Rail/Intermodal
Overall carload volumes took a step back in the latest week with weakness across several sectors from coal to many economically sensitive freight sectors. News of a forest products mill closure will apply further pressure to the already challenged sector of the carload market. The pulp and paper sector has been under pressure for most of the last year.
Chemicals volumes also declined meaningfully on a sequential basis in the latest week, but it is unclear whether the segment will have a fourth quarter that is as weak as the 2022 result. Grain volumes are one bright spot as they continue to show a normal cadence for the seasonal harvest season.
Intermodal volumes ticked up slightly and remained above levels seen over the summer and for most of 2023. The present level indicates a slight peak season is happening, but overall volumes are not at a strong or even average historical figure.
Given the discussion among ocean-going carriers and their shippers about the potential for blank sailings to be maintained and increased over the next several months ahead of the Chinese Lunar New Year, it is unlikely that absolute intermodal volumes will increase much beyond their present levels. In fact, the more likely scenario is that volumes decline further and faster than expected ahead of the end-of-year holidays beginning at the end of next month.
Regulatory Issues
Regulatory issues bear watching over the next few weeks as several Surface Transportation Board members indicated in recent public comments that the issue of reciprocal switching will remain a front-burner issue. Board chairman Marty Oberman did not say when the board will issue a final decision after the comment period closes in December, but he did say that it will not take the board long to finalize the rule.
Several members have also suggested that there could be another shoe to drop either when the dust settles from the existing proposal or once the board sees a broader need for the remedies of competitive switching. Industry participants will need to watch how things evolve and for the pending final rule proposal. The sense of urgency behind finalizing the existing proposal is likely at least partly driven by the fact that two members will see their terms expire in the coming months.
