The U.S. Freight Railroad Industry Ohio Conference on Freight Toledo, Ohio September 21, 2011
Assn. of American Railroads www.aar.org SLIDE 2
Integrated With Mexico and Canada ~140,000 route-miles in U.S., ~40,000 in Canada & Mexico (370,000 km) 1.6 million freight cars 31,000 locomotives Seamless across borders except for Customs SLIDE 3
America s Freight Railroads Type of Railroad The U.S. Freight Railroad Industry: 2009 Freight Miles Revenue Number Operated* Employees ($ billions) Class I 7 93,921 151,906 $46.1 Non-Class I 556 45,197 17,985 3.3 Regional 23 12,804 6,025 1.3 Local Linehaul 339 25,977 5,937 1.3 S&T 194 6,416 6,023 0.7 Canadian** 2 561 n/a n/a Total 565 139,679 169,891 $49.4 *Excludes trackage rights. **Includes CN and CP operations that are not part of a CN- or CP-owned Class I carrier. Source: AAR SLIDE 4
Big Changes Since 1980 (Index 1981 = 100) Productivity Staggers Act Passed Oct. 1980 Volume Price Revenue Source: AAR SLIDE 5
Highest Share of Ton-Miles 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% (% of Ton-Miles) Railroads Pipeline Water '80 '83 '86 '89 '92 '95 '98 '01 '04 '07 Pipeline excludes natural gas. Source: U.S. DOT Trucks SLIDE 6
Railroads in the U.S. Carry Just About Everything Total Class I Railroad Gross Revenue 2010: $57.4 billion *Estimated. Some intermodal revenue is also included in individual commodities. Source: AAR Coal $13.9 bil. Intermodal* $11.3 bil. Chemicals $8.1 bil. All Other $5.2 bil. Food $4.7 bil. Forest products $3.1 bil. Steel, iron, etc. $2.0 bil. Transp. Equip. $3.7 bil. Farm Products - $5.3 bil. SLIDE 7
Record Capital Spending Expected in 2011 U.S. Freight Railroad Capital Spending ($ Billions) Data are for Class I railroads. e estimate Source: AAR SLIDE 8
Double the Freight on Same Amount of Fuel! (Index 1980=100) *in freight service volume = revenue ton-miles. Source: AAR SLIDE 9
Class I Railroad Employment Source: AAR SLIDE 10
RR Employee Compensation is Far Higher Than Average (U.S. Railroad Average vs. Average All U.S. Workers) Data are 2010. Sources: Bureau of Economic Analysis SLIDE 11
Two Things to Remember 1. Railroads are a derived demand industry. 2. GDP = C + I + G + (X-M) C = consumption (~70%) I = investment (~16%) G = government (~19%) X-M = exports - imports SLIDE 12
As the Economy Goes, So Goes Railroads SLIDE 13
Lower Consumer Confidence Since Early 2011 Index of Consumer Confidence (Jan. 1985=100) 2006 2007 2008 2009 2010 2011 Source: Conference Board SLIDE 14
Little Improvement in Unemployment Rate U.S. Unemployment Rate 2006 2007 2008 2009 2010 2011 Source: Bureau of Labor Statistics SLIDE 15
Job Growth Still Weak Net New Jobs Created (000s) Most = temporary Census-related jobs 2005 2006 2007 2008 2009 2010 Source: Bureau of Labor Statistics SLIDE 16
Housing is Still Terrible U.S. Housing Starts (seasonally-adjusted annual rate, millions) 2006 2007 2008 2009 2010 2011 Source: Census Bureau SLIDE 17
...Meaning Lower Rail Carloads of Lumber & Wood U.S. Housing Starts vs. U.S. & Canada Lumber Carloads Rail carloads (right scale) Housing starts (left scale, in 000s) 2006 2007 2008 2009 2010 2011 Source: Census Bureau, AAR SLIDE 18
A Slight Increase in Auto Sales U.S. Auto Sales* (seasonally-adjusted annual rate, millions) Cash-for-clunkers 2006 2007 2008 2009 2010 2011 *Passenger cars, SUVs, minivans, and pickups. Source: Bureau of Economic Analysis SLIDE 19
...Is Reflected in Rail Carloads of Autos & Parts U.S. Auto Sales vs. U.S. & Canadian Auto Rail Carloads (Index Jan. 2006 = 100) Rail carloads Auto sales correlation = 94% 2006 2007 2008 2009 2010 2011 Source: Bureau of Economic Analysis, AAR SLIDE 20
Coal Stockpiles Are Down From Record Highs 220 Coal Stockpiles at Electric Utilities (Millions of Tons) 200 180 160 140 120 100 80 2005 2006 2007 2008 2009 2010 2011 Source: Energy Information Administration SLIDE 21
Industrial Production Trending Slowly Upward U.S. Industrial Production (Jan. 2006 = 100) 2006 2007 2008 2009 2010 2011 Data are seasonally adjusted. Source: Federal Reserve SLIDE 22
A Corresponding Uptick in Rail Traffic U.S. Industrial Production (Jan. 2006 = 100) RR traffic Industrial production 2006 2007 2008 2009 2010 2011 *Carloads + intermodal units Data are seasonally adjusted. Source: Federal Reserve, AAR SLIDE 23
Mfg. Sales and Inventories Manufacturing Sales and Inventories (seasonally-adjusted, $ billions) Manufacturing inventories Manufacturing sales 2006 2007 2008 2009 2010 2011 Source: Census Bureau SLIDE 24
Inventories Now at a New Normal Level Inventory-Sales Ratio for Manufacturing 2006 2007 2008 2009 2010 2011 Source: Census Bureau SLIDE 25
Still a Gap Between Rail Traffic and Inventory Levels The Manufacturing Inventory-Sales Ratio vs. U.S. Rail Traffic* (Index Jan. 2006 = 100) Inventory-sales ratio correlation = -90% Rail traffic 2006 2007 2008 2009 2010 2011 *Carloads + intermodal units. Data are seasonally adjusted. Sources: Census Bureau, AAR SLIDE 26
Much of Rail Intermodal is Consumer Goods SLIDE 27
U.S. Rail Intermodal Traffic (Trailers and Containers) 260,000 250,000 240,000 230,000 220,000 210,000 200,000 190,000 180,000 170,000 2006 (peak year) 2011 2010 2008 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Data are weekly averages. Source: AAR Weekly Railroad Traffic SLIDE 28
Total U.S. Rail Carloads + Trailers and Containers 625,000 600,000 575,000 550,000 525,000 500,000 475,000 450,000 425,000 400,000 2006 (peak year) 2008 2010 2011 2009 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Data are weekly average originations. Source: AAR Weekly Railroad Traffic SLIDE 29
What s Next for the Economy? SLIDE 30
Assn. of American Railroads www.aar.org SLIDE 31