Rail traffic slips as investors see hope for turnaround

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WASHINGTON — Rail freight traffic continued to slide last week as the Association of American Railroads reported an overall 6.1 percent decline compared to the same week in 2015.

Only grain and motor vehicles posted increases — 8.2 percent and 6.2 percent respectively — among the 10 commodity groups listed by AAR. The U.S. Department of Agriculture forecasts a bumper corn crop this year, and U.S. auto sales remain strong despite signs that a six-year boom is slowing.

Petroleum and petroleum products led the retreat down 29.8 percent followed by nonmetallic minerals, off 9.5 percent, and coal at minus 8.3 percent. Carloads for the week stood at 264,165, down 5.9 percent, while intermodal containers and trailers at 257,624 units declined 6.4 percent.

The financial press noted railroads lost some traffic to trucks in the third quarter just ended and attributed that to the low price of diesel fuel. Meanwhile railroad stock prices have increased as investors bet the worst of the traffic declines have passed, Bloomberg.com reports.

“For the rails, it’s all about what they can do to mitigate the lower volumes,” analyst Lee Klaskow of Bloomberg Intelligence says. “With less traffic, they are able to run their networks more efficiently, so you could see margins improve despite the decline in volumes."

Part of that efficiency comes from furloughing workers, parking locomotives and cutting back on capital investment, Bloomberg adds.

For the year to date, the AAR reports total U.S. carload and intermodal volume is down 6.9 percent compared to 2015. Canadian railroads saw traffic so far this year slipping 5.7 percent as traffic in Mexico dropped 2.5 percent.
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