Rail and intermodal picture brightens for 2018, says analyst

News Rail & Intermodal Transportation

A prominent industry analyst has observed that that 2018 is expected to be a much better year for railroads and shippers who rely on them.  

Frank Harder, a principal with the transport consultancy, Tioga Group, says that the inflection point was in late 2016 with railroads enjoying modest year over year increases throughout 2017.  

“Total U.S. carload traffic for the first 47 weeks of 2017 was 12,199,607 carloads, up 3 percent from the same point last year; and 12,653,426 intermodal units, up 3.7 percent from last year,” he says. “The industry has been experiencing record intermodal volume since mid-2017.”

As a result of a decade decline in coal other rail traffic, however, railroads are still operating at approximately 80% of peak 2006 volume levels.  Consequently, railroads generally have line and locomotive capacity to grow their traffic. 

“Railroads are generally optimistic about increasing shareholder value in 2018 given the growing industrial economy, the prospect of tax reductions, and the tightening of truck capacity,” says Harder.

“Because there is available operational capacity and because positive train control is coming on line, capital expenditures are expected to be relatively lower than in previous years.  Surplus cash is going into dividends and share repurchasing.”

View the 2017 Rate Forecast Webinar

According to Harder, CSX is the “wild card” in the rail equation in 2018.  

“Hunter Harrison is now in charge,” He notes. “While CSX operational changes made in 2017 caused some service disruption,  that appears to be past and 3rd quarter 2017 performance was better than the previous year.”

Harder says shippers should expect a rationalization and simplification of CSX’s intermodal network in 2018 and perhaps a movement of emphasis away from hub and spoke operations toward dense point to point services.  A key indicator of future direction, he says, will be CSX’s use of its Northwest Ohio Intermodal Hub.

“Motor carrier prices provide a ceiling for intermodal and truck competitive merchandise segments of the rail business,” Harder concludes. “My expectation is that rail and intermodal prices will increase with motor carriers to be 1-2% above inflation.”

Harder will be sharing his views on rail and intermodal trends when he joins other industry experts on the “2018 Rate Outlook” webcast this January. 

About the Author

Patrick Burnson, Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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