All that talk about the economy starting to turn around has a lot of rail industry officials scratching their heads, and wondering when they will be able to count on any strengthening in shipments that can last beyond a week or two.
The buzz phrase these days is “green shoots” — meaning early signs business is starting to come back at different levels in the economy. Some see shoots pushing up through the rubble of the U.S. factory sector; others see them in some retail trends.
For the freight rail industry that supplies factories and retail warehouses, however, this year’s up-and-down traffic levels have been a hard lesson. Now rail executives are reluctant to say volume is about to turn higher.
“I was looking for a green shoot with a magnifying glass,” said John Lanigan, executive vice president and chief marketing officer for BNSF Railway, “but it turned out to be mold.”
The line drew some chuckles at the annual meeting of the North American Rail Shippers Association in Chicago on May 27, but it also reflected a deep uncertainty among carriers and customers about when traffic will start to firm.
“There haven’t been what I would call sustainable green shoots,” said Patrick Ottensmeyer, executive vice president for sales and marketing at Kansas City Southern. “There have been periods week to week, but I think that what we are looking for is something that gains momentum.”
For instance, steel demand recently picked up, he said, but that was from nearly zero early in the year. “Again, it’s a matter of seeing those improvements for more than one week at a time. And that’s the frustrating part; it seems to be a week here and a week there (of gains), but as far as sustainability is concerned, it hasn’t been strong.”
Behind those low moods are dismal traffic numbers. The Association of American Railroads said large U.S. carriers originated about 19 percent fewer carloads in the first 20 weeks of this year than in the same period of 2008, while intermodal loadings were down 16.8 percent.
The numbers were actually improving a bit until March and April, when carloads of bulk materials, in particular, tumbled again. In some weeks this spring, volume was down about 30,000 carloads even from earlier in 2009, and down a whopping 26 percent from a year ago.
Rail hauls of intermodal trailers and containers began to recover in April and May but still trail levels reached in the first six week of this year. The latest box loadings, for the week ending on May 23, were 19.1 percent below the same point in 2008.
Still, the marketing chiefs for big rail lines could have been too pessimistic. Several shippers told the conference that order books were firming for some materials, including steel and chemicals, and that while demand would remain far down from last year, it was starting to come back from the worst lows.
And the May 23 data had the best showings in weeks for total carloads and for some key cargoes linked to early pickup in construction or the factory sector. Chemical shipments, scrap, metals and products, and a building materials category of stone, clay and glass products all moved to recent highs.
Still, said Jack Koraleski, Union Pacific Railroad’s executive vice president for marketing and sales, “it’s really been coming and going.”
Demand for center-beam flatcars to haul lumber, for instance, had been picking up this spring and until recently was “trending in the right direction,” he told NARS. But “the last two weeks, it’s kind of fallen off again.”
Koraleski cited other cargoes that showed recent, mild gains, but with each, he was reluctant to count on it. “Is that a green shoot? Yeah. Is there something else ready to spray it with some sort of weed killer? We’ll see.”
Contact John Boyd at email@example.com.