Rail Traffic Dips, But Not To Worry

Includes: CSX, KSU, NSC, UNP
by: Todd Sullivan

Total N. American rail traffic dipped to 641k cars last week. There are a couple of interesting points here. Auto’s again made a multi year high which backs the other data points we are seeing that auto demand continues to increase.

Virtually the entire drop was due to a fall in intermodal traffic. It looks as though the the sluggishness in rail traffic is due to a steady decline in coal. This especially pronounced when looking at YOY numbers. The other categories in the “what is being hauled” have remained steady (except auto’s up ~25%). The pronounced drop has been in coal.

I’m thinking this is a function of record low nat gas prices and utilities switching generation fuel. Since gas is primarily shipped though pipeline, any switching is a direct decrease in rail traffic. We are seeing natural gas use increase and coal demand was down 17% YOY in December.

So as long as we se the other categories retain their YOY strength, the coal situation isn’t a worry.

Here is the chart (click to enlarge):