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Drop in coal transport drags down North American railroad carload volumes

NORTH American carloads are expected to end 2015 with the lowest growth rate since 2009, and with total volumes dropping to their lowest level since 2010, according to IHS Inc., the leading global source of critical information and insight.

More than half of the overall loss in carloads is due to the drop in coal transport, as coal volumes are expected to finish 2015 almost 30 per cent below their 2008 peak, according to the IHS Freight Car Outlook report.

The rest of the declines have largely been due to the strong US dollar; as a strong dollar generally means low world commodity prices, and leads to a decrease in demand for commodities transport.

"The most spectacular impact has fallen upon the oil industry, which saw a weekly average drop in petroleum carloads of 15 per cent in September, compared with 2014," said IHS Transportation analyst Ryan Siavelis.

"But this is not the worst of it: metals and machinery carloads have fallen an average of 19 percent per week over the same period, and ores fell 25 per cent."

The carload volumes that tie closely to the US consumer - automobiles and containerised goods - continue to be a bright spot in the industry. As the US dollar strengthens, consumers' wages earn greater purchasing power for these goods, thereby increasing demand for transport.

"Rail activity is tied to underlying economic trends and is a leading indicator of economic growth," said managing director, IHS Transportation, Chuck Clowdis.

"This insight on rail activity translates to valuable knowledge on commodity movement via all transport modes, and what that movement says about current, and future, economic activity."

North American carload volumes are expected to return to strong growth of 3.6 per cent in 2017, after the coal decline has ended and the dollar stops appreciating. US carloads will largely drive the turnaround, with growth expected to be in excess of 3 per cent in 2017.