Weekly rail volumes hit peak levels for the year, says AAR

Coming off of two straight weeks of lower volumes, the Association of American Railroads (AAR) said that United States railroads hit their highest traffic levels of the year for carload and intermodal traffic during the week ending July 31.

Weekly carload volumes—300,292—were up 9.4 percent year-over-year and down 10.6 percent compared to 2008. This tops the week ending April 24, which hit 294,218 carloads, and was the highest weekly carload level since December 2008 prior to this release. It also surpasses the week ending July 24 at 286,854 and the week ending July 17, which hit 282,199.

In October 2009, the AAR began reporting weekly rail traffic with year-over-year comparisons for the previous two years, due to the fact that the economic downturn was in full effect at this time a year ago, and global trade was bottoming and economic activity was below current levels.

Carload volume in the East was up 9.9 percent year-over-year and down 13.7 percent compared to 2008. And out West carloads were up 9.1 percent year-over-year and down 8.5 percent compared to 2008.

Intermodal traffic—at 232,895 trailers and containers—was up 20.2 percent year-over-year and up 0.9 percent compared to 2008, which effectively eliminates the gap between current and 2008 intermodal volumes for the time being. This marks the highest intermodal levels in 2010, beating the week ending July 3, which hit 231,286. The week ending July 3 was the highest intermodal output since week 42 of 2008. Intermodal container volume was up 9 percent compared to 2008 and trailer volumes were off by 28.9 percent.

Domestic intermodal performance continues to be strong, due, in part, to a tightening of truckload capacity, which has some shippers converting to intermodal. This is indicative, said the AAR, of a years-long trend of domestic freight converting from truck trailers to containers on rail; truck trailers can be double-stacked, which makes them more cost-efficient and effective.

While the strong economic momentum from the end of 2009 through mid-June has somewhat abated, the rail industry is overall very optimistic about its future prospects, as evidenced in recent Class I railroads second quarter earnings results, which saw strong gains in pricing, volumes, and revenue per unit.

And rail industry stakeholders remain optimistic about railroad growth throughout the remainder of 2010. Among the things they have pointed to include increased industrial production growth in the form of manufacturing and new orders indices, as well as gradual consumer spending, among other factors, as drivers for these gains. But even though volumes are slowly recovering, they are still below previous peak levels.

While volumes remain below these previous peak levels, they will likely face tougher year-over-year comparisons through the remainder of 2010, given the fact that 2009 was a down year for the rails in terms of volume growth.

“The pessimism we hear about the durability of the recovery does not apply to the rails,” said Anthony B. Hatch, principal of ABH Consulting. “ And, with rail traffic a coincident indicator, perhaps we should take more heart about the economy.  Rail traffic has remained shockingly strong, well after the May ’09 trough comparisons.”

On a year-to-date basis, total U.S. carload volumes at 8,461,271 carloads are up 7.3 percent year-over-year and down 13.1 percent compared to 2008. Trailers or containers at 6,318,845 are up 13.5 percent year-over-year and down 6 percent compared to 2008.

Of the 19 carload commodities tracked by the AAR, 18 were up year-over-year. Metallic ores were up 73 percent and metals & products were up 35.2 percent.

Weekly rail volume was estimated at 33.0 billion ton-miles, an 11.1 percent year-over-year increase. And total volume year-to-date at 931.1 billion ton-miles was up 8.4 percent year-over-year.