Weather taking a toll on rail traffic, but economic factors are in play, too

RELATED TOPICS: WEATHER | COMMODITIES | UNION PACIFIC | BNSF
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The spate of harsh winter weather and flooding that has wreaked havoc with operations on BNSF Railway and Union Pacific has helped submerge traffic volumes, too.

UP’s carload traffic fell 12 percent in the week ending March 16, while intermodal volume was down 9 percent, amid record flooding in Nebraska and a rock slide and related derailment that effectively shut down UP’s Eastport, Idaho, gateway with Canadian Pacific.

BNSF’s carload volume dropped 11 percent, and intermodal was down 4 percent, in the week ending March 9, the latest weekly carload report that the railroad has posted. BNSF had routes under water in six Midwestern states, limiting its detour options.

There’s no doubt that the woes at BNSF and UP — and their double-digit traffic declines — helped drag down overall industry volumes over the past two weeks. Total U.S. weekly rail traffic was down 7 percent last week, and 5 percent the week before, according to Association of American Railroads data.

But it’s harder to determine how much of a role the weather played in a broader but shallower slowdown in rail traffic that began in February.

“We saw a one-week improvement in most volume segments about two weeks ago and then it started to turn negative again, which presumably represents the flooding impact,” says Todd Tranausky, a rail and intermodal analyst at FTR Transportation Intelligence.

Intermodal analyst Larry Gross says weather had an impact on lackluster U.S. intermodal volumes over the past two weeks.

Other factors, including the Chinese new year that delays exports and the rush to build up inventories late last year before new tariffs took effect, also have contributed to the recent intermodal doldrums, Gross says.

And rail industry experts note that factors beyond the weather are playing a role in rail traffic that’s down 1.3 percent through the first 11 weeks of the year.

There are signs that U.S. economic growth began to slow in February, which affects numerous traffic segments. U.S. grain exports remain depressed due to Chinese tariffs. And domestic coal shipments remain challenged, despite cold weather that normally prompts utilities to order more coal.

Price pressure from natural gas has elbowed out coal in many areas, however, which would help explain the slumping coal volumes.

The financial toll of the weather and volume issues remains unclear.

No railroad has yet changed its quarterly financial outlook. And it’s likely that volumes will recover as water recedes, lines are reopened, and delayed traffic begins to move.

“Most times weather phenomena result in delayed shipments, depending on how long the outage lasts,” Tranausky says. “In most cases shipper facilities are also affected by the weather issue and so have lower production rates themselves for a while.”

Some traffic volume, however, is likely to be lost as rail shipment delays mount and railroads place embargoes on certain types of traffic moving through flooded areas. Flooding in the Midwest also is likely to affect crops this year, which would show up in rail volumes during the harvest season.

It’s possible that materials used to rebuild and repair flood-damaged buildings may result in localized increases in rail volume.

“The uptick from rebuilding really depends on the event and the timing of that traffic depends on many factors including insurance coverage in a given area, so that likely will occur at some point, but whether it is significant enough to show up in the carload numbers is hard to say yet,” Tranausky says.

UPOuttage
Union Pacific service map
Union Pacific
BNSFouttage
BNSF Railway flood area service map
BNSF Railway

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