Rail Demand Will Remain Soft

Strong volumes in Canada kept intermodal numbers for North American Class 1 railroads from falling even further. Overall volumes were tracking below 2006 levels in part because of weakness in the housing sector and reduced Asian imports.

Bulk commodities for export markets have been increasing while imported consumer goods were on the decline.

“The rail industry has finally ‘lapped’ the weakness in the housing, automotive, and related industrial sectors that began in 3Q06,” notes Stifel Nicolaus. The intermodal market remains soft, continues the analyst report, as real consumer spending has decelerated and retailers have been importing less freight.

The traditional pre-holiday peak in volumes did not emerge in 2007 and may be a thing of the past, says the report. Overall, Stifel Nicolaus anticipates rail volumes will remain weak for the next several quarters.