Freight Rail Volume Declines 15% for 2009 but Rises Slightly in Last 3 Weeks of Year

This story appears in the Jan. 18 print edition of Transport Topics.

North American railroads ended 2009 with the largest annual percentage drop in freight traffic in six decades, but the carriers finished on a high note by topping 2008 levels for the final three weeks of last year.

Shipments and ton-miles — one ton of freight hauled one mile —fell 15%, said UBS analyst Rick Paterson in an investor note. The drop, as measured by Association of American Railroads reports, moderated late in the year as traffic rose an average of 6% in the last three weeks.

“Since the Great Depression, only the recessions of 1938 and 1949 produced steeper annual declines in railroad tonnage,” Paterson’s report said, while noting that industry volumes with the possible exception of coal should get stronger in the first half of this year.

In total, the railroads hauled 23.7 million shipments, including 13.8 million carloads of freight, the lowest total in at least 22 years. Intermodal loads last year totaled 9.9 million, the smallest number since 2002. In 2008, shipments totaled 28 million shipments, including 16.5 million carloads and 11.5 million in rail/truck cargo.

The late-year improvements were a combination of “easy comparisons with a historically difficult fourth quarter in 2008 as well as some improvement in demand for commodities as the U.S. economy strived to shake off a severe recession,” Dahlman Rose analyst Jason Seidl said.

Volume growth in the last three weeks was the first year-to-year improvement in shipments since late in the third quarter of 2008.

He termed 2009 “one of the most turbulent years in recent history for the railroad industry and the global economy.”

Several analysts noted a departure from the traditional rail pattern that has shown freight peaking in the third quarter and staying level or dropping in the final quarter.

Intermodal, the largest rail freight group, rose by 40,000 shipments, or 1.6%, in the fourth quarter from the third quarter of last year. However, the fourth-quarter total of 2.53 million loads was 5.2% below the final quarter of 2008 levels. The full-year decline was 14%.

Analysts Chris Ceraso of Credit Suisse and Ed Wolfe of Wolfe Research attributed the changes to factors beyond weak freight volumes in 2008.

Wolfe said a late surge in imports before a better-than-expected holiday shopping season helped the rails’ intermodal traffic.

Analyst Jon Langenfeld of Robert W. Baird also said intermodal was helped by what he called “encouraging” volume trends at J.B. Hunt Transport Services and Hub Group.

Ceraso said late-year volume growth was helped by better markets for agricultural products and chemicals.

Chemicals improved 5% in the fourth quarter but dropped 9.9% for the full year. Agricultural products’ patterns followed the chemical carloads, climbing 6.2% in the fourth quarter but dropping 11% for the full year.

Even auto traffic managed to eke out a volume gain in the fourth quarter, rising 0.4%. Full-year auto traffic moved by rail fell 34%, reflecting the worst spell for auto sales in three decades.

The news was not as good for the rails’ bellwether, coal traffic, which represents about half of carloads and is the second largest type of freight railroads carry. Coal loads dropped by nearly 900,000, or 11%, for the year. Coal shipments also countered the late-year improvement in other cargo, declining 14% in the fourth quarter.

Rail volumes of metals and forest products didn’t do as well, showing declines of more than 10% in the final quarter and as much as 46% for the full year.