Dive Brief:

• Intermodal rail volume fell again in March, though not as steeply as in February. Total volume was down 5.2% YoY, with intermodal volume down 1.5%. 
• In the first 13 weeks of the year, overall rail volume was down 1.3% YoY. Most railroad executives owed this dip to the harsh weather in the first quarter. A few executives blamed weak intermodal growth on lane rationalizations as several railroads cut routes to gain efficiency as part of their transitions to precision-scheduled railroading (PSR). 
• The first three weeks of April have shown similar traits, with intermodal carloads down between 1.6% and 3.9% compared to the same week in 2018. 

Dive Insight:

Intermodal growth in 2018 may have created the illusion that a rising tide would lift all ships. Now it's becoming clear that when intermodal growth is less robust, operational strategies, such as PSR, have a major effect on volumes. 

Executives at CSX, Kansas City Southern, Norfolk Southern and Union Pacific have explained their 2019 performance on earnings calls, showing the railroads are experiencing the fading out of the intermodal boom of 2018 very differently. 

Norfolk Southern represents the bright spot in the bunch, posting 6% YoY growth in intermodal volume and 2% growth in revenue. Norfolk Southern CMO Alan Shaw mentioned also the weather as an inhibitor on his call and said he remains "optimistic" intermodal will continue to grow, though not at 2018 rates. 

"In particular, international growth is up significantly due to a rise in import volumes as a result of tariff uncertainty. These gains were partially offset by declines in domestic shipments that face difficult comparisons to double-digit growth last year, and were negatively impacted by winter weather and lane rationalizations as part of our strategic initiatives to yield up and optimize our network," said Shaw. 

Norfolk Southern is in the early days of PSR transition. Major stresses on its intermodal volume could be still to come, as CSX showed in the first quarter. Among the American Class I railroads, CSX has been at PSR the longest and had to apologize to shippers for the drastic service changes it made. Those changes are still in progress, as apart from weather affecting total volume, CSX CEO James Foote blamed a 5% drop in intermodal volume on lane rationalizations at the railroad. 

"Intermodal revenues are expected to remain muted, as we work our way through the impact of intermodal lane rationalizations," said Foote. 

Mark Wallace, EVP of sales and marketing at CSX, said after the lane rationalizations are finished, he expects intermodal growth at CSX to return to the high single digits — estimating that growth will be flat until roughly Q4 2019. 

The sense from multiple executives at the end of Q1 was railroads still have a lot of work to do in order to pull volume off the highways and onto rail in a meaningful way.