Eastern US railroad said it expects that fourth quarter commodity market conditions will be mixed, limiting some freight demand.
"Going into the fourth quarter, near-term conditions look modestly more challenging," chief executive Joe Hinrichs said on Wednesday.
But the railroad expects "modest volume growth", supported by a few segments including chemicals and agriculture. But lower locomotive fuel prices and the impact of international coking coal prices, which are linked to export rail contracts, could drive a decrease in total revenue during the fourth quarter. He estimated that impact at roughly $200mn compared with last year's fourth quarter revenue of $3.68bn.
CSX expects to see a carryover of year-over-year momentum in chemicals, agriculture and food, forest products and minerals, while metals and automotive will continue to be challenged.
Demand for metals shipments is predicted to soften through the end of the year. Interest in shipments, particularly steel, is soft because of "sluggish demand, ample supply and low commodity prices", chief commercial officer Kevin Boone said.
A weaker-than-anticipated automotive market contributed to the drop in metals demand.
Consumer demand for automotive products has been reduced by high retail prices and interest rates, which has led to increased dealer inventories and slower production, Boone said.
But CSX expects that an "interest rate easing cycle will help these markets normalize," Boone said.
Metals and equipment volume fell in the second quarter, primarily because of lower steel and scrap shipments. Shipments of metals and equipment fell by 9pc to about 64,000 carloads compared with the same three months in 2023. Revenue dropped to $208mn, down by 8pc from a year earlier.
Automotive volume dropped in the second quarter because of lower North American vehicle production, CSX said. Automotive traffic fell to 301,000 railcars loaded, down by 2pc from the third quarter 2023. Automotive revenue dropped to $98mn, down by 3pc compared with a year earlier.
The outlook for fertilizer shipments is mixed following the third quarter as a decline in long-haul phosphates shipments persisted. Volume was negative, but the railroad was able to haul some profitable spot shipments.
Shipments of fertilizer fell to 45,000 carloads in the third quarter, down by 4pc from a year earlier. Fertilizer revenue dropped to $118mn, down by 5pc from a year earlier.
CSX expects growth in some market segments.
Chemicals freight demand is expected to continue growing following "consistent, broad strength across plastics, industrial chemicals, LPGs, and waste.
That demand helped boost chemicals volume by 9pc compared with a year earlier. Chemicals revenue rose to $727mn in the second quarter, up by 13pc compared with a year earlier.
Agricultural and food products shipping demand is expected to continue growing, led by demand for grain and feed ingredients from the Midwest for supplies. That follows a third quarter when higher ethanol shipments, as well as increased overall volume helped raise volume by 9pc from the third quarter of 2023. Revenue from shipping agricultural and food products rose to $416mn, up by 11pc from a year earlier.
CSX expects intermodal growth to continue with the trucking market falling, which would help drive more container freight to rail. Intermodal shipments are goods shipped in containers and trailers between different modes of transportation.
The 1-3 October strike by the International Longshoremen's Association (ILA) did impact intermodal traffic, but the railroad was pleased with the "relatively quick short-term solution", Boone said.
International intermodal volume during the third quarter rose because of higher east-coast port traffic. Domestic volume was mostly flat.
Overall intermodal volume during the quarter increased by 3pc compared with a year earlier. But lower revenue per container helped reduce total intermodal revenue by 2pc to $509mn.
CSX does not expect a major shift in coal volume through the end of the year as coal markets seem relatively stable and utility stockpiles are sufficient, Boone said. Rising natural gas prices are also unlikely to stimulate a "near-term step-up in volumes".
Export coal demand has been consistent lately, particularly from buyers in Asia.
But revenue per railcar for export coal could make a modest single digit drop, as contracts are tied to international coal benchmarks and prices fell earlier this year.
Expport coal voume rose to 11.1mn short tons (10.1mn metric tonnes) in the second quarter on higher demand for thermal and coking coal. But domestic coal deliveries fell to 10.2mn st, down by 12pc from a year earlier, on lower deliveries to power plants and lake and river terminals.
Rail coal volume fell by 2pc from a year earlier, while revenue dropped by 7pc to 553mn st.
Total CSX profits rose to $894mn, up by 8pc compared with third quarter 2023. Revenue increased to $3.6bn, up by 1pc.
