Record profits were noted at Norfolk Southern, an increase
of 26% to $410m; CSX with an increase of 13.7% to $449m; CN with an increase of
16% to $781.3m and UP with an increase of 25% to $863m.
However, despite the strong increases in revenue and profit,
growth in volume was minimal for some providers. UP, Norfolk Southern and CSX
all reported only 1% increases. A decline in demand for coal was the primary
culprit of the lackluster increase in volume. However, CN reported a 5% volume
increase noting double-digit volume increases in its intermodal and metals and
minerals business units. Intermodal volume growth of 18% and automotive volume
growth of 14.4% helped Kansas City Southern achieve 7% increase in volume.
Intermodal remains strong for the railroads – particularly
domestic networks. International intermodal networks continue to remain weaker
than domestic networks but should pick up as the year progresses . Norfolk
Southern noted a 3% decline in its international intermodal service mostly due
to volume reductions associated with Maersk.
The warm winter and weak demand for electricity attributed
to declines in coal however, the railroads noted strong increases from automobile
manufacturers. According to industry forecasts, 2012 North American automotive
production of vehicles is expected to increase 13% over 2011. CSX, UP, Norfolk
Southern and Kansas City Southern all noted increases in not only volume but also
revenue from this segment.
Kansas City Southern, one of the smaller Class I railroads
and perhaps one of the most unique has invested heavily in Mexico providing
service from Mexico’s west coast port of Lazaro Cardenas into the US. The
company reported cross border revenues increased 28% with cross border grain
revenues increasing 26% and cross border intermodal revenue increasing 87%.
Nearsourcing to Mexico was attributed to the increase in cross-border activity
particularly within the automotive industry. According to Kansas City Southern,
automobile manufacturing in Mexico is projected to increase by over 40% by
2015.
As the railroads continue to take freight from trucks via
such services as intermodal, Kansas City
Southern and Norfolk Southern recently launched a joint service – TMX – which
runs a 53ft rail-controlled container on a dedicated route between Kansas City
Southern’s intermodal centers in Mexico and Norfolk Southern’s intermodal
centers in Atlanta, Georgia and Charlotte, North Carolina. The service is
designed to be competitive with truck-only service.
The outlook for the railroad industry should remain positive
particularly as the automotive industry continues to increase production
throughout the North American region. Intermodal should also continue to see
modest growth. Combined, these should offset any further possible declines in
agriculture and coal.
