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11/4/2020
Moody's Investors Service has upgraded its outlook for the North American rail industry from "negative" to "stable" as freight-rail volumes continue to recover from the pandemic-driven drop.
Revenue is expected to grow by 4.25% to 6% over the next 12 to 18 months, as freight volumes improve, Moody's Vice President Rene Lipsch said in the firm's Oct. 29 research report.
"Nevertheless, the economic recovery remains tenuous and remains closely tied to the containment of the coronavirus," Lipsch said.
Intermodal volumes, which fell 6.3% in the past 12 months, will drive the increase. Intermodal shipments have grown 1.8% in the past three months. Periods of low inventory tend to coincide with strong intermodal growth, with current low inventory levels leading to restocking at warehouses and distribution centers to meet consumer demand, Lipsch said.
Coal volumes, which plunged nearly 25 percent over the past 12 months due to low natural gas prices, will decline at only a single-digit pace or be flat over the next 12 to 18 months, according to the report. An expected increase in demand for electric power generation and currently higher natural gas prices are likely to lead to a partial recovery in U.S. coal production, according to Moody's.
Moody's also expects shipments of most other types of freight to — except for petroleum products — to increase next year. Grain shipments have climbed 10% over the past few months and are expected to grow at a high single-digit rate for the foreseeable future.