Written by Steven Hansen
The variations and special situations associated with rail traffic continue. In the November 2012 Association of American Railroads (AAR) report talks about one of the wobbles in this month’s data.
As of November 2012, year-over-year U.S. rail intermodal traffic had risen for 36 straight months, but the 1.2% gain in November was the smallest such increase since August 2011. Part of the reason for that is a strike by harbor clerks at the Ports of Los Angeles and Long Beach that began on November 26 and was settled on December 5. The two ports are by far the first and second highest-volume container ports in the country (see the table on the next page) and are the source and destination for large amounts of U.S. rail intermodal traffic.
I am of two minds on rail data – analyzing it with and without the wobbles. Normally it is best to shut your eyes to the wobbles and analyze the data intact as their are good and bad wobbles – and time tends to even everything out. Like this situation with the strike at the Southern California ports – this is an issue which you mentally rationalize makes the data a little soft – and move on with the analysis.
But it is hard to ignore something that effects almost 1/2 of rail movements – coal and grain.
Year-over-year coal carloads have fallen each month in 2012, and by double-digit percentages in seven of those months. If and when coal-based electricity generation — and thus rail coal traffic — recovers to prior levels will depend on a lot of things, but probably the most significant (in the near term at least) is the price of natural gas.
U.S. rail carloads of grain averaged 18,998 per week in November 2012, down 10.7% from last year and easily the lowest weekly average for any November on record (which in this case is back to 1988). Corn is part of the reason. In recent years, corn has accounted for around 45% of rail grain carloads. Thanks to the severe drought in the Midwest earlier this year, U.S. corn production fell an estimated 13% in 2012 from 2011. Meanwhile, U.S. corn exports — around 22% of which typically move by rail — have plummeted.
Here is what the charts tell us if we view the whole rail situation with coal and grain included:
Here is an AAR chart which excludes coal and grain:
|Trends||w/grain and coal||w/o grain and coal|
|4 week average||Improving||Improving|
|13 week average||Improving||Improving|
|52 week average||Declining||Declining|
Overall, the November monthly summary data says:
- carloads down 4.0% year-over-year (compared to down 6.1% last month)
- excluding coal and grain (which are not economically intuitive), carloads were up 5.5% year-over-year.
- intermodal (containers or trailers on railcars) up 1.2% year-over-year (compared to up 1.5% last month).
- total carloads plus intermodal down 1.7% year-over-year (compared to down 2.7% last month).
The Association of American Railroads (AAR) reports this data in three parts:
- intermodal (sea containers or trailers on special railcars)
- total railcars plus intermodal
AAR rail traffic data are reported as carloads or as intermodal units. Carload traffic is classified into one of 20 different commodity categories and is carried in a variety of rail car types (e.g., tank cars, covered hoppers, gondolas, boxcars, etc.). A unit of rail intermodal traffic is either a shipping container (currently about 87% of U.S. rail intermodal traffic) or a truck trailer (about 13%) carried on a railroad flat car. Intermodal is not included in carload figures. Commodity detail on the freight inside the container or trailer is not available.
As coal and grain comprises well over half of all commodities transported, and coal / grain have major demand fluctuations unassociated with the economy – the below graph removes coal and grain from the equation.
Most finished consumer goods which travel on rail move in intermodal units, containers and trailers, on rail cars. If there was only one pulse point to watch – it is this one. A caveat here: this needs to be viewed with trucking data to get a complete picture – as this same service is provided by both modes of transport. Here we see a four month down trend – and my conclusion is the consumer portion of the economy is cooling off:
Rail is among the first reporters of October 2012 data. So far other major transport indicators are mixed but the transport data overall is showing weak growth:
- Truck Transport (October 2012): Down 3.8% month-over-month, down 2.1% year-over-year (Hurricane Sandy effected data)
- Rail (November 2012): Down 1.7 % year-over-year
- Rail (October 2012) Down 2.7% year-over-year
- Container Counts (October 2012): exports up 0.6% year-over-year, while imports are up 5.4%
For container counts, only import counts are economically intuitive. Using transport as an economic barometer – the real economic growth in the USA continues to be barely positive.