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CSX’s Intermodal Has Lower Slump than Total US Intermodal Decline


Dec. 4 2020, Updated 10:42 a.m. ET

CSX’s intermodal traffic

In the week ended April 9, 2016, CSX Corporation’s (CSX) total intermodal traffic declined by less than 2%. The overall traffic fell from ~54,000 units in the week ended April 11, 2015, to nearly 54,000 units in the latest reported week.

Containers declined by just 1% in the reported week of 2016. Trailer traffic also fell by ~17% in the same week of 2016 compared with the week ended April 11, 2015. However, the fall in CSX’s total intermodal traffic was relatively smaller than the 8% fall in total US intermodal traffic in the week ended April 9, 2016.

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Why does intermodal matter for CSX?

Railroads are four times more fuel-efficient than trucks, and the driver shortage in trucking is fueling intermodal growth. While about half of US’s rail intermodal volume consists of imports and exports, railroads are more environmentally desirable than the heavy reliance on highways for freight transport. In 2015, intermodal accounted for ~20% of revenue for the major US railroads.

Why does this matter? Intermodal is viewed as a solution to subsidize the shrinking coal business by all the Class I railroads. Intermodal volumes were roughly 42% of CSX’s total volumes in 2015, and its share of the company’s 2015 revenue was ~15%.

Key factors affecting intermodal traffic

Intermodal traffic is largely dependent on factors such as access to major seaports, highway-to-rail conversions, exclusivity to certain ports, and retail sales. The Association of American Railroads (or AAR) has observed a strong positive correlation between retail sales and rail intermodal in recent years. The AAR noted that the intermodal growth came through highway conversions rather than consumption. However, according to the AAR, the rise in intermodal doesn’t necessarily translate into growth in retail sales.

Among the major freight rail carriers, Norfolk Southern (NSC), Union Pacific (UNP), Genesee and Wyoming (GWR), BNSF Railway (BRK-B), Kansas City Southern (KSU), Canadian Pacific (CP), and Canadian National Railway (CNI) have recently focused on improving their intermodal volumes and pricing.

Investors who would like exposure to the transportation space can invest in the Morningstar Wide Moat ETF (MOAT). All major US railroads make up 10.8% of the portfolio holdings of MOAT.

For more information on the last week’s rail traffic, please read Mexican Railroads Shine as US and Canadian Railroads Slump.


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