First the BALTIC SEA RATE collapses now its the RAIL COLLAPSE!

John D. Boyd
Associate Editor
CHECK THIS GRAPH!
Rail freight is starting 2009 with momentum in the wrong direction.

Railcars loaded with bulk materials for factories, or even with semi-finished or finished goods such as metal products or automobiles, are shrinking at the fastest pace since the modern rail system evolved.

Even in intermodal loads, an area where trains can show a distance-haul advantage over trucks, volume is falling as fast as that of bulk carloads.

Preliminary rail freight figures for most of December show carloads fell 13.6 percent from a year earlier at major U.S. rail lines, and intermodal dropped 14.3 percent.

Both numbers were significantly weaker even than in November, which had been a very bad month for the industry as carloads fell 10.1 percent behind the 2007 month and intermodal loads were 7.9 percent lower.
In all, major U.S. railroads hauled about 168,000 fewer carloads in December than a year ago, equal to removing about 2,400 trains from the system.

Before December began, industry experts hoped there might be some better volume comparisons from 2007, when railroad traffic was slammed by a series of harsh winter storms. But instead of the freight hitting bottom, which would point to a rebound before too long, December data suggests freight demand is still falling as 2009 gets under way. Analyst Edward Wolfe of Wolfe Research said the December figures reflect "the worst single month of data we have back to 1990."

And while that data looks back at what happened as 2008 ended, Wolfe warned that freight activity could be headed downward for a while.
"On top of weakened demand generally, we believe we are stuck in a period of material inventory drawdown and extended production shutdowns," he said in a Jan. 5 report.

He cited output cuts announced by a number of large manufacturers, which are also big railroad customers, including Dow Chemical, U.S. Steel, Caterpillar, Alcoa and Potash. In addition, automakers have all cut back in the face of plunging car sales.

Sensitive cargoes are still falling. Loads of chemicals and scrap material - both early indicators of a pickup in manufacturing demand - were both flashing red signals. Chemicals loadings began December down 13 percent from the same week in 2007, and slipped further every week until ending the Dec. 27 holiday week 31 percent behind.

Meanwhile, scrap material loadings trailed the 2007 December weeks by 25 percent to 34 percent.

It was even worse for cargoes linked directly to the housing market. Railcar loads of lumber and wood products trailed the corresponding 2007 week by 27 percent as December began, then by 38 percent, 46 percent and 50 percent.

Even long-reliable coal, needed for domestic utilities and factories but also in strong demand from overseas, began to show weakness in December as the global recession deepened and the rising U.S. dollar made exports more expensive to foreign buyers.

U.S. factory purchasing managers confirmed the bad news in a survey released Jan. 2, when the Institute for Supply Management said its factory activity index fell again in December, to a level of 32.4 from 36.2 in November. Any reading below 50 indicates that sector is contracting, and it has not been close to 50 since August.

Norbert J. Ore, chairman of ISM's manufacturing business survey committee, highlighted a number of warning signs that point to even lower factory demand for freight service.

Ore said factories report that their "new orders are at the lowest level on record going back to January 1948," and the backlog of unfilled orders is the lowest since ISM started keep track of it in 1993.
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