Rail
Overall carload traffic volumes tumbled in the latest week as both economically sensitive freight and non-economically sensitive freight categories felt a decline. Pulp and paper volumes declined dramatically on a sequential basis after already starting from a weak position. A mill closure in Florida could create an ongoing headwind for the segment over the coming weeks and months.
It was not just pulp and paper that struggled, however. Automotive volumes took a less significant step down along with chemicals and crushed stone, sand, and gravel traffic. The several small drops combine to form a meaningful volume decline.
Grain volumes took a pause in the latest week after showing a typical seasonal harvest bump in the second half of September and early October. It is unclear whether the recent halt to growth is permanent or if grain volumes will move higher in the weeks ahead.
Coal volumes declined significantly in the latest week as inventories remain elevated and natural gas prices remain near $3/mmBtu. This dynamic is expected to continue through the remainder of 2023 and into 2024.
Intermodal
Intermodal volumes declined by less than 1% in the latest week as the sector retains most of the post-Labor Day bump it has experienced in loadings performance. Depending on import levels, volumes could start to decline in the second half of October, but they will almost certainly turn weaker by the second half of November when the typical seasonal decline occurs in loadings to the end of the year.
This year’s slowdown is expected to drag into 2024 with no real noticeable pre-Lunar New Year bump in loadings. Blank sailings remain common and are expected to continue and possibly accelerate in the coming months.
Employment
Meanwhile, the number of operating employees on the U.S. Class I carriers declined in September on a sequential basis with a majority of carriers reducing the amount of operating employees on their payrolls. The number of employees operating trains has been in focus by the Surface Transportation Board after carriers identified the number of employees as being a key reason why service stumbled in recent years.
The board has made it clear in recent public statements that it believes the carriers can increase headcount further to ensure a fluid network that provides the level of service shippers expect. The declines at most Class I carriers have been modest, but they still raise some concerns heading into the winter when service typically reaches its lowest level of the year because of weather-related disruptions.
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