For railways, clearly demand will be strong in 2019, even against “tough comparisons.” But can they, to paraphrase the largest railroad’s slogan, “handle it”? The short answer is yes — even in a year of disappointing service metrics, the rails handled the volume in 2018 — just not as quickly nor as efficiently as they had a few years before, or that their customers (and shareholders) would have liked to see.
Looking at one critical component, domestic intermodal, the rails have (year to date) achieved a 6 to 7 percent growth rate, with domestic container business up 5 percent. But is that good enough, in this best-of-all-worlds truck-competitive market? Or will we look back on 2018 as a year of missed opportunity?
The rails have dramatically attempted to address these issues through restructuring (CSX, clearly on the upswing) or plans to do so (essentially every other US rail). The two Canadian originators of precision scheduled railroading (PSR) have been spending the capital required to maintain growth in a post-PSR revolution model.
How the US, particularly Union Pacific and Norfolk Southern, responds to these PSR-influenced changes will be on every shipper’s mind as we enter the new year; I suspect that the combination of new operating plans, management (again, and shareholder) attention, and capex will yield good results on the service (velocity, dwell side).
But then there is the macro-drama, from market fears of “peak earnings” to lapping the tax cut to trade wars (impacting about half of the rail business — and the better half at that) to who knows what will be tweeted next?
For the long term, the rails have the financial wherewithal and their enduring network advantage to prevail over the turbulence; their actions suggest they are addressing them, the rest is … harder to analyze.