From the editor: The domestic intermodal story has legs

For a while now, Class Is have been working to offset the loss of coal volumes and revenue by diversifying their traffic mixes and focusing on other business segments, notably intermodal. Some railroads have been faring a bit better than others on the diversification front. Witness BNSF Railway Co.

In the first quarter, BNSF’s intermodal volume rose 6 percent (thanks to increases in domestic intermodal) compared with the total for the same 2015 period, Robert W. Baird & Co. Inc.’s Ben Hartford told Managing Editor Jeff Stagl last month. For the same year-over-year

Pat Foran

period, the industry average was 1 percent, Hartford told Stagl, who wrote this month’s cover story on BNSF’s domestic intermodal push.

Neither that 1 percent increase in intermodal nor boosts in automotive and construction-related traffic were enough to help Class Is make up for the continued, steeper-than-expected decline in energy-related volumes. And those moderately bright (read: not negative) spots won’t help much in Q2, either, if comments made by Class I execs during Q1 teleconferences last month were any indication. The Q2 comparisons will be even tougher for some. But several execs said they saw light at the end of the tunnel — the “end” being sometime during the year’s second half or into 2017. “It’s not really until we get to the fourth quarter [that] we will have a little bit easier comparisons year-over-year both on the coal side and on the general merchandise side, as well,” CSX Executive Vice President and Chief Sales and Marketing Officer Fredrik Eliasson said during the railroad’s April 13 teleconference according to a transcript of the event posted at Seeking Alpha.

“There’s a slowly strengthening economy out there and we’re doing a lot of business development to go after it, which again is being overshadowed by just the huge [negative] volume numbers for coal and shale, and the other headwinds we have,” said Union Pacific Railroad Executive Vice President of Marketing and Sales Eric Butler during UP’s April 21 earnings telecon, according to a Seeking Alpha transcript.

The message may not be all that encouraging for those in rail country who’ve been trying to make heads or tails of the headwinds and (hoped-for) tailwinds they’ve been hearing about the past several months. For some, the front-and-center sideshow that is this election season has only added fuel to the uncertainty fire, or so we keep hearing. But of these things I am certain: The headwinds and tailwinds of change will continue to blow in rail country, railroads will continue to adapt, and the domestic intermodal story has legs. The rail industry’s longer-term growth story has them, too.

— Pat Foran, editor