Petroleum, consumer spending behind carload boom
- Rail traffic did not let down after the first half of 2018, as railroads reported 5.2% more carload and intermodal shipments in July 2018 than the same time last year, according to the Association of American Railroads.
- The figure represents a 3.5% boost in carloads and 6.9% rise in containers and trailers shipped last month, closely follows trends in the U.S. economy, AAR Senior Vice President of Policy and Economics John Gray said in a press release.
- The biggest gains, however, came from a rise in energy-sector carloads and industries related to consumer spending. As one example, petroleum & petroleum product shipments rose 9,661 carloads compared to last year, representing a 27% share of the total carload gain in July.
A rising tide is bolstering railroad revenues as carload and intermodal volumes surge, but murky waters on the horizon are tempering expectations as trade battles accelerate.
Railroads are particularly vulnerable to shifts in the global economy, which affect commodity price points and, therefore, carload volumes in the U.S.
The significant rise in petroleum exports are a boon for U.S. rail right now, but — as any frequent gas-buyer knows — that market could turn around within weeks. Grain, which saw a 14.7% growth in July 2018, signals a steady basis for volume growth, if only they were not a target of foreign tariffs.
A rise in container and trailer shipments made by rail became a hallmark of railroad revenues over the past few years, as carload shipments entered a recession. In fact, the industry at large is seeing a reversal of freight modes, as a trucking capacity crunch prompts shippers to look for transportation alternatives.
However, the main products shipped by rail (e.g. automotive parts) are closely tied with consumer spending trends. As a result, those volumes could be severely impacted by global trade trends.
Data from other modes of transportation suggest the rise in container imports in May was a preemptive maneuver by shippers hoping to avoid higher tariffs later in the summer. The rise in rail's intermodal volumes could similarly reflect that trend.
- Supply Chain Dive Rail traffic continues to surge despite looming trade war
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