A Classic Exampe of "Putting Lipstick on A Pig"

• Posted by ToddSullivan
• on January 30th, 2009

I had to read this four times to be sure I wasn’t crazy (I may be.but not because I read this wrong).

Here it is:

Even with a down economy in 2008, United States railroad volumes for the year were the fourth highest on record behind 2005, 2006, and 2007, according to data released by the Association of American Railroads (AAR).

OR could be have just as accurately said “rail volumes were the lowest in 4 years”?

Here is the rest of the article:

The AAR said U.S. freight railroads originated 16,752,709 carloads in 2008, representing a 2.2 percent—or 380,805 carloads—decline from 2007. Intermodal loadings at 11,517,240 trailers and containers were down 4.2 percent—or 509,391 units—for the year. And combined U.S. carload and intermodal units for the year were 28.09 million.
And estimated ton-miles for 2008 came in at 1,728.7 billion, a 1.3 percent drop off from 2007.
Yearly totals would have been stronger had economic volume tailed off at such a hectic clip during the fourth quarter of 2008.

“During the first nine months of the year, there were some real strong spots with certain commodities like grain, and coal which was strong all year,” said AAR Director of Editorial Services Tom White in an interview earlier today. “There were a few areas that helped make up for those that were down [like autos and housing-related commodities]. As we got into the fourth quarter, particularly in November and December, things really began to deteriorate more so than earlier in the year.”

Commodity breakdown: Motor vehicles and equipment loadings were down 219, 603—or 21.2 percent—at 817,744 for the year. And crushed stone, sand, and gravel loadings were down 95,270—or 8.8 percent. Only grain, metallic ores, coal, and “all other” carloads saw annual increases, according to the AAR.

When asked about the railroad industry’s overall health at a time when the economy is sluggish, White noted that 2007 was the industry’s best year in history in terms of revenue, and earnings, coupled with the first three quarters of 2008 being fairly strong.

“The railroad industry is much better positioned to take the negative impacts of a deep recession than it ever was in the past 50 years,” said White. “That is because over the past number of years railroads have been able to invest a great deal of money into infrastructure [and other efficiencies] and things that strengthen the industry long-term. That is all very positive, as well as the fact that balance sheets headed into the recession were very strong. This speaks well to the railroad industry’s ability to weather the recession and be in a strong position once the economy does really turn around.”

So, we now know business for rail shippers like CSX (CSX), Norfolk Southern (NSC) and Burlington Northern (BNI) is dropping, hard.

When one also adds that International Air Freight fell 22% in December we would not expect any improvement anytime soon. Air freight matter because in order to get goods to or from the airport, rails are used heavily.

This is bad news for rails (and the economy as a whole), there is no sugar coating it no matter how bad the AAR wants to try..

Disclosure (“none” means no position):None

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