Moody's: Slowdown in oil shipments will not derail North American railroad freight growth

A slowdown in the growth of crude oil shipments in the wake of lower oil prices will not impact overall freight volumes enough for Moody's Investors Service to change its positive outlook on the North American railroad industry. Petroleum-related shipments would likely have to contract by approximately 15% for Moody's to change to a stable outlook, assuming other expectations are met, which we consider unlikely in 2015.

In the new report, "Freight Growth Resilient Despite Slowing Crude Oil Shipments," Moody's says its revised forecast for shipments of petroleum products will have only a modest impact on the total growth of freight volumes.

"The sector continues to benefit from broad-based demand for most other freight categories, reflecting steady improvements in the US economy," says Moody's Vice President and Senior Analyst Rene Lipsch. "However, our forecast for coal shipments, the sector's largest freight commodity is subject to a potential downside risk due to the current low natural gas prices and the US EPA's Mercury and Air Toxics Standards."

Petroleum and associated materials make up about 6% of total US carloads, about 3.3% when including intermodal containers. 'Using our freight volume sensitivity analysis, we estimate that our revised forecast of mid-single digit volume growth for petroleum products and for crushed stone, sand and gravel would lower total freight volume growth to about 3.2% in 2015, compared to 3.5% under our previous forecast of low double digit growth for these freight groups", says Lipsch.