Soaring US Covid infections disrupt peak capacity supply chains
Concern is mounting about supply chain disruption from the rising number of Covid-19 infections in ...
Strong headwinds failed to knock North American rail freight off its first-quarter rhythm, with both US and Canadian operators reporting healthy first-half results.
CSX, which ended last year on a bitter note with the loss of rail turnaround king Hunter Harrison, continued its good start to the year by smashing company performance records.
Its intermodal division’s results were less ground-breaking but strong, nonetheless, with revenue up 6% (at $939m) on the back of a 1% (1.42m tonnes) volume increase.
Chief executive Jim Foote said much of the intermodal growth came from international markets, noting that domestic business had been “relatively flat”.
“Our intermodal network needs a ton of work to become the efficient part of our system that it needs to be,” said Mr Foote. “We’re just beginning to get in there to figure out how to rationalise that big part of our business, so we can become more efficient and have a better product for our customers.”
For the three months to June, intermodal volumes were up 2% on last year (735,000 tonnes), bringing in revenue of $490m (up 9%) with revenue per unit up 7%.
Mr Foote said last year had seen the carrier change its intermodal “philosophy” by removing the hub and spoke model and with it about 7% in volumes.
“At that point in time, it was my belief that a large part of the rationalisation of intermodal had been accomplished. Well, that’s not the case,” he said. “So we are going to have open communication with customers about what we’re trying to accomplish, involving train design changes, terminals and potential terminal consolidations.
“We’ll do this methodically, logically and appropriately, and fully aware that we are looking at a peak season which everybody is indicating is going to be very strong.
“So we’re not going to do anything that’s going to screw up the railroads, and if it takes a little longer than a quarter or two, I’m fine with that.”
In the US, CSX was not alone in recording a healthy first half, with Union Pacific seeing its Premium [intermodal] product record revenue growth of 11% ($3.1bn) on a year-on-year volume increase of 6%.
Chief marketing officer Elizabeth Whited said this had been achieved despite “pricing pressures” in the intermodal markets.
“Domestic intermodal was driven by continued strength in parcel and stronger demand from tight truck capacity,” said Ms Whited. “International intermodal volume was up, as new ocean carrier business wins began to ramp up in the second quarter.”
Further north, Canadian Pacific continued the trend, with first-half intermodal revenue up 11%, predominantly due to a 16% uptick in second-quarter international turnover. Domestically, growth was “more modest”, linked to a series of strikes that hit the carrier earlier in the year.
Chief marketing officer John Brookes used an investor conference to welcome One Network Express to the business, anticipating a strong second half.
He added: “With truck capacity tightening and the anticipation of a strong peak, we expect both international and domestic intermodal to perform quite well for the remainder.”
When asked if CP had experienced customers withdrawing plans in line with questions around tariffs and trade, he said this did not match what the carrier was seeing.
Mr Brookes said: “Right now, I would say, as we look at this fall peak season, it remains actually quite bullish on this cross-border opportunity in those import goods.”