This report analyzes operational and service trends for the North American Class I railroads, incorporating weekly operating data through Jan. 31.
January is typically the most challenging month for rail operations and is now thankfully in the rear-view mirror. The industry was lapping a significant arctic blast in the week ending Jan. 19, 2024, which slowed the networks meaningfully and took two weeks to recover from. Fast forward to this year and a threatened polar vortex two weeks ago proved relatively mild. When you add the good operating momentum Union Pacific, BNSF and Norfolk Southern, in particular, generated in the back half of 2024 and carried into winter, the net effect is materially better operating efficiency, cost control and margins this year vs. last. Winter obviously isn’t over, but the networks can almost certainly handle its final punches.
With costs under control, positive volumes will generate some earnings growth if trends persist for the rest of the quarter. West Coast container imports continue to power the U.S. Western railroads (charts below), with total January intermodal loads up 20% YoY at Union Pacific and 12% at BNSF (less easy comp). Total Union Pacific loads are running +9% QTD as carloads are basically flat (+0.8%). The good news for UP is that coal, expected to be a significant drag this year, was only down 1% in January. While 1Q25 is setting up well for UP, the challenge comes in the back half of the year when coal headwinds probably accelerate and intermodal volume growth likely flips negative over an impossible comp. Potential North American tariffs for UP and all the rails are the wildcards.
BNSF also had flat (non-intermodal) carload growth in January, resulting in total volumes 6% higher YoY. Like UP, coal is only off 1.5% so far. Average train speed starts the year 1% better, but the big productivity story continues to be terminal dwell, down 19% YoY.
Norfolk Southern proved most resilient to the recent cold snap, at least according to the operating data, and in conjunction with an easy YoY operating comp posted a 7% improvement in both velocity and dwell in January. Operationally, this is the network on a hot streak as it catches up to the group off a lower base (2022 Service Crisis and 2023 East Palestine bottleneck). Against this big efficiency tailwind, we have, so far, modest volume headwind, with total loads down 2.3% QTD. Within this, intermodal is flat, but container volumes should improve as we move through the year as last year’s mix shift to the U.S. West coast (due to the East Coast port strike) normalizes.
This mix normalization will also ultimately benefit CSX, which recorded January volumes down 2.4%. CSX took a bigger hit from the recent cold snap than NS, contributing to January velocity down 4% YoY and dwell off by 9%. CSX has its work cut out in the near-term as it grapples with disruptions from the Blue Ridge Subdivision rebuild on the back of Hurricane Helene, and having to route around the Howard Street Tunnel in Baltimore as clearances are raised for double-stack. It’s a necessary and worthwhile investment, but it’s going to contribute to some sloppy financials over the next six months or so.
CN starts the year with 2.2% volume growth in January (carloads +1%, intermodal +4%), but asset turns are softer: velocity –2.8% and dwell +3.9%. CN does, however, have the benefit of easy comps due to severe congestion between Edmonton and Vancouver from March to June last year, so YoY fluidity should at least improve as we move through that period. The easy comps then keep coming as CN laps the Jasper, Alberta, wildfires in late July, the CN/ Canadian Pacific Kansas City strike/lockouts in August, which diverted import volumes that should normalize higher this year, and finally, a brutal December 2024 in terms of weather, with some derailments.
Finally, CPKC had a good January, with carloads up almost 4%, intermodal loads up 10%, velocity 3% faster, and dwell 1.5% lower. CPKC will also benefit from easy comps this year, specifically, the August strike/lockout and potential recapture of diversions. Separately, congratulations to CPKC on the opening of the Patrick J. Ottensmeyer International Railway Bridge. A perfect tribute.
Western Intermodal Reaccelerates Following Cold Snap
Here are the updated Western intermodal volume charts as we continue track unusual import strength off the West Coast (which make up a subset of these numbers). The cold snap in the week ending Jan. 24 had a modest suppressive effect on loads, but they subsequently strengthened the following week.
Union Pacific moved 87,788 units in the week prior to the cold snap, which slowed to 79,957 during the weather event, before reaccelerating to 82,244 in the week ending Feb. 1. January load growth was 20% YoY. The numbers for BNSF were 109,453, 103,642 (cold snap) and 111,484 (reacceleration). January loads were up 12% YoY, but note it had a less easy 2024 comp compared to Union Pacific.
