Intermodal Paints a Troubling Picture
The latest week’s volumes painted a troubling picture for intermodal as there was no improvement from the previous week when ramps were closed ahead of a potential strike and shippers may have diverted cargo away to the truck market. But without any such overhang in the latest week, volumes did not move appreciably from the strike-disrupted week. This is worrisome as it would have been expected for volumes to bounce back unless there was another factor at work. It is possible that shippers kept fright away from the intermodal network in the latest week pending ratification to ensure cargo was not stranded at terminals or along rail lines. But the other possibilities include shippers choosing truck over rail because of a more consistent service experience or a general weakening of consumer freight demand. There is significant congestion at east and Gulf coast ports while a west coast port executive told a shippers meeting that as of last week, nearly 80% of outbound rail containers waited longer than five days to be moved out. So it may simply be a product of ongoing rail service issues, but it is still worrisome.
Carload Volumes Mostly Hold Near Recent Averages
Most carload commodity groups moved down in the latest week, which is also concerning, but the sequential declines were much less dramatic than what occurred with intermodal. There is much more hope for recovery or stabilization among carload volumes than there is on the intermodal side of the business. Most carload commodity sectors are within their recent averages, while another week of intermodal results at present levels will likely prompt cause for alarm and a sharp reduction in our full-year expectations.
CP-KCS Merger Hearings
On the regulatory front, September 28th marked the first day of three days of hearings at the Surface Transportation Board about the Canadian Pacific-Kansas City Southern merger that the board is reviewing. The board will hear from the carriers, shippers, and trade associations along with other Class I carriers to compile a record, and then decide whether or not to approve the merger. It is thought that the merger will be approved, but the three days of hearings may well prove determinative. The present makeup of the board values consensus and fairness for shippers in its decisions, and so comments from shippers are likely to hold sway with the board and factor into its deliberations before it issues a decision before the end of January 2023.
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