Why Rail Is Booming: Intermodal & Carload Growth Explained

U.S. rail traffic is experiencing significant growth, with intermodal and carload volumes reaching new peaks. This expansion is not limited to specific industries, but rather reflects broad-based growth across nearly all sectors, driven by limited trucking capacity and elevated diesel prices. Intermodal rail traffic increased by 10.4% compared to the same period last year, while domestic carload volume rose by 3.4%, resulting in an overall U.S. rail traffic increase of 7.2%.

North American figures also showed positive trends, with carload volume up by 2.6% and intermodal traffic increasing by 9.1%, equating to a combined gain of 5.9%.

The data highlights the importance of this industrial expansion, indicating it is not just a short-term spike. In September and the third quarter, 17 out of 20 carload categories posted year-over-year gains, with chemicals traffic setting a September record and appearing on track for a new annual record. Western railroads took the lead in intermodal growth, with BNSF Railway up by 12.5% and Union Pacific up by 19.4% for the week.

Eastern carriers also demonstrated solid performance, with CSX up by 8.9% and Norfolk Southern up by 5.4%.

The surge in intermodal traffic can be attributed to multiple factors, including record container volumes moving through key West Coast ports, such as Los Angeles and Long Beach, which are now having a positive impact on the broader economy. Consumer goods spending has also shown resilience, with an increase of 2.7% in August, according to the AAR.

However, the AAR has flagged a potential concern: if diesel prices remain persistently high, it could lead to a softening of consumer spending. Inflation data is beginning to extend beyond gasoline prices, with rising food costs being a factor to watch for freight segments dependent on consumer demand.

On the regulatory front, the Surface Transportation Board is reviewing the Union Pacific-Norfolk Southern merger, and parties are filing their intent to participate. The board member Richard Kloster has called for stronger data and better arguments, suggesting that this may reflect the broader sentiment of the board members. Further details, including the outcomes of earnings calls by both railroads, are expected and will likely address questions raised by other railroads and Kloster's recent remarks.