AAR reports mixed carload and intermodal volumes for July 2015

United States rail carload and intermodal volumes for the month of July were mixed, according to data issued this week by the Association of American Railroads (AAR).

Carloads decreased 6.5 percent––or 95,295 carloads––to 1,376,411 compared to July 2014. And six of the 20 carload commodities tracked by the AAR saw gains in July, with grain up 6.2 percent or 5,921 carloads, and crushed stone, sand, and gravel up 1 percent or 1,227 carloads. Coal dropped 12.5 percent or 69,519 carloads, and petroleum and petroleum products saw a 13.6 percent decline or 10,691 carloads. AAR officials said that excluding coal, carloads were down 2.8 percent or 25,776 carloads in July 2015 from July 2014.

The AAR has previously stated that weak rail coal traffic is not surprising, given that many electricity producers are able to leverage low natural gas prices to generate more electricity from natural gas and less from coal, adding that this “product competition” is a strong competitive constraint faced by railroads for large segments of their business.) U.S. coal exports also continue to suffer, thanks in part to a stronger dollar that makes U.S. coal relatively more expensive abroad, it noted.

As for non-coal volumes, it explained that even with gains in job growth, retail sales, existing home sales, and consumer spending, there are signs that the economy is “shaking off its first quarter sluggishness,” and that rail traffic may currently be viewed as an anomaly and weaker than what might be expected.

Intermodal saw continued gains in July at 1,331,888 containers and trailers, which marked a 3.5 percent––or 45,538 units––increase over July 2015.

Avondale Partners analyst Donald Broughton wrote in a research note that the growth in total intermodal is a result of increased international import containers as the strength of the dollar improves our global buying power.

“With fuel prices at 5-year lows, we assert that trucking is stealing volume from domestic intermodal especially in shorter lengths of haul,” he stated.

Through the first seven months of 2015, the AAR said carloads were off 4.2 percent––0r 367,126 carloads––at 8,306,979, and intermodal was up 2.5 percent––or 194,980 containers or trailers–– at 7,936,917 units.

“Railroads are overexposed, relative to the economy in general, to the energy sector.  Put another way, changes in the energy sector are having a bigger effect on rail traffic than they are on the economy as a whole,” said AAR Senior Vice President Policy and Economics John T. Gray in a statement. “For that reason, we don’t think declines in overall rail carloads in recent months are necessarily reflective of fundamental weakness in the broader economy.”

For the week ending August 1, U.S. rail carloads were down 4.8 percent at 289,657 carloads, and intermodal was off for the first time in roughly five months, falling 0.3 percent to 269,468 trailers and containers.