Carload and intermodal volumes remain mired in weakness even after the prospect of a work stoppage has lifted. Most concerning is the fact that economically sensitive freight declined sequentially and remains weak compared with where it has run earlier in 2022.
Economically sensitive commodities will determine carload growth – or lack thereof – in 2023 and beyond. Those also are the commodities most likely to use truckload as an alternative.
Carload Traffic
Carload traffic increased in the latest week due almost exclusively to a gain in coal volumes. Coal traffic moved above 80,000 carloads in the latest week for only the fourth time in 2022. But coal volumes are not expected to maintain those levels into the new year as a significant number of coal-fired plants are scheduled to come offline in 2023.
Chemicals traffic is one of the most concerning segments to not show growth in the post-Thanksgiving holiday period. The lack of recovery from the holiday week suggests either that the global economy is slowing more than expected and demand has weakened or that railroads are losing market share to truck. Neither outcome is particularly desirable.
STB Hearing
This past week’s Surface Transportation Board hearing on Union Pacific’s use of embargoes and the letter sent by STB chairman Martin Oberman to UP Chairman and Chief Executive Lance Fritz about the railroad’s response to the board’s information request makes it clear that the board is quite interested in how the carriers are conducting themselves and that any such response may well go beyond simply UP. The board seemed to make clear along with the statements of shippers and their associations that there is a widespread belief that the carriers have been using formal and informal embargoes to limit volumes and keep service metrics from degrading further.
Several operating engineers filed statements for the record detailing actual examples of the use of embargoes. The board was not amused by the carrier’s initial response, and there were several feisty exchanges over the two-day hearing. It will be interesting to see how this gets resolved in the new year, but increased regulatory scrutiny appears likely.
New Labor Agreement
In the wake of the new labor agreement not including additional sick time or resolving train and engine employees’ main concerns about work-life balance, several carriers have announced their intention to ease back on the attendance policies that were at the heart of the ire of the rank and file during the recent negotiations. It remains to be seen if the changes will be enough to avoid many employees leaving the train and engine ranks in the new year, an outcome that could further reduce service levels and increase an already-hit regulatory spotlight.
UP even announced a pilot program in several parts of its territory that would make conductors a ground-based position in the hope of providing a more predictable schedule. That announcement came the same week that Federal Railroad Administration officials heard from a broad cross-section of short line and Class I carriers about that agency’s pending two-person crew rule. If FRA mandates that two employees must be in the cab of the locomotive, it will effectively nullify any efforts to make the conductor a ground-based, multiple-train position.
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