US Rail Volume Outlook Improves Amid Manufacturing Growth, Says AAR

The Association of American Railroads (AAR)

Potential Manufacturing Reversal Could Boost US Rail Activity in 2025

The future of US rail volume in 2025 is uncertain, but recent trends in manufacturing activity offer a hopeful outlook. According to the Association of American Railroads (AAR), growth in manufacturing could provide a crucial boost to rail volume. After 26 consecutive months of contraction, the US manufacturing sector showed signs of expansion in January, suggesting a potential reversal in industrial trends.

Manufacturing Growth and Its Impact on Rail Volume

The manufacturing sector in the US saw its first increase in January after a prolonged period of decline. This shift could drive up demand for various rail-hauled goods, including motor vehicles, steel, and crushed stone. According to the AAR, a continued increase in manufacturing could result in sustained demand for rail transport, particularly in non-coal shipments.

In January, US carload volume increased by 0.2% compared to the previous year, marking the first rise in five months. This increase is indicative of steady demand for goods transported by rail, especially outside of coal-related shipments. Grain loadings, which have been rising for 12 consecutive months, saw a notable 6.1% increase. Likewise, chemical traffic grew by 4.8%, continuing a 17-month streak of gains.

Challenges Amid Gains: Weakness in Industrial Products

Despite the positive trends, not all sectors of the rail industry are showing improvement. The volume of industrial products decreased in January, reflecting the broader weakness in the US industrial economy. Auto volume dropped by 6.7%, and primary metal products experienced an 8.5% decline. This indicates that some areas of rail freight, particularly in manufacturing-intensive industries, are still struggling.

Coal, however, may be showing signs of stabilization. After a 2.3% decline—the smallest in 13 months—there is cautious optimism surrounding the future of coal transport. As the largest single carload commodity by volume, any stabilization in coal could positively impact overall rail volume.

Intermodal Volume Shows Resilience

One of the bright spots in rail transportation continues to be intermodal shipments. These shipments, primarily consisting of consumer goods in containers, rose by 10% over the previous year. This marks the 17th consecutive month of growth in intermodal volume. The weekly average volume in January reached 265,943 containers and trailers, the highest level recorded for that month except in 2021.

However, intermodal volume remains susceptible to fluctuations in global trade, tariff policies, and inflation. These factors could influence the movement of goods across international borders, potentially affecting rail volumes in the future.

Conclusion: Cautious Optimism for US Rail Volume in 2025

In conclusion, while challenges remain, particularly in certain sectors of the industrial economy, the overall outlook for US rail volume in 2025 shows cautious optimism. Manufacturing growth, stable trade flows, and a potential turnaround in key sectors could support rail demand in the months ahead. The AAR’s analysis suggests that, with a steady recovery in manufacturing and economic trends, the rail industry may see positive growth in the coming year.