Rail/Intermodal
Intermodal volumes did not return to their pre-July 4th-holiday levels in the latest week, according to Association of American Railroads figures. While the holiday impact abated, intermodal continues to feel the effects of the closures of the western Canadian port. Weekly intermodal carloads remain well below pre-holiday levels.
Although intermodal volumes were expected to stabilize once a tentative agreement was reached between the ILWU Canada and the terminal operators, that agreement failed to be ratified this week by the union’s rank and file. The rejection led to another work stoppage this week that was eventually declared illegal by Canadian authorities because it was ruled that the union did not provide a required 72-hour strike notice.
The government’s action reopened the ports temporarily before the ILWU Canada issued such a notice that would allow the union to walk off the job on July 22. That notice was later rescinded by the union, but it suggests that disruptions from labor-related issues at the ports could continue for some time to come.
Carload volumes bounced back strongly from the July 4th holiday, but that rebound was powered by coal and grain volumes. This is a reversal of the footing for much of the year when economically-sensitive freight categories led the way and helped support carload growth. Economically-sensitive freight volumes, which exclude coal, grain, and petroleum traffic, have consistently run ahead of overall carload volumes for most of the year.
It is unclear whether coal and grain can maintain this support in the second half of the year as coal faces economic headwinds, and grain faces low stocks until the new harvest begins later this quarter. Natural gas prices below $3/mmBtu are not conducive to supporting additional domestic coal demand despite an abnormally warm summer in some Powder River basin coal demand areas like Texas.
Rail Employment
The number of operating employees at the Class I carriers rose again in June in figures released by the Surface Transportation Board earlier this week. The gains were concentrated at Norfolk Southern and Union Pacific, with other carriers holding steady or growing by a small handful of employees.
The gains at NS and UP are good signs for the industry as a whole, as those are two of the carriers who have endured the deepest service struggles and the result suggests that improvement is likely in the coming month in their service performance. BNSF saw its operating employment drop the most of any Class I carrier from May to June, but the decline was fewer than 100 employees in total.
