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Data points to intermodal slowdown


BLOOMINGTON, Ind.–FTR Intel’s State of Freight: Current Rail Environment webinar August 13 highlighted several key trends for rail in the U.S. domestic and international markets.

Larry Gross, FTR’s rail and intermodal expert, said that in terms of commodities the coal story has been a difficult one for the rails of late.

“The four week moving average is starting to improve sequentially. Long term it’s difficult to see any catalyst that will improve the coal picture,” he said, pointing to the strong U.S. dollar and the competitiveness of coal on the global markets.

Other commodities, such as crushed stone, sand, gravel, took a huge hit when fuel prices cratered, but there has been sequential improvement in these commodities since the middle of March, Gross noted.

Rail service levels, meanwhile have recovered “1/3 of the way, showing slow sequential improvement.”

Speeds are at 23.5 miles per hour on average but below the figures from two years ago.

“We are at under 25 hours in the most recent numbers for yard dwell time. The basic story is that we are about a third of the way back in terms of service recovery,” Gross said.

According to Gross, recent Association of American Railroads data indicates an intermodal slowdown is underway. The four-week moving average is just below 2%. The IANA numbers reveal domestic numbers are not growing much, and that seasonally adjusted domestic loadings are pretty flat.

Lower fuel prices, and an abundant supply of truck capacity, are creating some headwinds on the domestic side.

Current port volumes indicate a West to East diversion, which Gross said could stick for the long term, with West coast ports generally in the red.

“There was a big jump on the international side-some of that a rebound is from the difficulties occurring on the West Coast. The strong dollar industrially is helping us on the import side. International is growing faster than domestic. Growth rates are relatively anemic compared to what we are used to,” Gross said.

“Intermodal market share jumped up in Q2-it’s a  little above 19%-that was entirely a function of what happened on the international side. Near term intermodal growth will continue but at a slower pace,” Gross said.

“Data on the rail side is pointing more to a change in the mix of our recovery. The industrial economy has been the bulwark of our economy up until now-the recovery will depend entirely on what happens with the consumer from here on out, If unemployment remains at relatively low levels,” he said.

Some improvement is expected for 2016 on the domestic side as  “capacity sapping” factors take hold on the trucking side, i.e. with electronic logging and service hours.

On the international side, things are expected to slow down a bit after this year’s strong performance linked to a strong U.S. dollar.

The inventory situation is a mixed one, Gross noted.

“I think you will see some sort of inventory correction from where we are at the moment-but the transportation system is less reliable and consistent than it was before and this will be reflected in inventory levels. Between the ports and the railroads we are not getting the consistency and speed that previously was the case,” he said.

The outlook for crude by rail is that it’s not going away.

“Bakken production is going to continue to move. There likely will never be a good pipeline network. This is going to require higher standard tank cars and demand for new equipment even if the levels stay where they are now or decline,” Gross said.


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