2010 Rail Freight Volumes Grow at Fastest Pace in 50 Years

This story appears in the Jan. 17 print edition of Transport Topics.

North American rail freight volumes, led by intermodal, climbed out of the recession at a brisk pace in 2010, posting an  11% year-over-year growth rate that was the fastest pace in at least 50 years.

The Association of American Railroads, which compiles statistics for the seven largest carriers in the United States and Canada, reported on Jan. 11 that intermodal loads rose 14.5% to 13.7 million. That total for the freight that represents four in 10 rail shipments, was just 1.7% below the total posted in 2008 before the recession deepened.

“Like the economy in general, rail traffic in 2010 recovered some lost ground, but not nearly all of it,” said AAR Senior Vice President John Gray on Jan. 11. “That being said, monthly rail traffic increases were broad based, supporting the idea that economic recovery likewise is broad based.”

Carload shipments such as coal rose 9.1% in 2010 from 2009 but were 8.8% below 2008 levels.

AAR said the rail-traffic growth reflected indicators such as improved manufacturing levels, greater factory capacity utilization and increased retail sales.

Analyst Ed Wolfe of Wolfe Trahan said in an investor note that the annual increase was the fastest in at least 50 years, reflecting patterns that included a 1988 adjustment by AAR in the way intermodal freight was counted. Prior to 1988, AAR counted the cars that intermodal freight rode on, rather than the trailers or containers carried.

Intermodal volume growth was the fastest at Kansas City Southern, which hauled 32% more containers and trailers. Union Pacific Railroad had the next highest growth at 21%, followed by Canadian National Railway and CSX at 18% and Norfolk Southern at 16%.

AAR’s freight totals also include Burlington Northern Santa Fe Railway and Canadian Pacific Railway.

Although both of Canada’s major railroads, Canadian National and Canadian Pacific, move freight in the United States as well as their home country, their shipments are counted as Canadian freight. 

For U.S.-based railroads, the 2010 growth rates were 14.2% for intermodal, 7.3% for carloads, and 10% for total rail cargo.

North American carload shipments of metallic ores, used in the production of steel, rose 46%, the fastest of any rail shipment type. Chemicals shipments rose 13%. Coal, which accounted for 22% of rail shipments, rose 2.1%.

AAR calculated that the increased business was the equivalent of operating 20,000 more trains a year.

While traffic volumes surged in 2010, Wolfe and other analysts were cautious about the rail growth pace in 2011.

Wolfe said that he expects “materially slower volume growth in 2011.”

“North American Class I railroads ended a turbulent decade on a positive note [in 2010],” Dahlman Rose analyst Jason Seidl said. “The volume growth rate will likely decline somewhat in 2011 due to tougher year-over-year comparisons.”

However, Seidl added that “traffic strength should continue to be reflected in the absolute number of carloads transported, especially as 2011 promises to be a year of improving economic activity.”

Credit Suisse analyst Chris Ceraso noted that rising fuel prices and severe weather, mostly in the Eastern United States, are likely to hamper results.

A drought in Russia and ban on grain exports from that country are likely to help U.S. exports and boost rail traffic this year, Wolfe’s report said. That should particularly help Union Pacific and Burlington Northern, which ship grain to Asia, he said.

CSX could also be helped by higher grain volume and domestic coal shipments for manufacturers. Canadian National and Norfolk Southern are primed for further intermodal growth, he said.

Floods in Australia that disrupted transportation could help U.S. coal exports, since the United States competes with Australia to provide coal for European and Asian manufacturing customers.