AAR reports continued declines through July on a year-to-date basis

United States rail carload and intermodal volumes for both the month of July and the first six months of 2016 continued to underwhelm on an annual basis, according to data released this week by the Association of American Railroads (AAR).

July carloads fell 8.8 percent, or 99,530 carloads, to 1,025,367, compared to July 2015.

And only four of the 20 carload commodities the AAR tracks saw annual gains, including: grain, up 15.3 percent or 12,641 carloads; waste and nonferrous scrap, up 25.9 percent or 3,400 carloads; and miscellaneous carloads, up 12.9 percent or 2,880 carloads. Coal dropped 17.5 percent, or 70,479 carloads, and petroleum and petroleum products were off 22 percent or 11,926 carloads. When coal is removed from total carloads, the decline was more than halved, with a 4 percent annual dip, or a difference of 29,051 carloads.

Intermodal containers and trailers in June were off 6.9 percent, or 74,482 units, to 1,002,401.

On a year-to-date basis through the first 30 weeks of 2016, U.S. carloads were down 11.9 percent, or 986,109 carloads, to 7,320,583, and intermodal containers and trailers were down 2.8 percent, or 221,538 units, to 7,715,404, with intermodal continuing to outpace carloads through 2016, albeit by a relatively slim margin.

“Rail traffic continues to reflect the uncertainty rail customers face in a challenging economic environment,” said AAR Senior Vice President of Policy and Economics John T. Gray in a statement. “For the present, railroads are focused on providing safe and efficient service to their customers, while watching to see if the increase in consumer spending in the second quarter will lead to additional Gross Domestic Product growth in the second half of the year.”

Gray also noted rail intermodal remained off from 2015’s record traffic level while carloads showed a small improvement in coal and a bit of an improvement in grain.

In a previous interview, Tony Hatch, principal of New York-based ABH Consulting, noted in a recent interview that a lot of the carload declines are due to what he called “terrible energy and mediocre industrial numbers.”

“Over the last several years, we thought that as energy prices came down, there would be gains in consumer numbers,” says Hatch. “But intermodal is only doing OK at the moment, and that shows in the growth rates.”

Hatch stresses that these lower volumes are not the byproduct of railroads doing something wrong. Instead, he cites how some Class I railroads have very good earnings results amid the market challenges in the first quarter, which is reflective of the carriers ability to manage variable costs and more productive service levels as well.

For the week ending July 30, U.S. carloads were down 5.3 percent at 274,355, and intermodal saw a 2.6 percent decline at 262,561.