JoC ONLINE  April 9, 2001

Rail carload traffic, with a decline of .1%, was nearly equal with year-earlier levels in the four weeks ended March 31, according to data from the Association of American Railroads. Carloadings were down 1.9% for the first quarter, suggesting that the recent slump is easing, reported Lawrence Kaufman for JoC Online.

Intermodal volume, which is recorded separately from carload data, continued the slump that began at the beginning of the year, down 1.4% in March, following a decline of 1.3% for the first quarter. The intermodal mix of trailers and containers continued its shift, with containers now accounting for 72.8% of intermodal originations. Container shipments were up 1.9%, but trailers were down 9.1%.

Shipments of manufactured goods continued their downward trend in March, but strong coal shipments that increased 10.6% from the previous year almost negated the decline in other commodities. Coal shipments were depressed in March 2000 as utilities worked off inventories accumulated in anticipation of Y2K computer problems that never materialized at the beginning of 2000.

Rail executives expect coal shipments to remain strong through the second quarter, with western coal doing even better because of inventory replenishment and an increase in market share as low sulfur western coal increasingly penetrates midwestern and eastern markets where utilities are under continuing pressure to meet Clean Air Act requirements. The sharp rise in natural gas prices also is helping the rail coal business, as utilities that are able to shift production to coal-fired plants do so.

A mild winter in 2000 also affected coal burn rates and slowed the inventory draw-down. A more normal winter weather pattern this year has contributed to the railroad industry's one commodity bright spot. The increase in coal traffic picked up in March. For the first quarter, coal shipments increased 6.9%.

In addition to coal, agricultural commodities posted a gain, up 3.6% in March and 3.3% for the quarter. All other commodities registered declines.

Among major railroads, Burlington Northern Santa Fe, Kansas City Southern and Union Pacific reported carload gains, while CSX Transportation, Norfolk Southern, Canadian National and Canadian Pacific had declines. BNSF, the volume leader in intermodal, recorded a .2% increase in March, and a .1% decline for the quarter. UP was down 2.4% in March intermodal volume, and 2.1% for the quarter. Canadian Pacific and CSX had declines, while CN, KCS and NS had intermodal increases. CSX withdrew from a number of intermodal markets in summer 2000, accounting for most of its 9% year-over-year decline.

Some of the earlier intermodal decline was considered to be a result of the timing of the Chinese New Year, which occurred Jan. 24 and traditionally slows exports from the Far East to the United States. Some intermodal experts think that by March that factor was washed out of the system and think the continuing intermodal decline is a measure of slowing U.S. imports and the soft economy.

BNSF originated carloads were up 3.9%, or 11,518 cars, led by a 10.3%, or 14,668 car, jump in coal and a 9.8%, or 5,391 car, increase in agricultural products shipments. Other commodity groups had declines, led by a 30.8% drop in motor vehicles and equipment and a 21.8% drop in metallic ores and metals shipments.

UP's 21.5%, or 27,018 cars, jump in coal originations more than offset declines in most other commodities, bringing the railroad to a 20,773, or 5.9%, increase in originated carloads.

Coal was unable to put eastern railroads into the black, as sharp declines in automotive, metals and forest products shipments brought CSX to a 1% decline in originated carloads and NS to a 4.6% decline for the four week period. NS had a 7.2% increase in agricultural shipments, as it carried feed for the expanding poultry and hog industries in the Southeast.

Automotive shipments were up slightly at both NS and UP, the only carriers to report gains in the commodity group. James Valentine, rail analyst at Morgan Stanley Dean Witter, told clients that the mixed picture for automotive shipments reflected the sharp drops in production by General Motors and Daimler Chrysler, while Ford production has held up better. "NS provides the lion's share of transport services for Ford," Valentine wrote.