RAIL FREIGHT CONTAINER VOLUMES HIT SIXTH HIGHEST LEVEL EVER
Either rails have become a lagging indicator or there is no recession in rail traffic. This week’s data is VERY strong (via AAR):
“The Association of American Railroads today reported that rail traffic for the week ending July 3, 2010 topped comparison weeks from both 2008 and 2009. Carloads were up 18.8 percent, at 286,777 cars, from the comparable week in 2009 and up 0.4 percent from the same week in 2008. Comparison weeks in both 2009 and 2008 included the July 4th holiday. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008.Intermodal traffic totaled 231,286 trailers and containers, the highest since week 42 of 2008. Volume was up 36.6 percent from a year ago and 19.1 percent from 2008. Container volume of 197,134 was the sixth highest week ever and the highest since week 39 of 2007. Compared with the same week in 2009, container volume gained 39.8 percent and trailer volume rose 20.9 percent. Compared with the same week in 2008, container volume increased 30.8 percent and trailer volume fell 21.3 percent.
Eighteen of the 19 carload commodity groups increased from the comparable week in 2009, with metallic ores up 205.5 percent; motor vehicles and equipment up 122 percent; metals and metal products up 80.3 percent; and crushed stone, sand and gravel up 50.6 percent. Seven of the commodity groups also posted gains over 2008 levels.
Carload volume on Eastern railroads was up 36.8 percent from last year and 5.5 percent from 2008. In the West, carload volume was up 9.5 percent from last year but down 2.7 percent from two years ago.
For the first 26 weeks of 2010, U.S. railroads reported cumulative volume of 7,338,963 carloads, up 7.8 percent from 2009, but down 12.9 percent from 2008, and 5,434,892 trailers or containers, up 12.9 percent from 2009, but down 6.2 percent from 2008.”
Source: AAR
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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11 Comments
Is there any chance that most of the increased rail traffic is due to a shift from air and truck transportation to cheaper rail transportation?
I was about to post that same question…
No, TPC is right it has become a lagging indicator. The auto industry is tooling up to build more cars due to the cash for clunkers program, just as auto sales are dropping off. However as the plants tool up , they are increasing their incoming raw materials thus the lagging indicator. This is happening due to the 4th qtr inventory rebuild. Businesses are going to get caught with a lot of excess inventory in the 3rd qtr 2010 and that is going to hurt GDP. This is a pretty common issue with industry.
so nobody actually believes this is good news? It just has to be inventory over stocking though the ISM Manufacturing Index shows that inventories are too low. The contraian in me likes the other side of that trade.
Using YoY growth figures can be misleading. In this case we must remember that GM and Chrysler were dealing with Ch. 11 during the summer of 2009. They reduced production significantly and are still restocking. The motor vehicle component of AAR’s report shows 122% growth YoY.
Just measure it on WoW/MoM change. It’s been pretty flat.
stonefoxcapital,
This really isn’t a trade issue. I have done inventory supply for a major company, and this is how the real world works in manufacturing. They want to make their numbers look good so they will continue to produce until the supply chain is overloaded, then and only then will most businesses back off. And yes I am aware that it should be run differently, but remember you are dealing with humans ( not computers) who report to other humans all of whom are trying to make their individual numbers look better.
“remember you are dealing with humans ( not computers) who report to other humans all of whom are trying to make their individual numbers look better” — anyone who works for a large corp understands this one – larger the company the larger the dysfunction
Guess those rail CEOs did know what they were talking about.
The guy above has it right, partly. The auto companies are usually shutting down each year around this time for 2 weeks. They chose (GM and Chrysler, not sure on Ford) not to this year. That makes a huge difference even if all other things were held constant. And auto production is way ahead of last year so things are not constant. I’d expect rails to be showing this variance for at least 3 weeks.
“no recession in rail traffic” – doubt that.