Recovery in rail volume remains uneven, with intermodal leading the way

Coal may never return to pre-pandemic levels, analyst tells conference
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A Union Pacific intermodal train departs from the Port of Los Angeles. Intermodal continues to lead railroading's recovery of traffic volume, while the ports of Los Angeles and Long Beach has regained market share lost to East Coast ports.
TRAINS: David Lassen

PITTSBURGH, Pa. — The recovery of railroad traffic since the depths of the pandemic-related declines in May varies wildly by commodity.

Intermodal and grain volume are now up compared to last year. Carload traffic remains in a funk and lags both trucks and intermodal. Energy-related commodities were crushed and have not rebounded. And coal may be a pandemic casualty, a freight forecaster told the North East Association of Rail Shippers on Tuesday.

A combination of tight truck capacity, a surge in retailers restocking depleted inventories, and a rise in imports through the ports of Los Angeles and Long Beach has contributed to the recovery in intermodal volume, says Todd Tranausky, vice president of rail and intermodal at FTR Transportation Intelligence, a freight forecasting firm.

Despite the quick rebound in intermodal volume, rail service appears to be holding up relatively well overall, based on intermodal train speeds remaining above the long-term averages, Tranausky says. There are pinch points, however, in Southern California, Chicago, and elsewhere, he adds.

Retailers have decided a “need for speed” outweighs the cost savings of importing consumer goods via all-water routes to East Coast and Gulf Coast ports as they have done in recent years, Tranausky says. As a result, Los Angeles and Long Beach since May have regained all of the market share they lost to East and Gulf Coast ports over the past several years, he says.

It’s unclear if that trend — which even caught Southern California port officials by surprise — will continue once pandemic-related supply chain disruptions settle down, Tranausky says.

Carload traffic has been on a long, slow recovery with volume still below February levels, Tranausky notes. Even when coal, energy, and agricultural shipments are removed from the carload tally, the rail recovery remains muted. “It’s not a great story,” Tranausky says.

Auto production settling into a “new normal” of more than 15% below last year’s levels contributes to declines in carloads for steel, plastics, glass, and chemicals that go into new vehicles, Tranausky says.

Grain shipments are running above their five-year averages in Canada and the U.S., helping to bulk volumes recover. “People have to eat during a pandemic,” Tranausky says.

But the other big bulk commodity — coal — is a different story.

“Coal is unlikely to ever recover from the effects of the pandemic,” Tranausky says, with volumes down nearly 25% compared to last year. The U.S. Energy Information Administration expects coal to generate just 17% of electricity this year, a level not seen since the 1960s.

As coal continues its long-term decline, it’s possible that in the next five years it will no longer be the largest segment of carload volume, Tranausky says.

NEWSWIRETrains News Wire

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