Rail Freight’s Hidden Risks: Key Trends Shippers Need to Know

Rail Freight Trends: The Risks Hiding in Plain Sight

North American rail traffic turned negative year over year in week 36, ending a months-long stretch of gains and offering a warning sign for trucking companies, drivers and other freight operators watching the broader economy.

According to analysis from Bill Stephens of Trains Magazine in a FreightWaves Today interview, total North American rail traffic fell 3.6% compared with the same week in 2024. Carloads declined 3.3%, while intermodal volume dropped 3.8%.

In the United States, the decline was slightly sharper. Carloads fell 3.3%, intermodal volume decreased 4.1% and total rail traffic was down 3.7%.

The figures do not establish a long-term trend by themselves, but the breadth of the decline is notable. Rail volumes often serve as an early indicator of industrial and consumer activity, making the latest numbers relevant to truck drivers and fleets that move freight connected to rail terminals, ports, manufacturing facilities and distribution centers.

Industrial freight shows weakness

The decline becomes more pronounced when coal and grain are excluded. Those two commodities can be influenced by factors that do not always reflect the underlying strength of the industrial economy. Without them, economically sensitive carload volume was down 5.9%.

Chemicals and petroleum, the second-largest carload category after coal, fell 5.6%. Chemical traffic alone declined 9.2%. Automobile carloads were down nearly 19%.

There were still areas of strength. Grain, forest products, coke and primary metals recorded gains, but those increases were not enough to offset declines across several major freight categories.

For trucking operations, weaker rail volumes can affect drayage demand, regional transfer work and the availability of freight moving into or out of intermodal facilities. A sustained industrial slowdown could also reduce demand for long-haul truckload capacity tied to manufacturing and construction supply chains.

Fuel prices are shifting modal decisions

Class I railroad executives told investors that higher fuel prices are encouraging some freight to move from highways to rail. Norfolk Southern said it was seeing increased conversion from truck to rail in lumber, steel and metals.

That shift can create additional work around rail ramps and terminals, even as it reduces some over-the-road freight opportunities. For drivers, the effects are likely to vary by lane, commodity and proximity to major intermodal facilities.

Railroads also cautioned that higher fuel prices could eventually weaken consumer demand. If households reduce spending, the resulting decline in retail and industrial activity could affect both rail and trucking volumes.

International intermodal traffic in the eastern United States has faced additional pressure as shippers favor West Coast ports for cost reasons. Changes in port routing can alter drayage patterns, repositioning requirements and the flow of containers across regional trucking markets.

UP-Norfolk Southern merger remains a major issue

The proposed Union Pacific-Norfolk Southern merger remains the most significant structural development in the rail industry. A key issue is what concessions regulators might require to address concerns about competition and customer access.

BNSF, CSX and Canadian Pacific Kansas City have requested access rights as part of the regulatory process. BNSF’s requests are the most extensive. The railroad is seeking trackage rights for intermodal trains over Norfolk Southern’s network between Chicago and Harrisburg, Pennsylvania, a major distribution area for consumer goods.

For carload traffic, BNSF is seeking the creation of a neutral switching railroad on the Gulf Coast, which is home to a large concentration of chemical production.

Union Pacific CEO Jim Vena has questioned whether BNSF’s proposed trackage rights would work economically. The concern is that access fees would be added to the costs of operating trains over another railroad’s infrastructure.

Union Pacific has also said it could walk away from the transaction if regulators require widespread trackage rights. The merger agreement includes a $750 million concessions trigger that would allow Union Pacific to reconsider the acquisition if the required conditions exceed that threshold.

BNSF has argued that a combined Union Pacific-Norfolk Southern system would control about 85% of intermodal traffic in the Harrisburg area, including access to an independent terminal in Bethlehem, Pennsylvania. The dispute illustrates how a merger could affect competing railroads, shippers and the trucking companies that handle first- and last-mile moves.

Potential industrywide effects

Historical precedent is adding to the attention surrounding the proposed deal. BNSF was created in 1995, and the transaction was followed by the Union Pacific-Southern Pacific merger a year later. An approved Union Pacific-Norfolk Southern combination could therefore influence how other major railroads evaluate their competitive positions, although the outcome of the current proposal remains subject to regulatory review.

Passenger rail developments are also affecting the broader transportation landscape. Amtrak is scheduled to place Siemens Mobility-built Airo trainsets into Pacific Northwest Cascades service on Sept. 30. The new equipment is expected to add capacity to a corridor that has been constrained by aging and out-of-service equipment.

Meanwhile, Brightline continues negotiating with creditors to refinance its debt. The private passenger railroad, which operates between Miami and Orlando International Airport, has reported record ridership but remains under financial pressure because of its debt load. That pressure has raised concerns about the company’s ability to meet its obligations.

For professional drivers, the central message is straightforward: rail traffic is showing signs of weakness in several economically sensitive categories, while fuel costs and potential railroad consolidation are reshaping freight decisions. Intermodal demand, terminal activity and industrial volumes will remain important signals for trucking businesses trying to determine where freight is strengthening and where it is beginning to soften.