For North American freight rail, 2013 doesn’t appear like it will be a red-letter year. Rather, it perhaps will be more of a “transitional” or, as some have noted, a “bridge” year. As in every year since I started contributing to this Annual Review and Outlook, I expect to see more confirmation of the “rail renaissance” in terms of share price appreciation, market share, margin and return-on-investment improvements, despite the uncertainty of the economic outlook at this point.
Assuming there aren’t any “cliffs” to threaten us, the biggest thing I expect for 2013 is a sense of stabilization in the bulk commodities. First, after a drought of major — if not epic — proportions, we hope for a return to normalcy in the grain fields and markets.
Given President Obama’s re-election, we shouldn’t see a reversal in coal — the former king of commodities that now faces a brave new energy world — but stabilization at a new lower level. This level, perhaps some 25 percent lower than the 2007 peak, has been driven by environmental regulations and legislation, accelerated by cheap natural gas and camouflaged by hot winters and slow economic growth that impact stockpiles.
As the dust clears, we see a new world where coal remains important and profitable, albeit at a new, lower plateau. Over the course of 2013 we should gather new evidence that the “new energy” industries have some real legs: coal-by-rail and especially the secondary impacts of a revitalized industrial sector, starting with the chemical industry (whose direct carload and revenues benefits are still a few years out).
Finally, we’ll see more gains in domestic intermodal as it increases market share and revenues, and prepares to turn the corner on ROI much as its international sister did in 2003-05. Stir in Mexican industrial and automotive development, a nascent housing recovery and the slow cyclical revival and it looks like 2013 will be a nice appetizer for the feats to come in 2014 and beyond.