At Gerdau, we follow the AAR report is because; freight railroading is a “derived demand” industry: demand for rail service occurs as a result of demand elsewhere in the economy for the products railroads haul. Thus, rail traffic is a useful gauge of broader economic activity, especially of the “tangible” economy.

Total US carloads excluding coal was up 2.0% in December 2016 over December 2015 (m/m) and off 1.5% for the year. Metallic ores (primarily iron ore) decreased 4.3% m/m and were down 12.7% y/y. Primary metal products carloads increased by 3.9% m/m but fell 6.5% for the year. This was the first monthly increase after a 20 month string of declines. Scrap carloads jumped 23.4% m/m as the market for scrap turned around starting in November. On a 12 month measure scrap was down 2.0%. Carloads of motor vehicles and parts rebounded m/m to +5.3% after a down month in November. For the year motor vehicles and parts recorded 2.1% growth.

Total intermodal jumped 11.2% m/m, (containers +11.6% & trailers +8.4%). For the year intermodal eked out a 0.5% gain. Total cars plus intermodal grew by 6.9% m/m but was off 5.0% for the year. It is encouraging that the last two months are showing growth indicating stronger economic activity heading into 2017.

Jan.12.2017.Rail.Fig.1

Figure 1

Figure 1 presents a chart comparing the growth of rail carloads of motor vehicle & parts, primary metal products, metallic ores and iron and steel scrap from 2010 to present.

Total Canadian carloads excluding coal increased 9.2% m/m but was down 3.9% through December. Metallic ores (primarily iron ore), surged by 51.2% m/m but on a y/y basis was down 5.5%. Primary metal products carloads declined by 11.2% m/m and 17.1% y/y. Scrap carloads surged 23.7% m/m, it was up 1.4% y/y. Carloads of motor vehicles decreased by 1.2% m/m however climbed 3.4% for the year.

Total intermodal was climbed 9.7% m/m, (containers +9.5% & trailers +26.4%), but was down 1.2% on a y/y basis. Total cars plus intermodal grew by 8.7% m/m but was off 3.1% for the last twelve months y/y. Much like the situation in the US, economic activity ticked-up a bit over the past two months.

Figure 2 presents a chart comparing the growth of rail carloads of motor vehicle & parts, primary metal products, metallic ores and iron and steel scrap from 2010 to present.