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U.S. weekly rail traffic sank nearly 23% last week as COVID-19 pandemic woes put pressure on rail volumes for the second quarter.
For the week ending April 18, U.S. rail volumes slipped 23.3% compared with the same period in 2019, to 403,283 carloads and intermodal units, according to the Association of American Railroads (AAR).
Double-digit percentage declines for all carload types except chemicals and forest products contributed to a 27.5% decrease in overall U.S. weekly carload volume. Weekly carloads totaled 189,598; year-to-date carloads were down 9.5% to 3.6 million.
“Rail volumes suffered again last week as extremely difficult times for rail customers and the economy continued,” said AAR Senior Vice President John T. Gray. “Like everyone else, railroads are looking forward to a return to normalcy and an end to the significant challenges associated with the pandemic. Until that happens, railroads will work hard to keep their employees and the communities they serve safe, will continue to deliver the goods needed to sustain and heal the nation and, when appropriate, support its economic restoration.”
U.S. intermodal traffic also slumped last week, falling 19.1% to 213,684 intermodal containers and trailers.
Intermodal volumes could be under pressure over the next several weeks as firms are reporting that supply chain stakeholders should brace for a sharp decline in U.S. seaborne imports. Container-line schedules point to a drop in U.S. seaborne imports ahead, which could also translate into reduced trucking and rail volumes domestically, FreightWaves reported on April 21.
According to Copenhagen-based Sea-Intelligence, 435 deep-sea sailings have been “blanked” (canceled) through this past Sunday (April 19) as service levels were reduced due to lowered demand, FreightWaves reported. This equates to a loss of 7 million twenty-foot equivalent units (TEU) of container capacity to Europe and the U.S.
Further cancellations were announced after the Sea-Intelligence report was released, including sailings by the 2M Alliance (Maersk, MSC) and Hapag-Lloyd, according to the April 21 FreightWaves report.
Those expectations for reduced import volumes are reflected in recent actions at some U.S. East Coast ports. The Port of Virginia said it would be closing its legacy import terminal, the Portsmouth Marine Terminal, in May, while the head of the Georgia Ports Authority said he expects lower port volumes this spring.
Looking at overall North American volumes, weekly rail traffic was down by one-fifth compared with the same period in 2019. North American volumes totaled 569,573 carloads and intermodal units, with carloads down 23.5% to 277,795, and intermodal units down 16.5% to 291,778.
Year-to-date North American rail volume for the first 16 weeks of 2020 slipped 8.4% to 10.2 million carloads and intermodal units.
“We just simply can’t accurately predict or control what happens with volumes and revenues at this point during the COVID-19 crisis,” said Kansas City Southern (NYSE: KSU) Chief Financial Officer Mike Upchurch last week during the company’s first-quarter earnings call. A sizable portion of Kansas City Southern’s (KCS) volumes includes cross-border traffic between the U.S. and Mexico.
To hedge against the uncertainty, KCS has created a number of planning assumptions, including one that anticipates a 15% decline in second-quarter revenue, followed by declines of 5% and 10% for the third and fourth quarters of 2020, respectively. The percentage changes are compared to the same quarters of 2019.
Another planning assumption is a 30% decline in second-quarter revenue, followed by third- and fourth-quarter revenue declines of 5% and 10%. The 30% decline approximates the worst quarter KCS experienced during the Great Recession in 2009.
This article first appeared on www.freightwaves.com
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