U.S. rail traffic slipped over 5 percent in July amid declining rail volumes for coal, grain and intermodal.
U.S. rail volumes in July totaled 2.58 million carloads and intermodal units, a 5.5 percent drop from July 2018, the Association of American Railroads (AAR) said on August 7. Of those volumes, U.S. rail operations originated 4.8 percent fewer carloads and 6.1 percent fewer intermodal units compared to July 2018. July’s U.S. carload volume was 1.26 million carloads, while U.S. intermodal container and trailer volume totaled 1.31 million intermodal units.
“Rail traffic in July, as in many other recent months, was held back by declines in three of the largest rail traffic segments – coal, grain and intermodal,” said John T. Gray, AAR senior vice president of policy and economics. “Despite a summer heat wave of historical proportions, very low prices for natural gas have seriously weakened the seasonal demand for coal-generated electrical power. These same low natural gas prices appear to have allowed chemical production to pretty much hold steady even in the face of the uncertainty around foreign trade, which has been the source of much of the recent growth in chemical production.
On a year-to-date basis, U.S. rail volumes fell 3.5 percent to 16.05 million carloads and intermodal units for the first 31 weeks of 2019. On a weekly basis, U.S. rail traffic was down 5.2 percent to 541,558 carloads and intermodal units for the week ending August 3.
Meanwhile, overall North American rail volumes were mixed. On a year-to-date basis, North American volumes were 2.3 percent lower than the same period in 2018, at nearly 21.9 million carloads and intermodal units. Of that total, Canadian rail traffic was up 2 percent to 4.68 million carloads and intermodal units while Mexican rail volumes fell 3.4 percent to 1.16 million carloads and intermodal units.
But North American weekly rail volumes slumped across the board, with Canadian rail volumes down 0.6 percent amid lower carload volumes to 156,694 carloads and intermodal units, while Mexican rail volumes slipped 7 percent to 37,904 carloads and intermodal units.
While the leaders of Class I railroads reiterated plans in recent weeks to match rail capacity with demand in the second half of the year, uncertainty surrounding U.S. trade policy direction could affect rail volumes for the consumer and manufacturing sectors.
“With 50 percent of rail intermodal business which is overseas – including international trade, both imports of consumer and intermediate manufacturing components and exports such as food products – trade policy uncertainty continues to drag down this traffic segment. Export grain movements are also facing increasingly serious headwinds from threats to trade policy stability,” Gray said when AAR reported this week’s rail volume data.
Meanwhile the trade associations of shippers’ interests expressed concerns over plans by U.S. President Donald Trump to place tariffs on additional Chinese goods starting in September. (see related video: https://www.freightwaves.com/news/freightwaves-now-tariffs-bonds-and-las-vegas-tender-rejections). These associations represent consumer and manufacturing goods that would travel via rail and other transportation modes.
Said Myron Brilliant, U.S. Chamber of Commerce executive vice president and head of international affairs, “Raising tariffs by 10 percent on an additional $300 billion of imports from China will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong U.S. economy. Like the President, the U.S. Chamber applauds the constructive dialogue between U.S. and Chinese negotiators. We are deeply disappointed that the two sides missed the opportunity in May to address the substantive disagreements between them and have not yet reached a comprehensive, enforceable agreement. We urge the two sides to recommit to achieving progress in the very near term before these new tariffs come into effect, and to remove all remaining tariffs as swiftly as possible.”
The National Retail Federation’s David French, senior vice president for government relations, said, “As we’ve said repeatedly, we support the administration’s goal of restructuring the U.S.-China trade relationship. But we are disappointed the administration is doubling-down on a flawed tariff strategy that is already slowing U.S. economic growth, creating uncertainty and discouraging investment. These additional tariffs will only threaten U.S. jobs and raise costs for American families on everyday goods. The tariffs imposed over the past year haven’t worked, and there’s no evidence another tax increase on American businesses and consumers will yield new results. We urge the administration to bring our allies to the table and find new tools beyond tariffs to achieve better trade relations.”