Rail freight metrics

What do these numbers tell us in the near term?

Chemical– Industrial demand for bulk chemicals seems to be booming.

Containers– No surprise here as shippers were eager to get as much Asian cargo into the US before tariffs went higher. We should expect a slump in May, followed by a real surge in June and July.

Grain– Solid performance as foreign buyers continue to rely on U.S. supply before the new harvests start in the Southern Hemisphere (e.g., soybeans from Brazil, wheat in Australia).

Crushed Stone– The building blocks for cement and concrete. Modest growth here and far too early to see any signs of manufacturing construction in US because of tariff actions.

Coal– This should come as no surprise. Coal plants continue to be decommissioned despite the current “political winds.” Some push to stop further decommissioning but it is hard to see coal shipments making a big comeback medium term. Eventually the Class 1 railroads (BNSF, CN, Union Pacific) will decide to permanently decommission their fleets of aluminum-bodied coal cars. This would be a nice windfall to buyers of 6061 obsolete scrap as these cars have about 44,000 pounds of aluminum built in!

Metals– This is largely steel, but some Canadian aluminum finds it way into the numbers. No real signal being thrown off…steady.

Motor Vehicles– The surge in shipments really does not reflect the 25% import duty, as the tariff was not announced until March 26 with effect from April 3. We might see a spike in shipments during April and May as domestic OEM take advantage of consumers buying ahead of announced MSRP price increases in June or July.

Waste and Scrap– This is a steel metric as not much aluminum is railed unless it is intermodal container going off the West Coast for exports. Quite stable.

Lumber– A good indicator on residential starts and suggests nothing special going on. Nor are we seeing any unusual pickup in domestic lumber shipments because of Trump’s exhortation for domestic mills to produce more wood at the expense of Canadian softwood imports.

Why it matters

Railroad movements of aluminum are confined to Canadian exports south. Unfortunately, the CN and CP Canadian railroads do not share data with the Association of American Railroads so the that’s why we look at short line and regional movements as an indirect barometer of what’s happening.

When Canada begins to divert more metal to the EU, we should see the Metals segment start to go negative. Watch for this during the 2nd Quarter reporting.

From a more macro perspective, pay close attention in coming months to the following:

• The container movements to gauge the pace of those Trans-Pacific movement ex China and South Asia
• Crushed stone to see if cement production is rising and an early indicator of more commercial, industrial construction
• Motor vehicles for follow through from consumers buying ahead of the import tariff price increases
• Lumber for a bump in housing starts