CSX Train
© Wangkun Jia

Rail operators are failing to take advantage of the difficulties plaguing North American haulage, but in Canada at least, the sky is looking a little less stormy.   

North America, much like Europe, is seeing an ongoing decline in the number of long-haul truckers, but US haulage firms have continued to depress volumes for rail operators.   

Vice president of NF Industries Mark McKendry told The Loadstar on the eve of North American class 1 railways publishing first-half results, intermodal business had seen a strong decline. throughout the first half, “with the entirety of that erosion occurring in the US”. 

“Declining US volumes has been driven by increased pressure from road carriers using lower prices to motivate shippers.”   

He said “in general”, US rail carriers had “so far” been unwilling to copy this tactic and trade price for volume.  

With little quarter given, he added, there had been a short drag on volumes as a result – although his comments contrasted those of CSX chief executive James Foote, who told investors during the carrier’s first-quarter earnings call in April: “Every day we are winning new business from the trucking sector.”  

In the past, they [shippers] may have given 60% of volumes to rail and 40% to road, because they didn’t trust the reliability of the railroad to get their products across to market,” he added. “This is where we’re seeing growth – from existing customers to a large degree, but we are gaining a larger share each and every day and, hopefully, that will continue.”  

However, CSX’s results showed a decline in both volumes and earnings, with other US operators also posting muted performances.   

During the call, Mr Foote said he expected intermodal volumes to remain muted, but Mr McKendry suggested this may not be the picture across the border.  

 The Canadian railroads are not seeing the same pressure as their US peers and are seeing modest year-on-year gains in volume,” he said. “This is due in large part to the Canadian geography, which has its large population centres spread far apart, making intermodal a highly competitive option.”  

He added though, that for some carriers, there was a problem from the introduction of precision scheduled railroading (PSR), which CSX is rolling out. PSR, Mr McKendry said, typically increased services on existing routes, but did add volatility, echoing Mr Foote’s assessment of the situation.  

“Despite international growth, intermodal declined due to the additional lane rationalisations implemented following peak season,” said Mr Foote. “Intermodal revenues are expected to remain muted, as we work our way through the impact of these lane rationalisations.” 

“This is a long game – these changes are going to take place over the next several years, and we hope the segment’s profitability will continue to increase over time.” 

 Further clarity will come over the next week, with many railroads scheduled to release first half results.  

According to Bloomberg the truck driver shortage has continued to worsen, with consecutive annual declines since the end of 2015 – the current North American shortfall is about 300,000.  

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