Carload, Intermodal Volumes Each Bounce Back Sequentially
Carload and intermodal volumes each recovered significantly on a sequential basis in the second week of 2023, but some context is needed to understand the real strength or weakness of each sector. Carload volumes reached their five-year average for the first time in more than a year and unlike the first week of the year, more than coal and grain participated in the strength. Nearly every sector showed a bounce back in the latest week with the exception of pulp and paper. Pulp and paper traffic was weak for most of 2022 and the first two weeks of 2023 showed no change to the outlook. Coal and grain were again strong contributors with coal reaching its five-year average and grain volumes back to their fourth quarter of 2022 harvest highs. It is unlikely that coal will continue to show strength through the balance of the year as a significant amount of coal-fired power plants are scheduled to come offline over the course of the year. Grain should be strong for at least the next month to six weeks until the South American crop starts to come off and compete with North American volumes in global markets.
Intermodal Shows More Weakness Than Carload in Opening Two Weeks
Intermodal volumes increased sequentially but remained below 2022 and five-year average levels. Its competitiveness with the competing truckload market remains challenged and is expected to remain so for the balance of the year. This will challenge intermodal volumes and pricing for the duration of 2023. Increasing spare capacity in the truckload market along with stable to lower diesel pricing will keep trucking strongly competitive. When combined with weaker import levels and a shift in ports of entry toward east and Gulf coast ports, additional pressure will be exerted on rail intermodal volumes. Traffic levels are not expected to return to growth until 2024.
STB Chairman Oberman Talks Agenda at Industry Event
Surface Transportation Board chairman Martin Oberman discussed some of his priorities this week at the Midwest Association of Rail Shippers conference. It appears that rail service in all its forms will remain front and center for some time to come. Oberman talked at length about embargoes in the wake of a hearing last month where Union Pacific was called to account for its use of embargoes to meter traffic on their system. The chairman made clear that he views the embargo issue and the ongoing lack of operating personnel on the part of the carriers as a potential common carrier violation and that additional hearings could be coming as the year moves along. The board is focused on issuing a final decision on the Canadian Pacific-Kansas City Southern merger before moving on to other high priorities. The board faced a statutory deadline this week for a decision in the merger proceeding that it missed as it awaits environmental documentation to be finished. Oberman also hopes to finalize a reciprocal switching rule this year after pushing it back out of 2022. He did not offer a timeline for a final decision, but it appears the delayed decision is in part the result of seeking consensus so that any final decision is unanimous.
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