Carloads – transporting oil, coal, grains, chemicals, and the like – fell 5.9% in the week, to 264,165 loads. Intermodal (containers and trailers), which accounts for about 46% of total traffic, fell 6.4% from a year ago, and 6.5% from two years ago.
This comes after an already dreary September, when total freight traffic was down 4.8% from September last year, with carloads down 5.4% , and intermodal down 4.2%.
“Rail traffic in September was more of what we have come to expect this year: big declines in energy related products, continued weakness in intermodal and most other export markets, but with some strength in grain,” the AAR report said. “The fact is, in many of their markets, railroads are facing significant market uncertainties.”
These “significant market uncertainties” – actually “certainties” would be a better word – come in several packages:
The decline in car loads is mostly due to two big factors:
- The ongoing collapse of coal shipments. Power generators have been switching to natural gas and renewables, at the expense of coal. This trend started years ago when the price of natural gas collapsed and when power generators began building large utility-scale renewables facilities, particularly wind, in Texas, California, and other states.
- The total collapse of crude oil shipments. This started two years ago, when the oil bust began to bite. In the latest week, shipments of petroleum and petroleum products were down nearly 70% from the same week two years ago!
A more recent addition to the freight rail problem is the decline in intermodal traffic.
Intermodal had been the big hope for railroads. As oil and coal shipments were collapsing, intermodal was growing, and the hope was that it would be able to compensate for the decline in coal and oil shipments. But that hope fell apart in Q4 2015, when intermodal booked its first year-over-year decline (-9%) since the Financial Crisis.
This was followed by an uptick (+1%) in Q1 and by two back-to-back year-over-year declines in Q2 and Q3 (about 5% each).
It’s not just a blip. Year-to-date, US railroads reported a total volume decline of 6.9% from the same period last year, with car loads down 10.4% and intermodal units down 3.3%. Coal shipments, by far the largest category, accounting for about 30% of total carloads, plunged 25%. Petroleum and petroleum products shipments fell 22%, forest products 7.8%….