ATLANTA — The pandemic hurt railroad traffic across the board, but none more than Norfolk Southern.
NS volume for 2020 was down nearly 12%, which was twice as much as Eastern rival CSX Transportation and considerably deeper than the industry average of a 7% decline [see “Canadian Pacific leads industry volume for second straight year,” Trains News Wire, Jan. 4, 2021].
“I agree with the characterization of the year for Norfolk Southern. Our top line was disproportionately affected by the pandemic. A lot of that has to do with our energy commodity franchise and a disparate impact on our utility coal business, for example,” CEO Jim Squires said in response to a question during a National Railroad Construction and Maintenance Association fireside chat on Wednesday.
NS coal volume declined 37% last year — by far the biggest drop in the industry – and its ethanol and frac sand volumes also were affected by the collapse of energy prices due to the pandemic.
“But with that said, I remain confident that we have an outstanding growth strategy at Norfolk Southern. We have one of the premier intermodal franchises in the industry,” Squires says.
Intermodal traffic serves the increasingly important consumer economy, and NS has the largest intermodal network in the East. “It’s consumers that are going to pull us out of the slump that was 2020 as well,” Squires says.
Squires expects the economy and rail traffic to rebound further this year as COVID-19 vaccines are rolled out and the pandemic wanes.
“I’m very optimistic about 2021, particularly in the second half we should see a great deal of activity as customers restock inventories, as people enjoy the ability once again to be out and about and to lead their lives as usual,” Squires says.
Looking longer term, Squires says the railroad industry needs volume growth.
“I want us to grow as an industry,” Squires says. “It’s essential that we have a growth strategy as a company, Norfolk Southern, and as an industry to compete with trucks.”
Norfolk Southern’s transition to an operating model based on Precision Scheduled Railroading is not quite complete, Squires says. The railroad made a lot of progress in 2020, Squires says, and is operating more efficiently and reliably.
PSR, at its core, can be distilled down to moving tonnage on fewer but longer trains, Squires says. What makes NS’s version of PSR different, he adds, is that the railroad is keeping customers in the loop so they can understand and prepare for significant operational changes. “Ours is a no surprise approach to PSR,” Squires says.
“We are fully committed to growth … as a component of our strategy and believe that operational excellence will pave the way for growth as well,” Squires says.
NS remains busy transforming itself into what Squires calls a “tech company.”
The railroad aims to unlock the power of big data, advance automation, empower its workforce, and rapidly deploy new technology, Squires says.
