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Tuesday, August 11, 2009
freight - us and recession style
Most people think of the USA as pretty much backwards transport wise, but in fact as rail freight goes it is cutting edge. Most freight in the USA is moved by rail, not road.
So this piece, in an investment newsletter, caught my eye. To me it shows that rail is beginning to push itself to the front of the agenda, and also really does provide an indicator of economic activity, something our clogged roads can never do!
The No. 1 Reason I Don’t Trust This Market
BY TOM DYSON
The train drew round the bend and approached the crossing. The warning bells rang, and the barriers fell across the road. Then the engineer pulled four long blasts on his horn. Two 4,400-horsepower GE locomotives rolled past me at low speed ... bending the rails with their weight. This was an express container train bound for Chicago..."Shorter than normal," I thought. "And more empties than usual." Last week, I was on vacation in California. While I was there, I took the opportunity to gauge railroad activity. We drove a hundred miles beside Union Pacific's southern California mainline. This is one of the most important stretches of railroad in the country. It links the ports of Long Beach and Los Angeles with the eastern seaboard. I was expecting to see dozens of trains. We only saw two...
Then we stopped in Los Angeles to ogle the huge tangle of idled Union Pacific locomotives outside the Port of Long Beach. There must have been over 100 of them.
Freight trains move our most important basic materials around the country... like coal, fertilizer, steel, and container boxes. By watching the trends on America's freight railroads, you can get an excellent feel for the strength of the economy.
Right now, the railroads are hurting. Railcar loadings are down about 20% from last year's levels, railroads have abandoned half a million freight cars and idled over 5,000 locomotives. CSX Railroad has even closed a local freight yard near where I live in Florida and is using it entirely for storage.
Here's the thing: Since the stock market started rising in March, and the news from the housing market has improved, everyone's talking about economic recovery and the end of the recession. Last week, the non-farm payroll numbers came out. They were stronger than expected, sending the stock market to a new nine-month high... So why is business in the railroad industry still deteriorating?
This month's issue of Trains Magazine features a study of the number of locomotives held in storage by the major, "Class 1" railroads. The number of idled locomotives has swelled 57% between March and June...
Each quarter, Economic Planning Associates releases its Rail Car Overview report. In the second quarter, orders for new rail cars by railroads and shippers tumbled to 2,165 units from 2,374 units in the first quarter.And finally, the Association of American Railroads released its weekly report on rail car loadings last Thursday...
For the first seven months of 2009, total U.S. rail car loadings were down 19%, while container and trailer transportation fell 17.2%. All 19 major commodity categories tracked by the AAR saw car loads decline in July. The biggest declines were coal (down 9.9%), metals and metal products (down 47.7%), metallic ores (down 58.9%), and crushed stone and gravel (down 25.8%).The message from the railroads is, the economic recovery is a mirage. Things are going from bad to worse. Until you see the railroads turn around, you should continue to be suspicious of the rally in the stock market and the "green shoots" story in the news.