Rail/Intermodal
Intermodal volumes have trended upward in the second quarter after a weak first quarter of 2023. After holding near 300,000 carloads per week for the first 13 weeks of the year, volumes have increased to nearly 325,000 carloads per week for most of the second quarter.
Intermodal’s improvement is notable given a tough competitive environment in trucking, which is seeing low utilization. Intermodal volume is still running well below 2022 and five-year average results, however.
Recently announced new services from Mexico could be a sign that carriers are working to increase intermodal traffic levels from non-traditional gateways and routes. Many of those services were slated to begin June 1, so they are not a factor in intermodal’s recent gains. In addition to Mexico, new services are focused on Houston with new lanes and more frequencies that could help intermodal compete more effectively with trucking.
Rail Service
Rail service levels are essentially in line with historical averages after being above those levels for much of the first quarter. After a disappointing employment report where two carriers accounted for the bulk of the headcount gains while the others held steady or declined, it remains to be seen whether carriers can maintain and improve upon their existing service levels.
The Surface Transportation Board is watching closely how service levels and employment levels move to determine whether and when to release carriers from expanded reporting requirements. It will take an increase from the historical average to get regulators to relax and customers to bring additional volumes back to rail.
Carload Volumes
Economically sensitive carload freight volumes posted a strong sequential increase in the week prior to the Memorial Day holiday. The strong upward move was fueled by a rebound in crushed stone, sand, and gravel movements along with a strong upward move in metals and metal products and in pulp and paper.
Crushed stone, sand, and gravel bounced back to previous levels after a drop-off two weeks ago.
Metals traffic is showing sustained upward performance which provides some hope that the industrial and manufacturing economy is performing better than expected.
Pulp and paper moved up strongly on a sequential basis, but the move comes from a weak level and does not get the sector close to its prior year or historical average level. Given some recently announced mill closures and pressures in the boxboard sector, pulp and paper is likely to face sustained challenges and headwinds over the balance of the year even as its latest gain helps support growth in economically sensitive freight growth.
