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The pace of U.S. rail traffic has modestly improved since mid-May, and secular intermodal growth and continued recovery in industrial end-markets should continue to drive traffic gains in the second half, according to Robert W. Baird & Co. Inc.’s “Domestic Truck, Intermodal and Rail Trends” report for June.

There are signs of improving industrial demand in recent weeks. June volumes so far have benefited from metal-related carload demand, which outpaced all other traffic categories in the year’s 23rd week, the report states.

“We will continue to monitor this segment for further signs of sustainable improvement above slower early second-quarter growth, though we view recent volume improvements as encouraging,” Baird analysts said in the report.

Meanwhile, chemical traffic remains strong, with week 23 volumes representing the second-best commodity growth rate, according to Baird.

In the intermodal sector, recent volumes are consistent with expectations for mid- to high-single-digit growth in 2011, fueled by secular demand, tight truckload capacity, higher fuel prices and eastern rail infrastructure development, the report states.

“Notably, eastern rail intermodal growth is modestly outpacing western rail growth,” Baird analysts said. “Union Pacific is the notable laggard in U.S. intermodal with volumes flat year over year in the second quarter to date — possibly a function of its underlying IMC relationships. Encouragingly, truckload contacts have noted seasonal volume improvement in early June, which bodes well for intermodal demand improvement [continuing].”

However, coal traffic remains a laggard. Yet, the outlook suggests growth opportunities exist, Baird analysts said.

“Export coal remains a growth opportunity for rails presently and into the future, with eastern U.S. rails primarily benefiting from increased global demand,” they said. “Recent railroad commentary suggests utility coal stockpiles are at levels supporting more normalized demand.”