Rail News Home Rail Industry Trends December 2016 Rail News: Rail Industry TrendsCompiled by
This email address is being protected from spambots. You need JavaScript enabled to view it., Managing EditorNothing like a high degree of uncertainty heading into 2017 after dealing with a lot of volatility throughout 2016. That’s the position Class I chief executive officers find themselves in, which makes it difficult to gauge their respective railroad’s chances of growing revenue and traffic next year.The contentious presidential election didn’t provide much clarity on the economy’s direction or business climate’s condition after a mostly sluggish 2016 spelled traffic drops and revenue declines for Class Is. And with the new year about to dawn, there were more questions than answers about the impending administration’s business-building objectives.For example, several media outlets last month questioned whether President-Elect Donald Trump’s proposal to “tear up” the North American Free Trade Agreement would negatively impact
Kansas City Southern, which generates a good chunk of its annual traffic and revenue from business in Mexico. But as of mid-November, there wasn’t enough information available to make an informed decision, says KCS President and CEO Patrick Ottensmeyer.“The truth is, we don’t know yet,” he says. “The government is run by checks and balances. It would take congressional action to get something done that would be drastic.”KCS should have a seat at the table to address anything that could directly impact the company, Ottensmeyer believes.“We want to engage in the dialogue,” he says.In the meantime, KCS isn’t doing anything differently despite the murkiness. Ditto for the other Class Is. They plan to stay the course until there’s a reason to alter it.Following are comments from Class I leaders about how they expect to continue “grinding it out” next year, as
CN President and CEO Luc Jobin characterizes it. In addition to Ottensmeyer and Jobin, Progressive Railroading received emailed responses to “Outlook 2017” questions from
BNSF Railway Co. President and CEO Carl Ice;
CSX Chairman and CEO Michael Ward;
Canadian Pacific CEO E. Hunter Harrison; and
Union Pacific Railroad Chairman, President and CEO Lance Fritz.
Norfolk Southern Corp.’s responses were submitted by Executive Vice President and Chief Marketing Officer Alan Shaw.The online version of this December issue article includes longer responses from some of the seven execs, as well as Outlook 2017 commentary from
OmniTRAX Inc. CEO Kevin Shuba (see far below).Q: What's your take on the potential for volume growth in 2017? Are there certain commodities/business groups you feel pretty good about heading into next year?Fritz: As outlined in our third-quarter earnings release, the macro-economic environment faces several significant challenges: an unstable global economy, a relatively strong U.S. dollar and continued soft demand for consumer goods, specifically those shipped via intermodal containers. However, certain segments of the economy are showing signs of life, and we’re optimistic about volume growth in some business segments. For example, increasing crude oil and natural gas prices are encouraging indicators for our coal and shale-related businesses. We also were pleased to see strength in the overall grain market and expect lumber to be stronger as housing starts continue expanding. Additionally, light vehicle sales remain robust, forecasted to finish 2016 less than half a percent lower than 2015’s record rate, still well above levels immediately following the Great Recession.
Lance Fritz We expect continued headwinds for intermodal, with international volumes adversely impacted by a strained ocean carrier industry which saw three major mergers and a bankruptcy in 2016. Thanks to our strong and diversified franchise, we are developing opportunities in intermodal, offering shippers unique “matchback” options. It works like this: we help our agriculture-based shippers find ways to reuse empty containers returning to Asia. Additionally, relatively low natural gas prices have made the United States a low-cost industrial chemicals and plastics producer, providing us opportunities to grow this business, which typically moves from the Gulf Coast to Asia.
Despite economic challenges, we will continue doing what we do best: operating a safe, efficient and productive rail network. We remain committed to strengthening our customer value proposition and driving new business opportunities. As they arise, we are well positioned to respond quickly and efficiently. Most important, we expect our unrelenting safety focus to yield positive results on our way to an incident-free environment.