Rail Traffic Trends: A Weak Start to 2025 Amid Shifting Market Dynamics

The North American rail industry saw a 1.2% decline in total rail traffic last week, with carloads falling 5.9% while intermodal traffic increased 3.5%. These shifts highlight the ongoing challenges for rail freight, particularly in carload traffic, as well as the evolving landscape of intermodal demand.

Carload Traffic: Declines Extend into 2025

Carload traffic continues to struggle, extending the weakness observed throughout 2024. The concerning trend is that even commodities that had been growth drivers last year are now in decline:

• Grain: After finishing 2024 up 4.8%, it fell 9.7% y/y this past week and 6.1% over the past four weeks.
• Chemicals: After a 3.1% gain last year, it dropped 5.6% this past week and 1.8% over the past four weeks.
• Other significant declines:
  • Metal products: ↓ 12.0%
  • Coal: ↓ 7.5%
  • Forest products: ↓ 4.3%

The only bright spot in carload traffic this past week was petroleum products, which posted a 3.7% y/y gain.

Intermodal Growth: Moderation After a Strong January

Intermodal traffic remains positive y/y, but growth has moderated in recent weeks. The primary driver of the earlier strength was an inventory pull-forward, partially in response to anticipated tariffs on goods from China, Mexico, and Canada. This effect was particularly visible among western U.S. carriers:

• BNSF has seen three consecutive weeks of moderating y/y growth.
• Union Pacific (UP) has posted five straight weeks of slowing growth.

Tariff-Driven Surge in Imports

One major factor influencing intermodal trends has been the spike in imports ahead of tariff increases. The Port of Long Beach reported its busiest January ever, moving 952,733 twenty-foot equivalent units (TEUs)—a 41.4% increase from last year and 18.9% above the previous record from January 2022.

This surge was primarily driven by retailers frontloading shipments to get ahead of expected tariff hikes on imports from China, Mexico, and Canada, and the possibility of an East and Gulf Coast port strike. While a 30-day pause on tariffs for Canada and Mexico has been granted, China did not receive a reprieve, leading to:

• A 10% increase in duties on Chinese goods.
• Chinese retaliatory tariffs on U.S. exports of LNG, coal, and farm equipment.
• Restrictions on exports of key rare earth minerals like tungsten and bismuth.

Looking Ahead

While intermodal growth remains positive, it is expected to moderate further as the impact of frontloaded imports fades. Carload traffic, on the other hand, faces an uphill battle given the broad-based weakness across key commodities. Additionally, trade tensions and tariffs will continue to shape freight movements, potentially creating volatility in demand for both rail carload and intermodal services.

As we move deeper into 2025, close attention to macroeconomic trends, inventory levels, and policy developments will be critical in assessing where rail freight demand is headed next.