Railroad shipping: Despite a down year, AAR says 2007 volumes are second highest ever

Jeff Berman, Senior Editor -- Logistics Management, 1/3/2008

WASHINGTON—Despite challenging economic conditions, including the ongoing housing industry slump and a decline in the automotive market, United States railroad volumes for 2007 experienced the second highest totals on record, with 2006 being first, according to data released this week by the Association of American Railroads (AAR).

U.S. freight railroads originated 16,952,288 carloads in 2007, which was off 2.5 percent—or 426,598 carloads—from the record-breaking 2006 volumes.

Intermodal loadings at 12,026,660 trailers and containers decreased by 2.1 percent—or 255,561 units—compared to 2006.

The AAR also reported that total freight volume at 1.76 trillion ton-miles was off by just 1.0 percent compared to 2006.

AAR Director of Editorial Services Tom White told Logistics Management in an interview that these 2007 volumes reflect a decline in the housing and automotive sectors, which began late in 2006 and continued throughout 2007.

“The key to what happened in 2007 is the housing industry and the construction industry being negative this year, and the automotive industry doing poorly again,” said White. “Those are very important parts of our traffic base, and if you take a look at the numbers that is a very high percentage of the reason why our total volume was down.”

Lumber and wood products, a main driver of the housing industry was down 19.0 percent—or 53,196 carloads—in 2007, according to the AAR. And loadings of motor vehicles and equipment were down 5.3 percent—or 58,201 units.  Crushed stone, sand and gravel was down 8.3 percent—or 97,721 units.

While other modes, like trucking, are not expecting a significant uptick in volumes until the second half of 2008, White says there are different variables which could impact railroad performance, especially with inclement weather being a factor for the next few months

“One of the difficulties we always have at the beginning of the year is that you run through periods of extreme weather,” said White. “Those are things you can’t predict and that will have an impact on traffic volumes—totally apart from anything going on with the economy as a whole.”

On a more positive note, coal once again had the highest volumes for U.S. freight railroads, even though it was down 0.9 percent to 7,213,955 carloads in 2007, according to the AAR. What’s more, coal represented 43 percent of total carloads in 2007. Chemicals were up 3.3 percent at 1,569,735 loadings, and petroleum products were up 4.4 percent at 333,610 loadings. The AAR said that of the 19 major commodities it tracks only chemicals and petroleum products saw increases in 2007 compared to 2006.

As for 2007 freight volume totals, White said that while the AAR does not make yearly projections, how the railroads fare this year will ultimately depend on how well the economy does, as was the case a year ago.

For the month of December, U.S. freight railroads originated 1,234,439 carloads of freight, which was down 2.6 percent from December 2006, and 867,386 intermodal trailers and containers, which was down 2.5 percent from December 2006.