Coal Freight Could Surge in Q4: What Rail Data Reveals

Rail Freight Forecast: Coal Volumes Set for a Modest Q4 Uptick

Coal remains in a long-term decline as a U.S. rail commodity, but recent data and a new forecast point to a limited rebound in shipments later this year.

Telegraph’s Freight Market Intelligence group is projecting less than 1% year-over-year growth in national coal carloads during the fourth quarter. The expected increase would be small, but it would mark a notable change for a commodity that has been losing volume and rail share for more than a decade.

The forecast follows a stronger-than-expected start to 2026. In January, U.S. coal carloads increased by more than 10,500 loads, or 4.7%, compared with January 2025. It was the largest monthly percentage gain since May 2025. Coal volumes have posted year-over-year gains in eight of the past 11 months.

Several short-term factors have supported coal consumption and production since 2025, including economic conditions, weather and policy developments. Telegraph Director of Freight Market Intelligence David Correll said the anticipated fourth-quarter improvement is being driven primarily by export opportunities.

Coal volume growth reported by CSX and Norfolk Southern in their second-quarter results also supports that view. Export demand can be particularly important for eastern railroads, which connect domestic mines with Atlantic and Gulf Coast terminals. For truck drivers, the effect is generally indirect but can show up in higher activity around mines, transload facilities, ports and industrial customers that handle rail-served energy products.

Domestic power generation is another factor in the outlook. Correll said the pace of coal-fired power plant retirements has slowed, while data center construction is increasing electricity demand in some regions. That could provide a secondary lift to coal consumption, although the forecast does not call for a broad reversal of the industry’s long-term direction.

“I don’t want to say that we’re completely flipping the script,” Correll said in comments on the forecast. “It’s gradual and it’s modest.”

Rail volumes show mixed performance

Coal was one of the leading contributors to overall rail carload growth in January. Total U.S. carloads rose 4.4% from a year earlier, with 12 of the 20 major categories tracked by the Association of American Railroads reporting gains. Grain, coal and industrial-related products led the increases.

Carloads excluding coal rose 4.3% in January, producing the 21st year-over-year gain in that measure during the past 24 months. The seasonally adjusted AAR Freight Rail Index, which excludes coal and grain from its measure of intermodal shipments and carloads, increased 3.1% from December. The monthly improvement was driven mainly by stronger carload traffic.

Other commodity results were uneven. Chemical carloads increased 2.4% year over year in January, their first gain following two monthly declines. Chemicals set a record for annual carloads in 2025, making the January result an important early indicator for manufacturing-related freight.

Primary metal product carloads, which include large volumes of steel, fell 2.5% in January. Metallic ore carloads across North America declined 2.6%, extending that category’s year-over-year decline to 20 consecutive months.

Intermodal performance was weaker. U.S. rail intermodal shipments fell 3.5% from January 2025, marking the fifth consecutive year-over-year decline. The Association of American Railroads cited weaker port activity, softer goods demand and ample trucking capacity as factors weighing on intermodal traffic.

A severe winter storm also disrupted rail operations across much of the country during the final week of January. Despite those disruptions, total rail carloads remained higher than a year earlier.

Tank car supply is another concern

Telegraph’s forecast also calls for nearly 10% growth in tank car volumes. At the same time, a congressional effort could accelerate the retirement of DOT-111 tank cars, which are currently scheduled to be phased out by the end of 2029.

Those developments could create a tighter supply of tank cars just as demand rises for transporting plastics, chemicals and petrochemicals. The issue is more directly tied to rail equipment and shipper planning than to truckload freight, but it could affect drayage and other short-haul work connected to rail terminals and industrial facilities.

Correll described the combination of rising tank car demand and a possible earlier phaseout as a key issue for the rail market. The timing and final details of any legislative change remain important variables.

Intermodal faces both opportunity and limits

The broader outlook for intermodal is mixed. The interview cited a 34% price difference between truck and intermodal service at the time of the discussion, a spread that can encourage shippers to shift long-haul freight from highways to rail.

Shippers have also been reconfiguring supply chains, with those changes accelerating around July, according to the discussion. Correll linked the shift to strong intermodal volumes and said rail intermodal traffic had reached record levels in the broader market view.

However, the January AAR data show that intermodal shipments were still below year-ago levels. The conflicting signals highlight the difference between recent monthly comparisons and longer-term changes in shipper routing and network flows.

Telegraph also raised concerns about how much additional intermodal growth the existing rail network can handle. If terminals, train capacity or mainline infrastructure become constraints, a lower rail price may not be enough to move additional freight from trucks.

For professional drivers, the outlook means coal and industrial freight may provide selective support for rail-connected trucking activity, while intermodal competition will continue to depend on pricing, service reliability and available truck capacity. The January numbers show a resilient carload market, but the overall freight picture remains uneven and closely tied to manufacturing, trade policy, energy markets and labor conditions.