North American intermodal traffic is hitting all-time weekly highs but the biggest railroads are raising caution flags about how the freight business will fare in coming months.
BNSF Railway, the continent’s largest hauler of containers and trailers, said although its box business is ahead of 2010’s pace, “intermodal volume remains well below the historic high we experienced in 2006, is subject to the slowing economic recovery, and this year’s peak for steamship traffic was lackluster.”
The second-largest intermodal carrier, Union Pacific Railroad, likewise said “there is little sign of a peak” in the international import container business through West Coast ports, which tends to drive autumn box traffic.
That seasonal autumn peak is “suppressed” this year, UP said, by “economic uncertainties” at home and abroad. “Our intermodal traffic was off sharply before recent gains in domestic intermodal shipments moderated the decline,” UP said.
The tepid outlook reports were part of a package of letters that railroad CEOs sent to Surface Transportation Board Chairman Daniel Elliott late last month, the annual rite in which carriers tell the STB how they are preparing for autumn harvests and the near-simultaneous intermodal peak.
Although some railroads are more optimistic, this year’s reports reflect plenty of disappointment about the pace of freight shipments and caution about where the economy may be headed.
But even as rail chiefs were signing their cloudy outlook letters, the Association of American Railroads reported that total box shipments on North American rail lines set new record highs for the weeks ending Sept. 24 and Oct. 1.
Last year at this time, freight shippers were enjoying a solid peak intermodal season that was the best since the 2006 peak period. So far in 2011, the AAR says, railroads are hauling more boxes most weeks of this year than in 2010.
And the long-delayed peak buildup finally appeared to take effect. From average year-over-year weekly gains of only about 1 percent in late summer until mid-September, the last two weeks of the month saw volume jump 3.5 percent and 4.1 percent over box traffic in the same weeks last year.
BNSF’s third quarter intermodal traffic was 2.2 percent ahead of last year — not a sharp gain, but a gain all the same. That left its year-to-date box volume up 7.3 percent
UP’s third quarter performance was re of a mixed bag. Box traffic slid 6 percent from 2010, partly on the import weakness and partly as UP alters its domestic business to get more revenue per load.
But UP Chief Executive James Young said domestic intermodal picked up so much in recent weeks that by late September the railroad was taking “the last of our stored containers out of storage to meet this peak demand.”
Some other key areas look good as well. “Chemical shipments have been strong all year,” Young wrote, and despite track disruptions from Missouri River floods “we actually increased coal shipments.”
CEO Matthew Rose of BNSF said his rail line’s total costs from floods along the Missouri Basin and elsewhere would be about $375 million. But the carrier restored some key lanes last month and will reopen another in October.
That allows BNSF to rebuild average train velocity and move more coal, while a broad grouping of industrial commodities and products keep showing strength along with oil shipments out of the upper Great Plains.
Sidebar: Prep for Fall Peak.
The AAR said non-intermodal shipments reached a new 2011 high in the final week of September, up 4.5 percent from the same week in 2010 to 408,383 carloads.
That included gains across various cargo groups but one in particular stood out. Rail hauls of vehicles and equipment — mostly autos — moved well past their April 2 levels that had been the 2011 peak. Resurgent auto traffic points to more solid consumer demand than is widely believed and will draw in a range of other cargoes from metals and ores to plastics.
Things looked better from the vantage point of eastern railroads, although they were also eyeing the wobbly economy.
“Despite the uncertain economic landscape,” wrote Norfolk Southern Railway CEO Charles Moorman, “we continue to see volume increases in ... intermodal, coal, automotive, and metals and construction.”
Michael Ward of CSX told the STB that although his company now expects slower economic growth than previously forecast, “we remain optimistic that gradual, steady recovery will continue.”
His carrier’s intermodal business has also slowed “due to slower international trade,” but Ward said, “intermodal remains a growth engine.” He said recent declines in coal traffic are moderating while year-over-year growth in broader merchandise traffic “is in line with second-quarter performance.”