Railroad traffic is expected to take a hit from the economic fallout surrounding the coronavirus pandemic.
International intermodal volumes have declined since China extended its Lunar New Year holiday to slow the spread of the illness. Factories have since been ramping up production, however, so the lull is expected to continue for another four to six weeks while containers make their way to ports and then across the ocean, says Todd Tranausky, a rail and intermodal analyst with FTR Transportation Intelligence.
“The carload side of the business has not yet seen any impacts, but our baseline economic forecast now indicates a short V-shaped recession in the middle of 2020 that carload is unlikely to escape unscathed,” Tranausky says. “The sharp reduction in crude prices we have seen over the last 10 days to two weeks will pressure crude-by-rail volumes and any remaining drilling sand volumes. Lower economic activity related to the coronavirus will limit electricity demand and make it even harder for coal to compete with now even lower-priced natural gas.”
Like other forecasters and some of the Class I railroads, FTR projects a surge in volumes related to pent-up demand once social distancing measures are eased around the globe.
“But the magnitude and timing of that event is fairly uncertain, as the timeline for resumption of normal activities changes day by day, if not hour by hour,” Tranausky says. “Right now, we would expect to see some of that bump occur in the late third or fourth quarters of 2020.”