The STB hearing on U.S. Class I volume growth—or lack thereof—shined a spotlight on this important issue, and before that spotlight fades and we get back to the business of not growing, we were interested in coming up with a visual representation of the problem. The patchwork below shows consolidated annual volume growth for Union Pacific, BNSF, CSX, and Norfolk Southern so far this century, by 16 product categories. The categories are ordered from highest to lowest 2024 YTD volumes, left to right:
There’s obviously way too much red (negative growth) on this image for anybody’s liking, and the basic takeaways are that intermodal can generally be relied upon to grow in two out of every three years, coal to decline in roughly two out of every three years, and for every other commodity it’s basically a coin toss. It’s instructive for financial forecasting because most of us on Wall Street model positive volume growth for most commodities in future years. But it just isn’t the case. This results in volume bias that is usually too favorable compared to the reality that subsequently unfolds. The sad reality is that modeling some growth in intermodal, declines in coal, and ZERO for everything else is going to get you in the ballpark most of the time.
Hurricane Helene Hits Eastern Railroads Hard
Hurricane Helene has proven to be horrendous, with a (still growing) death toll, the third highest in recent history, trailing only Maria in 2017 and Katrina in 2005. In a railroad context it’s probably the second worst behind Harvey, which inundated flood-prone Houston in 2017. CSX and Norfolk Southern have scrambled as usual to quickly remediate track washouts, clear downed trees and restore power, but Helene is unique among recent storms in that it has left both railroads with some significant infrastructure damage, primarily in North Carolina around Asheville, one of the communities most devastated by Helene. Regarding CSX, it lost two bridges and sustained 44 miles of track damage between Erwin, Tenn. and Spruce Pine, N.C., which we show in red on the map below. This is about 40 miles northeast of Asheville. Only about five to seven trains per day use this line, mostly merchandise plus a little coal. There’s no timeframe for remediation, but CSX should be able to route around this outage without any significant network-wide effects. As usual, the operating data will tell the story over the next few weeks.
Regarding Norfolk Southern, its track actually runs through Asheville, and the outage here is the only remaining one on NS’s network. We don’t have any more information than that. Next week’s operating metrics for CSX and NS will no doubt be ugly (only one day of the storm was captured in the latest data, through the week ending Sept. 27), but what matters is always recoverability. We suggested a one-week storm impact followed by two weeks of recovery to clear backlogs and spin the networks up, but given the scope of Helene that’s probably a best-case scenario.
