Here’s how short lines are doing

By Roy Blanchard

In an earlier post Fred Frailey comments on the traffic gains the Class I railroads are seeing as we begin to come out of the economic downturn that started more than two years ago. Shortline and regional railroads are seeing better days too -- not surprising since roughly 20 percent of all Class I carloads touch a short line someplace between origin and destination.

Week 13 shortline carloads as reported in the RMI RailConnect Index were up nine percent compared with a year ago and up four percent year-to-date vs. the 2009 period. The leading percentage gainers in the week were ore (76 percent), metals (32 percent), waste (22 percent) and automotive (27 percent). Putting this in context, the most important shortline commodities year-to-date are chemicals (17 percent of the total loads), grain (14 percent), coal (12 percent) and aggregates (10 percent).

The real question is how much of a return to those heady days of 2007 the shortline community may expect. Comparing total carloads for the first quarters of 2010 and 2007 we find each first-quarter week of 2010 running 18 to 26 percent behind the comparable 2007 week; total 2010 first quarter carloads lagged the 2007 first quarter by 22 percent. The good news is that chemicals remains the largest single commodity group in terms of carload volumes. 

Genesee & Wyoming’s March 2010 carloads turned the corner to a seven percent gain over March, 2009 vs. a nine percent year-over-year decline in February 2010. Carloads for the quarter were off four percent. Moreover, GWR lacks the chemicals concentration seen in the industry as a whole (ten percent of vols vs 17 percent) yet does double the business in coal (26 percent of vols vs. 12 percent). In addition, GWR includes its Australian vols in its published car-counts, skewing the food numbers (12 percent for GWR vs. five percent for the North American shortline community) in particular.

RailAmerica March 2010 carloads were up nine percent year-over-year and posted gains in six out of 12 commodity groups. RA rang up double-digit gains (triple for ores) in agricultural products (18 percent), chemicals (24 percent), food and grain (11 percent) and forest (!!) products (11 percent).  First quarter 2010 revenue units increased five percent year-over-year. Recent conversations with RA management confirm my sense that the Giles Team is finding new revenue opportunities overlooked by the previous owners and they’re not done yet.

My contacts in the non-Class I railroad business, while quite pleased with the present uptick in carload volumes, are taking a wait-and-see approach to the rest of 2010. Suppressed demand for steam coal, the continuing malaise in the residential and commercial construction sector and the increased consumer savings rate do not point to any traffic surges. Yes, volumes are returning, but to what level and in what commodities? Only time will tell.