NEW YORK — CSX is moving more tonnage on fewer trains this year as part of a significant reduction in the number of road train starts.
The 10% decline in coal volume this year has contributed to the reduction, Chief Financial Officer Sean Pelkey told an investor conference Tuesday. “But there’s a significant amount of reengineering of the network,” he said. “The Cumberland Yard … has been a big driver of that.”
CSX has completed a reconfiguration of the yard in Cumberland, Maryland, that nearly doubles the flat-switching capacity of the former hump yard. This has allowed the former Baltimore & Ohio main line to handle merchandise traffic moving between the Mid-Atlantic and Midwest that had been routed the long way around via Selkirk, New York, on the former New York Central Water Level Route.
The railroad has reduced train starts by 1,000 per week, or roughly 10%, which has pushed locomotive utilization to the highest level since 2016.
The train-start reduction is bringing cost savings of about $4 million per month, which helps offset some of the $10 million in monthly detour costs related to the Howard Street Tunnel project and the rebuilding of the Blue Ridge Subdivision, which has been out of service as a through route since it was damaged by Hurricane Helene in September. The Howard Street Tunnel in Baltimore was shut down on Feb. 1 so CSX could begin its long-awaited double-stack clearance project.
The closure of the Howard Street Tunnel and the Blue Ridge Sub has prompted CSX to detour roughly 15% of its daily road trains onto alternate routes, Pelkey said at the J.P. Morgan Industrials Conference.
Although traffic volume ran below expectations in January and February, Pelkey says March is trending close to plan. Domestic and international intermodal volume are both up more than 2% for the year to date.
CSX has not seen any significant tariff-related changes in traffic patterns, Pelkey says. There may have been some inventory pull-forward at East Coast ports as importers tried to beat potential tariffs, he says, and some fertilizer imported from Canada is no longer moving across the border.
“We’re not talking about big, big numbers, big dollars right now,” Pelkey said. “I think those impacts will be felt if and when certain tariffs go into effect.”
The Trump administration has imposed or threatened to impose tariffs on goods imported from Mexico, China and Canada, the top three U.S. trading partners.
Some tariffs, such as on aluminum and steel, could boost metals traffic, Pelkey says, pointing to a rise in domestic metal production that occurred when tariffs were imposed in 2018.
But right now the railroad and its customers are taking a wait-and-see approach. “We’re trying to make contingency plans, but in terms of the actions that are being taken to date and how it’s impacting our volumes year to date, I don’t think we’re seeing anything all that significant,” he said.
All the tariff talk has contributed to increased interest in industrial development at CSX-served sites. The railroad already has a record number of industrial development projects in the works across the system that it expects will produce more than $1 billion in carload traffic over the next three years.
“One thing that’s encouraging is the phones are still ringing, there’s still activity going on, there’s still interest. In fact, I think if you were to ask the industrial development team, they’d tell you they’ve probably seen a 15% to 20% increase in terms of total call volume coming into this year versus last year. So the inquiries are out there,” Pelkey said.
The industrial development pipeline has grown to 600 projects, up from 550 or so in November.
“Is there a little bit of hesitance to actually put new capital into the ground given uncertainty around where things play out from a tariff and policy standpoint? I think that would be fair to say, but it’s not stopping the amount of activity that’s going on in the background,” Pelkey said.
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