Short-line traffic through September continued to show slippage
10/18/2023
By Jeff Stagl, Managing Editor
The traffic outcome for many regionals and short lines has remained essentially the same in 2023: disappointing.
Through the year’s first three quarters, 473 small railroads collectively registered 4,942,613 carloads, down 4.7% compared with the 5,187,793 carloads they logged in the same 2022 period. Wabtec Corp.’s GE Transportation subsidiary compiled that data for the period ending Sept. 30 and shared it in its weekly RailConnect Index of Short Line Traffic.
By commodity group, the biggest decliners in the 39-week period were coal, down 26.9% to 234,746 units, and paper products, down 21.2% to 243,230 units. The groups that also posted year-over-year declines — although not by double digits — were grain (-7.4% to 505,722 units); intermodal (-7.2% to 901,663); lumber and forest products (-6.7% to 219,600); ores (-3.2% to 115,521); stone, clay and aggregates (-1.8% to 546,116); chemicals (-1.6% to 916,787); and waste and scrap materials (-1.4% to 254,865).
On the positive side, the small railroads’ motor vehicles and equipment loads climbed 25.3% to 148,377 units and “all other” miscellaneous carloads rose 21.5% to 81,553 units. In addition, more meager volume increases were achieved in the following three categories: petroleum and coke products (+2.8% to 180,928 units); metals and products (+2.8% to 360,023); and farm and food products excluding grain (+2.3% to 233,502).
Which railroads posted gains and which ones were dealing with declines? RailPrime recently reached out to a number of holding companies, regionals and short lines to gauge the state of their carloads through 2023’s first nine months. Following are summations and explanations from 11 of them.
Underwhelming underperformance
The Red River Valley & Western Railroad Co. (RRVW) is among the small roads with soft traffic. Carloads declined 7% at the regional, which operates 500 miles of track primarily in the southeast quarter of North Dakota, and interchanges with BNSF Railway Co. and Canadian Pacific Kansas City.
The primary reason: grain shuttle carloads, which fell 13%.
“The grain shuttle business has continued to underperform compared to last year as a result of soft export demand for agricultural products,” says RRVW President Victor Meyers. “The remainder of [our] portfolio has performed well, with strong domestic demand for single carloads of grain and strong demand from value-added agriculture processing plants that are located on the railroad.”
Despite a tough first three quarters in 2023, Farmrail anticipates improving traffic performance in the fourth quarter. Farmrail System Inc. It also was a tough nine months for Farmrail System Inc., which owns the 170-mile Farmrail Corp. and 178-mile Grainbelt Corp. In Oklahoma, and retains a joint-venture interest in Finger Lakes Railway Corp. In New York state. The company’s traffic tally through nine months shows a 14% year-over-year dip.
The good news? The company anticipates traffic improvement in the fourth quarter, says Farmrail CEO George Betke. That’s a reflection of some recent positive trends with crude-oil drilling and grain harvesting, which primarily drive the company’s traffic.
“The spring wheat harvest was disappointing, but cotton looks better and the oil patch is picking up, regardless of what Washington is saying officially,” says Betke. “We hope this could be the fourth straight year of improvement from the doldrums in 2019, when the oilfield frenzy ended.”
In the Southeast, the New Orleans Public Belt Railroad’s (NOPB) traffic dropped 10%. Owned by the Port of New Orleans, the short line operates 26 miles of mainline track and 75 miles of total track, and interchanges with six Class Is.
Nine-month volume dropped 10% for the New Orleans Public Belt Railroad, including a 14% drop in intermodal loads and 15% decline in concrete/clay carloads. New Orleans Public Belt Railroad The railroad registered a 13% decrease in food products traffic, 14% drop in intermodal loads and 15% decrease in concrete/clay units.
“On a positive note, [carloads of] chemicals increased 3% and wood/lumber increased 36% compared to 2022 volumes,” says NOPB Press Secretary Kimberly Curth.
Alaska Railroad Corp.’s (ARRC) total car volume through three quarters fell 9.5%. A predominant factor: A reduction in needed gravel transportation.
“A large road project was completed in early spring 2023 and an airport construction project start date was delayed into the future,” says ARRC Corporate Communications Officer Catherine Clarke.
However, most other business lines posted growth in the period. ARRC notched heavy freight volumes into Seattle for its rail-barge service to Whittier.
“Capacity to respond has been constrained by having a sufficient number of rail-equipped barges and personnel,” Clarke says. “ARRC has responded by establishing a permitting system to manage inbound freight, which has included imposing an embargo on freight to Alaska from the lower 48 states, Canada and Mexico.”
Call it a push
For Palmetto Railways, carloads weren’t down significantly through nine months, but they were flat to slightly under forecast, depending on the commodity. A division of the South Carolina Department of Commerce, the short line typically moves more than 100,000 carloads annually, mostly chemicals, finished autos, steel and port-related import or export transloaded products such as pulp/paper and dry chemicals.
“Some chemical markets are down, and that is directly impacting our volumes. We had an unplanned closure of a paper mill affect our business this year, as well,” says Palmetto Railways President and CEO Patrick McCrory. “The rest of the impacts are consumer-related, similar to the rest of the country, such as autos, imports/exports, etc.”
Watco’s traffic was relatively flat in the period, too. The owner of about four-dozen short lines notched 586,723 carloads through three quarters, up a scant 0.8%.
The company’s coal, metals and other traffic jumped 42.9%, 15% and 11.3%, respectively, but carloads fell in nine other commodity groups. The biggest decliners were agricultural products (-22.3%), crude oil (-19.7%), lumber and forest products (-9.7%), chemicals (-8.8%) and minerals (-5.2%).
“Flat” also describes the 2023 traffic fortunes of Bighorn Divide & Wyoming Railroad (BDW). The 15-mile Wyoming short line that interchanges with BNSF so far this year hasn’t been able to drive up carloads, which at least have been stable, says BDW Chief Financial Officer Seth Kucera.
The railroad’s typical traffic drivers are sulfur (a natural gas byproduct), soda ash, oil drilling products and bentonite.
“As always, we are trying to win more traffic,” says Kucera. “Oil and natural gas products are important to us, but they aren’t big in Wyoming for now.”
Chalked up as wins
Conversely, some small railroads scored big traffic gains in the nine-month period. OmniTRAX Inc. — which owns and operates 25 short lines in the United States and Canada — boosted its carloads by 10%.
Although forest products volume declined, construction, metals and agricultural products loads climbed, says OmniTRAX spokesperson Julie Slagle.
Likewise, traffic was in the black for Indiana Harbor Belt Railroad Co. (IHB), which operates 54 miles of mainline track and 266 miles of additional yard and siding track in the Chicago area. The short line — which interchanges with 16 other railroads — notched a 5% gain. The railroad typically moves about 170,000 or more carloads annually.
“Auto traffic is close to pre-pandemic levels,” says IHB General manager John Wright.
After logging an 11% traffic gain through September, the Reading & Northern expects its 2023 total to duplicate 2022’s 15% volume growth. Reading, Blue Mountain & Northern Railroad For the Reading, Blue Mountain and Northern Railroad (RBMN), traffic was up about 11% through nine months. But the leader of the 400-mile Pennsylvania regional expects even better results going forward.
“At this point, I think we will duplicate last year’s 15% growth. Our growth is driven by frac sand and anthracite coal, and we expect those commodities to be even stronger in the fourth quarter,” says RBMN President Wayne Michel. “We also have had some industrial development projects come to fruition this year.”
In northern California, traffic growth continues to explode for the Sierra Northern Railway. The short line — which operates 75 miles of track and several branch lines, and interchanges with BNSF and Union Pacific Railroad — is bucking trends by registering high double-digit gains, says Sierra Northern CEO Kennan Beard.
For example, freight revenue alone is up more than 35%.
“Our traffic continues to be strong, with much of the growth attributed to our new transload operation in Oakdale, California,” says Beard. “We are seeing new freight business growth on our Ventura line, as well. We budgeted for a very strong year, and even then, we are nearly at double digits above budget.”
