By Julie Sneider, Senior Associate Editor
Shippers and the freight-rail industry can look forward to carload volumes improving possibly in the later months of 2022 and likely in 2023. But how much that volume improves will depend on a number of uncertain factors, not the least of which is how quickly the Class Is can turn around their poor service levels, Todd Tranausky, vice president of rail and intermodal at FTR Transportation Intelligence, said during the company’s recent “State of Freight” webinar last month.
“We expect, or hope, that service will get better by the time we get to 2023,” Tranausky told webinar attendees.
Both sides of the freight-rail market — carload and intermodal volumes — have struggled to “launch” and grow during the first half of 2022, he noted.
During the first half of 2022, U.S. railroads logged 6,878,726 containers and trailers, a 3.5% decrease compared with intermodal volume in the same period a year ago, according to Association of American Railroads data. At the same time, railroads hauled a steady amount of carloads during the first six months of this year versus a year ago — 5,993,917 carloads, down just 0.1%.
In particular, comparing intermodal volumes during the first half of this year to the same period last year isn’t easy, he said.
“You’re comparing the first half of 2022 with 2021 when things were going gangbusters,” he said. “Volumes were moving and then, right about this time of year, it all slowed down. You started to see congestion, issues and constraints in the system, and it never got back to those same levels that we saw in the first half of 2021.”
Tranausky expects intermodal volumes to remain down a bit overall for 2022. Domestic will fare better than international intermodal, he believes. Trends will start to improve in 2023.
“You’ll see a strong peak, particularly for domestic, in the back half of the year,” Tranausky said. “Everyone in intermodal will take this as a welcome sign. It’s been a very long year, in large part because of the service issues.”
Service problems add to uncertainty
Service remains an uncertainty for both intermodal and carload volumes. Traffic congestion at the ports is smoothing out a bit, with more volume moving through the ports this year, he says. While “still a little choppy” at the two largest U.S. ports — Los Angeles and Long Beach — volume is ramping up at ports in other parts of the country due in part to shippers shifting their traffic.
“But looking into our crystal ball, one of the largest things we have to consider is the port labor situation on the West Coast. The biggest labor threat is on the West Coast,” he said.
“What was the old song, ‘Those Lazy, Hazy, Crazy Days of Summer’? That’s pretty much where we are at the end of July.” — Todd Tranausky, FTR Transportation Intelligence https://freight.ftrintel.comThe labor contract representing about 22,000 West Coast dockworkers expired July 1. Since then, cargo has kept moving as negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union continue. The PMA and ILWU began talks in May to negotiate a new contract for longshore workers at 29 ports in California, Oregon and Washington.
“There hasn’t been disruption so far; however, most of time, when you get out past the contract expiration, there’s been some sort of hiccup out there,” he said. “So, we’re all waiting for the other shoe to drop on the West Coast.”
Of course, it’s not just the ports that have had service issues — so have the railroads, whose service disruptions have intensified so much over the past two years they’ve attracted the attention of regulators at the Surface Transportation Board. Regardless of the service metrics measured, “things aren’t good out there,” Tranausky said.
“Unfortunately for shippers, there’s no sign that things are going to get better soon. We’re bouncing on the bottom right now, waiting to make that turn” on service, he says.
The primary culprit remains a train crew shortage. Since October 2020, the number of crews at the Class Is has held at 46,000 to 47,000 employees.
“That is a significant decline from before the pandemic and from 2019 before that, as the industry implemented precision scheduled railroading,” said Tranausky.
Although the Class Is have ramped up hiring, it takes months of training before new members are ready to begin their jobs, he noted.
“That has been a headwind solving those service issues,” he said.
Lazy and hazy volumes
Tranausky’s views of rail carload and intermodal traffic trends didn’t change much between the July 14 webinar and his July 29 podcast, when he again described freight-rail traffic so far this year as “pretty weak.”
“What was the old song, ‘Those Lazy, Hazy, Crazy Days of Summer’? That’s pretty much where we are at the end of July,” Tranausky said in the podcast. “Volumes are pretty lazy, they’re weak and right around the five-year average.”
As of July 23, AAR data showed U.S. railroads logged 6,663,741 carloads through the first 29 weeks of 2022, a 0.2% decrease; and 7,644,302 containers and trailers, a 5.9% decrease.
For the short term, “a lot of crazy” remains on the horizon due to uncertainty on the rail labor and regulatory front, Tranausky said in the podcast.
The Class Is and labor unions are at a standstill over contract negotiations, and President Biden on July 18 named a presidential emergency board (PEB) to try to break the stalemate. Under the Railway Labor Act, the PEB has 30 days to make its recommendations for a settlement; after that, the unions and Class Is have a “cooling off” period to negotiate an agreement based on the recommendations.
On the regulatory side, the Surface Transportation Board is still reviewing the proposed merger between Canadian Pacific and Kansas City Southern, and closely monitoring weekly service data and improvement reports from the Class Is. Also, last week, the Federal Railroad Administration — as expected by many — proposed a train-crew size mandate for freight and passenger railroads.
All those issues sum up to “a lot of uncertainty” on the rail front, Tranausky said.
“It’s not going away,” he added. “In some ways, uncertainty is part of the new normal as we go into the balance of 2022 and on to 2023.”
