We’ve made some major changes to the CPKC data this week. Ever since the KCS operational consolidation on April 14, 2023, we’ve been using the consolidated velocity and dwell from 4/14/23 forward and comparing it to the long-term average velocity and dwell that excluded KCS between 2010 and 4/14/23. We were largely comparing current CPKC with historical CP, which was obviously “wrong,” but we wanted to see how the CPKC metrics stacked up again CP’s historical standard. We got our answer, with consolidated velocity over the past three months, for example, 7% worse and terminal well 27% worse than the old CP benchmark. In a nutshell, it was primarily the addition of the higher dwell KCS yards that drove a sea of red in our charts in recent quarters.
We’re now making a change for a couple of additional reasons. First, and predictably, the company got tired of all the red and asked us to look at it. Second, we now have a few years of data that enables us to restart this analysis on a cleaner CPKC basis. However, cleaner isn’t clean, and the new data comes with its own big caveat. Clearly, the weekly operating data from 4/14/23 onwards is legitimate, and CPKC additionally provides restated weekly data on its website from January 2020 through 4/14/23 that basically pretends CP and KCS was one integrated network, when it clearly wasn’t.
There are 20 colorful boxes for CPKC above, but only the seven on the right truly represent the post-acquisition network. Having said that, if you look at the first 13 (1Q20 through 1Q23 pro-forma), it sanity checks well with industry events (green during the COVID lockdowns and red during a polar vortex and the KCSM meltdown, for example).
So, on this new basis, what’s the current state of CPKC’s operation? On the far right, reflecting the past 13 weeks through Nov. 29, CPKC’s velocity is 1.4% better than the weekly average since the start of 2020, and terminal dwell is 1.5% worse, which basically nets to zero given we equally weight them in our chart. That’s gloriously average, but at least better than the –34% under the old methodology.
Turkey, Football, Better Network Speed
As one of the five major public holidays that materially impact rail networks through a temporary lull in customer activity and associated dip in volume pressure, Thanksgiving had the usual effect of accelerating speeds last week. BNSF made the most of it, with system velocity 4.8% better than the prior week, while Union Pacific (+2.1%) and Norfolk Southern (+1.8%) also benefited. The tailwind for CSX was more muted, at just 0.4%. The Thanksgiving story isn’t over, as the ability to clear some yards and reposition power and crews often extends velocity gains in the week after Thanksgiving through a slingshot effect. It was this exact effect that finally got Union Pacific out of the Service Crisis ditch in 2022, for example.
Related to the above, most Western intermodal volume pressure this year has been on the networks of BNSF and Union Pacific has they’ve struggled with a surge in international imports. How did Thanksgiving help them? Intermodal network speed gained 6.6% at BNSF in reaction to a sequential 10.5% dip in intermodal loads last week, while Union Pacific’s intermodal network ran 3.7% faster as loads backed off 13%—in both cases a handy reprieve.
We recently noted that CSX and BNSF were already “in the green” in terms of equal weighted velocity and terminal dwell being at least 10% better than historical averages, while three other railroads were on the cusp. We can now add one more: Norfolk Southern. It has been a long time coming, and it’s not since 3Q20 that we’ve seen the composite of these two basic measures of asset turns in such good shape. Well done NS.
Finally, a volume update. You’ve probably noticed some funky YoY comparisons over the last two weeks as Thanksgiving fell on different railroad reporting weeks. That has now run its course and the clean 4Q24 quarter-to-date numbers are as follows. Volumes at the two Canadian rails were of course heavily impacted by last month’s Canadian port strike::
- BNSF +5.0%.
- Union Pacific +1.9%.
- Norfolk Southern +1.2%.
- CSX –1.3%.
- CN –7.0%.
- CPKC –7.3%.
