We’ve now seen three weeks of suppressed intermodal volumes at Union Pacific and BNSF due to the China air pocket effect, which is a lagging consequence of the 145% U.S. tariffs on Chinese imports between April 9 and May 12, after which it fell—to a still onerous 30%.
Here are the updated volume charts, with the dotted line showing something that approximates normal seasonality, and that highlights the tough back-half comps (light green lines) the Western railroads will be dealing with a month from now.
The railroads have reported volumes through May 24, and the Port of Los Angeles reported a 25% YoY drop in inbound containers in the week ending May 31, so we’re not out of the woods yet.
CSX Operational Recovery, Week 6
CSX racked up a sixth week of sequential improvements in the week ending May 23, with most key metrics better, including terminal dwell, hump yard dwell, cars-on-line and operating inventory, and the proportion of this inventory that was slow-to-move (sat idle for 48-plus hours during the week).
At this point, all the above have essentially normalized, and CSX is left with one problem, which of course is velocity. You can see in the chart below that after a good rebound from the Kentucky and Tennessee flooding in early April, it’s stalled out just below 24 mph in recent weeks, which is 6% below where it was at this time last year and 11% from two years ago.
It’s not a terrible deficit but will still act as a modest brake on earnings until asset velocity can be fully restored. The only question is whether the reroutes around Baltimore’s Howard Street Tunnel and the Blue Ridge Subdivision in North Carolina and Tennessee preclude better velocity until those reroutes are removed in 4Q2025, or whether a combination of continued operating plan fine tuning and better execution can improve speed earlier. We shall see.
