Intermodal Volumes
Intermodal volumes declined slightly in the latest week on weakness in the trailer segment. Container volume is nearly flat sequentially but at a low level relative to 2022 results and the five-year average.
Comparisons likely will get worse before they get better for intermodal because there is no expected peak season for intermodal in 2023. The combination of weak import levels and a truck market where active truck utilization is below its historical average will combine to keep the pressure up on intermodal until at least the 2024 peak season. FTR’s Intermodal Competitive Index is mired in negative territory for the next few quarters, showing just how steep the hill is for intermodal to make inroads against domestic truckload carriers.
Carload Volumes
Carload volumes ticked down in the latest week on declines in economically sensitive freight categories. Coal maintained its level between 70,000 to 75,0000 carloads per week in the latest period but shows no sign of the typical seasonal uptick that occurs in the third quarter. This trend is not entirely unexpected as low natural gas prices, ample utility stockpiles, and lower seaborne coal pricing. Comparisons relative to 2022 and the five-year average will only become more pronounced to the downside as 2023 goes on.
Grain volumes were also stable in the latest week sequentially, but at low levels compared with last year and the five-year average. Volumes are expected to remain weak for the next few weeks until the new harvest begins to come off the fields in Canada and the upper Midwest.
Surface Transportation Board (STB)
All eyes will be on the Surface Transportation Board over the second half of August for data and decision releases. Next week, the board will release July railroad employment figures. Carriers said on recent earnings calls that they intend to slow hiring, so it will be telling to see whether that had begun to happen by July. Some carriers were already slowing their headcount gains and even moving down in some cases over the last few months.
Another issue to watch at the STB is the status of EP 711, the reciprocal switching proceeding. There are some market participants who believe that the decision will come in the next few weeks, while the chairman has been clear that the proceeding is a priority for the agency. While he certainly hopes to get it done by the end of the year, time will tell if August is realistic. Many in the industry believed it would be issued last year around this time and it never happened. Time will tell if a decision is imminent and how far-reaching it will be, but it has the potential to dramatically alter the competitive balance between railroads and their shipper customers.
