17.2 percent decline in Railroads

The decline in intermodal containers probably has a lot to do with declining imports.

Railroad shipping: AAR reports January volumes are off by 17.2 percent

Jeff Berman, Group News Editor -- Logistics Management, 2/6/2009

WASHINGTON—Railroad traffic had another tough month in January, volumes down across the board for the third straight month, according to data from the Association of American Railroads (AAR).

The AAR said that United States rail carload traffic declined 17.2 percent—or 221,426 carloads—to 1,067,548 carloads during the first four weeks of 2009 compared to the first four weeks of 2008. Intermodal traffic, which is not included in carload volumes, fall 12.9 percent—or 116,823 trailers and containers—to 788,115 units in January, and total January volume was estimated at 113.3 billion ton-miles, which was off by 15.9 percent year-over-year, said the AAR.

Of the 19 commodities tracked by the AAR, none saw a monthly gain in January. Motor vehicles and equipment and metallic ores were down 63.0 percent and 55.5 percent, respectively. Coal was off by 3.3 percent, and lumber & wood products saw a 37.7 percent dip.

In an interview with LM, AAR Director of Editorial Services Tom White said there are clearly not a whole lot of positive takeaways that can be gleaned from this data. And the last time a recession with double-digit declines impacted railroad volumes to this extent, said White, was in 1982.

“Hopefully things will pick up later in the year, but I don’t know when we are going to be at the bottom or if we already are,” said White. “We still may have a little further to go…it is still hard to tell.”

And the severe recession is now negatively affecting every major rail market, said AAR Senior Vice President John T. Gray, in a statement.

“Nevertheless, railroads are planning to maintain a strong level of re-investment in 2009, as they have for the last several years,” said Gray. “Actual re-investment levels will depend to some extent to how deep the recession goes and how long it lasts, but railroads know that they have to invest today to have the rail capacity America needs for tomorrow.”

White said it is likely that capital expenditure spending may be down by as much as ten percent in 2009, but he added that is still fairly high especially when compared to 1982, when capital expenditures by AAR members was down about 30 percent.

This shows that major railroads are all still very positively thinking towards the future, and they think that the trends that led to increases in railroad volume before the economy dipped will continue, and that is one reason you still see railroads investing in things like double tracking, working on clearances, building more passing sidings,” said White. “Long term initiatives are what we are investing in.”

Even with the economy having a sharp impact on declining railroad volumes, the railroad industry in actually better positioned to absorb the negative impacts of a recession than it ever was in the past 50 years, White told LM in a recent interview.

The reason for this, explained White, is that because over the past number of years railroads have been able to invest a great deal of money into infrastructure and things that strengthen the industry long-term.

“That is all very positive, as well as the fact that balance sheets headed into the recession were very strong,” said White. “This speaks well to the railroad industry’s ability to weather the recession and be in a strong position once the economy really does turn around.”