Intermodal/Carload Volumes
Intermodal and carload volumes held nearly flat on an overall basis this week as intermodal volumes continue to struggle and carload holds near its five-year average level. Rail service is showing improvement in recent weeks and could provide a tailwind to volume going forward. So far, there appears to have not been much of a volume boost from the recent service gains, however.
Several shippers have suggested that it could take longer than normal for carriers to see a bump because the traffic may have been tied up in multi-year truck contracts that will take time to unwind. Some key carload commodity groups, like chemicals, are showing stability after a weak end to 2022 which provides hope for the broader economy throughout the rest of the year.
Intermodal volumes across the domestic and international spaces are unlikely to improve meaningfully until the west coast port labor situation resolves and the trucking market tightens. Shippers have moved volumes away from the west coast and toward East and Gulf Coast ports while they await resolution of the labor dispute after the contract between dockworkers and terminals expired in July 2022. The East and Gulf Coast ports are much more truck competitive and given the low active truck utilization and shorter lengths of haul will remain a competitive threat for some time to come.
Derailment
The Department of Justice filed a case last week against Norfolk Southern in an attempt to further discipline the company in the aftermath of its East Palestine, Ohio, accident in February. The suit claims the company allowed for the unlawful discharge of pollutants, oil, and other chemicals in the wake of the derailment.
The suit seeks a judgment that would require the carrier to pay for all past, current, and future cleanup costs at the site. The suit comes after the Environmental Protection Agency issued a Unilateral Administrative Order requiring NS to pay for the agency’s response and clean-up costs from the incident and is in addition to the company’s pre-existing pledges to pay for the costs related to the derailment. It is unclear what additional costs could be covered by the DOJ suit that has not already been addressed by the company or the EPA order.
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