Rail/Intermodal
Intermodal volumes remain weak and in fact took a further step down in the latest week as the Lunar New Year really sets in for the sector. Things should improve slightly in the weeks ahead as production in China ramps up, but the sector will still face significant headwinds from low active truck utilization, shifting import flows to the U.S. east and Gulf coasts, and still sub-standard rail service.
Overall intermodal loadings have averaged roughly 315,000 carloads per week since Week 2 of 2023. Southeastern ports have gained five points of overall import share over the last two years, as many shippers are wary of west coast port labor relations.
The shift toward the southeast in particular leads to much shorter lengths of haul for many goods and an overall move toward truck and away from rail inter-modal. The longer the impasse on the west coast lasts, the less market share is likely to return quickly as companies form new partnerships and new relationships near these non-west coast ports.
Within rail carload, volumes increased significantly on a sequential basis, but most of that gain was driven by a strong result for the coal sector. Coal has moved around a fair bit to start the year and overall has been fairly strong. That strength is not expected to be maintained throughout the entire year and other commodity groups will need to increase on a year-over-year basis for traffic to maintain present levels.
Regulatory Developments
The industry is focused on Washington, DC, this week as several developments either occurred or are waiting in the wings.
This week marked the first time that the Surface Transportation Board could approve the Canadian Pacific-Kansas City Southern merger. The agency was required to wait at least 30 days from when it released the final environmental impact statement (EIS) early last month and that deadline passed this week. A final decision on the merits can now be issued at any time, which is expected to be approved after the lack of any significant conditions being included in the final EIS.
The other major activities in Washington centered around the continuing fallout from the Norfolk Southern derailment in East Palestine, Ohio, last month and a spate of other recent incidents across its network. The National Transportation Safety Board announced a special investigation that it will launch into the safety practices and culture of Norfolk Southern. No deadline was given for the NTSB to conclude its investigation.
NS was also on Capitol Hill this week for a Senate Environment and Public Works Committee hearing into the derailment. NS chief executive Alan Shaw along with various representatives of the state and federal government discussed and debated the accident and the carrier’s response to it. It is likely to be the first of many hearings that are likely to be held in the coming months about the accident.
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