Article from Trains.com on Rail Traffic

One of the editors of Trains Magazines (online site is www.trains.com ), recently published an article on the state of Rail Traffic and economic conditions that are directly related. After Mexican rail traffic fell last year.. and even the U.S. with its state of economy, we are seeing Canadian rail traffic bring in higher volumes and become the dominate carriers.
With some positive outlooks are on the rise, let's hope that we can tune up our people and locomotives to be ready for the rise in demand!

Rail traffic bounces back (and stays back)

"The economists who officially date the start and finish of recessions know when The Big One began. That would be December 2007, when the previous economic expansion topped out. But the group, called the Business Cycle Dating Committee of the National Bureau of Economic Research, says it’s still too soon to declare that recession over. While they dither, I’ve got news: The nation’s railroads are back in business, big time.

Latest data, covering the week ending Saturday, April 10, again confirms a strong up-trend that began seven weeks ago, when the number of originated carloads started topping 375,000 consistently. The improvement in carload freight follows that of intermodal units, which began improving last November. This data, reported by ASI/Transwatch, is collected by the Association of American Railroads.

What I did, to smooth out the numbers and reduce anomalies, was compare the averages for the past four weeks with averages for the same four weeks in 2009. Here’s the percentage improvement versus the past year for the seven North American Class 1 railroads and Mexico’s two biggest carriers:

EAST
CSX 2.5%
Norfolk Southern 17.5%

WEST
BNSF Railway 12.2%
Kansas City Southern 14.8%
Union Pacific 14.1%

CANADA
Canadian National 21.9%
Canadian Pacific 23.9%

MEXICO
Ferrocarril Mexicano 33.4%
KCS de Mexico 24.7%

The Mexican economy truly tanked in 2009, which explains why Ferrocarril Mexicano and Kansas City Southern de Mexico made such gains this year. I asked railroad consultant and TRAINS author Roy Blanchard why the two Canadian-based railroads scored such big traffic pickups. Roy’s explanation: “From the financial press, I sense that the Canadian government is doing a much better job of running their country than the U.S. government is. Banks are stronger and so is the Canadian economy. That’s what I ascribe it to.” In the eastern U.S., CSX simply has not revived its business volume to the extent that rival Norfolk Southern has. NS and Union Pacific were hurt last year by the collapse of automobile sales, but benefited from the revival of that industry in 2010; they are the dominant carriers of new cars in the east and west, respectively.

Short line traffic trends are not collected by AAR. But RMI's RailConnect index of short line traffic for the week of April 10 was up 20.6 percent from a year ago. Meanwhile, the two biggest short line conglomerates both reported higher carloads for March, compared with a year earlier; Genesee & Wyoming's loadings rose 6.9 percent and RailAmerica's 8.7 percent.

All of these improvements point to the possibility of a faster rebound for the economy in general and railroads in particular than had generally been expected. Instead of an L-shaped recovery, in other words, we may see one that more strongly resembles a V. Such was the tone of a front-page analysis April 15 in the Wall Street Journal, which pulled together a number of favorable economic indicators, including a nice rise in retail sales and signs of a strong first-quarter performance by the financial sector. Granted, financial companies are not railroad customers. But the stunning setbacks of banking and securities businesses in 2008 fed the fires of the recession and cut off credit to borrowers everywhere. Better times for financial companies auger well for their customers.

It’s important to note that while volumes are up sharply from a year ago, they remain well below the same four weeks of 2008, before the recession really began to take hold. This table compares the four weeks through April 10, 2010, to the same weeks of 2008 and notes the declines:

EAST
CSX -19.1%
Norfolk Southern -14.7%

WEST
BNSF Railway -8.8%
Kansas City Southern -11.3%
Union Pacific -13.1%

CANADA
Canadian National -10.2%
Canadian Pacific -6.9%

MEXICO
Ferrocarril Mexicano 7.2%
KCS de Mexico -14.8%

That’s correct, Ferrocarril Mexicano is already in positive territory versus 2008. Among the Class 1s, Canadian Pacific and BNSF Railway have the least ground to make up, and the two eastern railroad the most.

Looking at commodity groups, the biggest declines between 2008 and 2010 are forest products (down 30 percent) and motor vehicles (down 26 percent). With housing starts still anemic, the near-term outlook for forest products doesn’t appear good. The smallest declines are intermodal (down 8 percent) and, in a tie, food products, grains, and chemicals/petroleum (each down 7 percent).

Going forward, the operating challenge for railroads will be bringing the people and locomotive and freight car fleets back to service in tune with rising demand. It’s not easy, either. At least one Class I railroad, slow to delve into its lines of stored locomotives, was recently reported chronically short of serviceable power for its trains." — Fred W. Frailey

Published Apr 15 2010, 03:46 PM