US railroads pull ahead as high fuel costs hit truckers harder
UNP•High fuel prices and shrinking truck capacity are shifting long-haul freight from trucks to rail, lifting third-quarter results at Union Pacific, Norfolk Southern and CSX. Their intermodal volumes rose 13%, 3% and 7%, respectively, year over year.
1. Freight shifts to rail
Union Pacific, Norfolk Southern and CSX reported higher third-quarter revenue and profit as shippers shifted freight from highways to trains, executives said. Union Pacific's domestic intermodal volume rose 13% year over year, while CSX's increased 7% and Norfolk Southern's 3%.
2. Fuel costs pressure margins
Diesel reached a record $6.53 per gallon in September, according to AAA data. Higher fuel costs also raised railroad expenses: Union Pacific said fuel prices hurt its third-quarter operating ratio by 140 basis points, while Norfolk Southern said fuel accounted for about half of the year-over-year increase in both revenue and expenses. Fuel surcharges offset some of the pressure.
3. Truck capacity shrinks
Railroads are also gaining freight as a prolonged downturn, high operating costs and stricter driver enforcement limit the return of trucking capacity. American Trucking Associations Chief Economist Bob Costello said recent tonnage levels reflected reduced capacity rather than robust demand.
