American freight railroads are optimistic about the coming year, according to their association’s monthly report.
December can be a slack month after the holiday rush, and the Christmas spirit runs dry. However, according to the monthly report from the Association of American Railroads (AAR) the industry is on an upward trajectory and has good prospects for 2025.
The AAR is looking forward to a year that builds on growth in the rail freight sector. That growth is bucking some economic trends. In November 2024, their bellwether “Freight Rail Index (FRI) was the highest since May 2021 and up 2.8% over October 2024. This suggests that the industry remains generally on solid ground while the economy has its challenges.
New year, new challenges
In the last weeks of 2024, the US economy is holding steady, says the AAR. They understand this to be driven mainly by robust consumer spending. That, in turn, is playing into its members’ hands. It’s driving intermodal rail volumes to new highs.
However, the AAR notes that there is a persistent weakness in domestic manufacturing. That suggests that import volumes are behind the surge in intermodal traffic. Wider economic indicators back that up. Mexico, China and Canada each account for about 15% of all imported goods into the US.
Carloads and coal are mixed news
In common with many other developed economies, one of rail’s staple loads is in decline. The AAR says that the decline in coal demand continues to weigh down on overall rail carload performance. “Coal is the biggest problem,” notes the AAR monthly report. “US rail carloads of coal were down 15.2% in November and down 14.0% in 2024 through November. Higher coal exports this year have not been enough to counteract lower domestic coal demand.
While not as pronounced as, say, the United Kingdom, where coal traffic is negligible due to a policy of decarbonising the energy generation sector, traffic is in sharp decline. Coal accounted for just 15.2% of US electricity generation in 2024 (figures to September). That represents a low for the century and much of the twentieth century too. “Year-to-date coal carloads of 2.71 million were the lowest in our records,” says the AAR.
Record intermodal traffic
WorldCargo News analysis of the AAR’s Freight Rail Index shows that coal traffic still represents 25.9% of the carload total. That’s well ahead of second-place chemicals (14.8%) and third-place grain (9.4%). Excluding coal, US carloads rose 1.0% in November, their tenth straight year-over-year gain. Year-to-date carloads were up 1.4% – the most since 2019. However, it is intermodal traffic that defines modern railroads in the US (and in many other parts of the world). This traffic is surging, across borders and particularly through US ports.
An average of 282,000 intermodal containers and trailers (trucks ‘piggyback’ on trains) were carried per week in November 2024. That’s up 10.7%, year on year. It’s also the highest weekly average for any November in AAR records, dating back to 1989. Intermodal volume in 2024, to November, was 12.75 million units. That’s up 9.1% over last year and the third most ever (behind 2018 and 2021). The AAR notes that cargo diversion and front loading of imports are partly driving this growth, and there is much uncertainty over how 2025 will unfold. “The combination of strong intermodal growth and stable consumer demand offers reasons for optimism, but railroads and the economy alike must navigate evolving policies and potential disruptions. Vigilance on these economic indicators will be critical in assessing the trajectory of rail traffic and broader economic health in the months ahead,” AAR concluded.