As it was already analysed by Freightwaves "The latest rail carload data is showing that the industrial side of the economy, which is the backbone for a large amount of freight movement in the U.S., has finally started to recover after hovering on the floor for over three months. Increasing carload volumes for raw materials like chemicals and motor vehicles are good leading indicators of future truckload volumes. This could mean an incredibly strong late third and fourth quarter for transportation providers but much tighter capacity for shippers.
Rail
carloads typically transport the building materials for mass-produced goods.
The finished products are usually transported on trucks and rail containers. It
is important to note that carloads are not intermodal containers or boxes that
typically transport finished goods. Carloads are generally filled with bulk
non-palletized items, loosely loaded in either a liquid tank or open top hopper
or gondola for ease of loading and unloading at production facilities.
Chemicals
shipped on the rails are processed into anything from household cleaners to
petroleum-based plastics. Total carload volumes are a barometer of the
industrial sector of the economy, which is connected to energy and production.
Total carload volumes include chemicals and motor vehicle parts as shown in the
chart above, but it also includes items like coal, grains and petroleum
products.
Rail
carload volumes were trending lower prior to the COVID-19 outbreak, showing
negative year-over-year weekly comps through most of 2019. While the year-over-year
numbers are still dismal at -22%, they are improving over the -30% that was the
bottom in May and showing a strong upward trajectory after the Fourth of July,
increasing almost 6.5% last week.
While
there is still a long way to go to call it a recovery, this is a very positive
sign of other surface transportation. So far the freight market has been
thriving on supply chain dislocation and unexpected shifts in consumption
without any help from the industrial sector. If the industrial economy continues
to improve, this could lead to another surge of freight moving on top of an
already strong amount moving across the country.
Capacity
has tightened to levels not seen since 2018 as the national Outbound Tender
Reject Index (OTRI) topped 17% this week, having measured over 15% for the
entire month of July. The highest value of 2019 was 14.25% on Christmas. It
only exceeded 10% for the two weeks surrounding Christmas." Freightwaves
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By: LFS Marketing
August 3, 2020
