Railroads voice wary optimism for peak as freight volumes make slow progress in July

Dive Brief:

U.S. railroads originated 1,042,017 carloads in July 2020, a 18% year-over-year (YoY) decline, and 1,295,960 intermodal containers, a more than 1% YoY slide, according to the latest numbers from the Association of American Railroads.
"Rail traffic, like the overall economy, is generally trending in the right direction, but progress is slow; there’s a long way to go before it’s back to normal; and both week-to-week improvements and setbacks in individual commodities are to be expected," AAR SVP John T. Gray said in a statement, adding that "intermodal is closer than any other rail traffic category to pre-pandemic levels."
The pandemic-driven volume swings have affected railroads in different ways. The West Coast lines — BNSF and Union Pacific — have seen dwell improve to shorter times in the 31st week of the year. The other Class I railroads in the Eastern U.S. and Canada have seen dwell increase, according to a research note from UBS released earlier this month.

Dive Insight:

Despite the drop in freight compared to 2019, volume has begun to improve compared to the second quarter when railroads across the country experienced a double-digit loss in volume as a result of the pandemic. And some rail executives have voiced optimism heading into peak season.

"Demand is picking up," Kenyatta Rocker, the EVP of marketing and sales at Union Pacific, said on an earnings call late last month. "Our volumes are really increasing each week. They're pretty strong. All the dynamics show that we're going to have a pretty solid peak season. ... Warehouse inventory is normalized."

When it comes to pricing, Kenyatta said it was "premature" to talk about a surcharge.

CSX CEO Jim Foote said strong intermodal volume in July can be credited to retailers replenishing inventories and noted that peak season might look a little different this year.

"If the COVID cases are still sort of concerning and people are cautious about venturing out then I think you may see that e-commerce type of peak a little bit sooner as people stay home and sort of order stuff on the web," Foote said. But the railroad, like everyone else, just has to wait and see what happens, he said.

Norfolk Southern CMO Alan Shaw said COVID-19 case numbers and the unresolved issue of an economic stimulus were two big question marks looming over the company's Q4 volume and revenue.