As the flooding effects in Tennessee and Kentucky dissipated, CSX was able to get the network moving in the right direction in the week ending April 18. Average train speed, which had plummeted to a 33-month low of 21.9 mph the prior week, had a good bounce to 23.3 (black line in the chart below).
Within this velocity metric, all subsets: intermodal, manifest, coal, and grain, were sequentially better. We shouldn’t expect this pace of recovery to be maintained, however, as the network remains cluttered with too much operating inventory, which will take a long time to work down. Operating car inventory fell by only 287 cars (0.15%) to 194,766, and 4% of these were slowto- move (idle 48+ hours) when 1-2% is normal for CSX.
Also note the arrow in the chart pointing to 14 trains per day holding for crews in the week ending April 18. If we ignore spikes for big public holidays, that’s a high we haven’t seen since October 2023. It’s probably just a lagging impact of the flooding that will quickly normalize, but still worth watching because there’s a (low probability) worst-case scenario where the combined reroutes and flooding has triggered systemic and growing crew availability problems.
Putting that bit of paranoia aside, we’re obviously pleased to see CSX finally stem the bleeding and show signs of regaining some control over the network.
The Incoming China Effect: Less Volume, More Speed
As we move into May later this week, we’re about to see the impact of the de facto trade embargo with China show up at the west coast ports, and then of course at BNSF and Union Pacific. The Port of Los Angeles is currently projecting an 11% increase in inbound containers in the week ending May third, compared to the same week in 2024, followed by YoY declines of 19% and 22% in the two following weeks. It’s based on scheduled vessel arrivals and constant true-ups will modify these numbers, but things are about to get real as international intermodal inflects negatively.
Flow Through Effects on the Railroads
In volume terms it’s obviously bad, and we again highlight the Chinese 125% counter-tariffs, which will impact the western railroad’s shipments of agricultural exports, like soybeans (BNSF most exposed). It’s not just imports and intermodal.
It’s also bad in two phases: in May due to the China effect, and worse starting in July as YoY comps get extraordinarily tough, and those insurmountable comps will persist through April 2026.
Operationally, there are two stories that will play out, one negative and one positive. We’ve previously referred to unintended consequences from the economic divorce from China that is now underway, and the first of those is about to show up in the form of west coast congestion risk from empty containers.
As the last of the pre-tariff boxes are unloaded across the country and most start making their way back to the west coast, they’re going to find it difficult to hitch a ride back to Asia due to all the canceled ocean services. Intermodal terminals and trains at BNSF and Union Pacific therefore run the risk of becoming overwhelmed and commandeered for empty storage. Both Class I’s are well aware of the problem and no doubt have contingencies to mitigate it. Let’s see how they do.
On the positive side of the ledger: volumes are the enemy of speed. We’d rather have the volumes of course, but the impending reduction in volume pressure should at least allow the western railroads to accelerate and improve efficiency and service levels, aiding domestic intermodal competitiveness with truck. Intermodal velocity at both UP and BNSF is currently, and coincidentally, 1% below their respective five-year weekly averages, and that could well accelerate to double-digit positives. Non-intermodal services will also accelerate with fewer intermodal trains on the main lines.
The domino effects then move over to the east as fewer land-bridged containers are interchanged to CSX and Norfolk Southern, and vessel arrivals from China, with the longer sailing time to the east coast, become scarce. CSX should be able to use this air pocket in volumes to accelerate its network recovery, so at least some good might come out of this.
After that, who knows? We remain of the view that the 145%/125% U.S/.China tariffs are the trade equivalent of mutually assured destruction; pressure is building, and we’ll soon see a climb-down. But to what? You could cut these tariffs by 80% (29%/25%) and it would still have a dramatic effect on trade volumes and import prices passed on to consumers. Again the lessons of history were ignored. Trade wars and tariffs: more losers than winners; easy to start but hard to end.
