We attended the Southwest Association of Rail Shippers 2025 Annual Meeting in Dallas, March 18-19. Macro uncertainty was a clear theme across multiple presentations. Class I’s and short lines attested to tariff-related freight pull forward also evident in strong transloading trends. Class I’s continue to optimize for consistent service and sounded very positive on driving tech advancement under new FRA leadership after being “handcuffed” for several years.
Class I and shipper participants acknowledged the disruptive impact of tariffs and the current unpredictability of the market. A major short line we spoke with highlighted that shippers had pre-staged plastics and steel late last year and early this year, but these volumes are already slowing down. Railroads also attested to strong transloading as intermodal outperformed to start the year, corroborating pull-forward activity, also highlighted by Union Pacific at our recent investor dinner. Export chemicals were noted as having exposure to Canada, Mexico and Asia, though tariff impacts have yet to materialize in a notable fashion—but likely will in our view.
The Class I’s and short lines reiterated their focus on consistent service. Much work remains to be done, with short line panelists Michael Miller, Genesee & Wyoming; Dean Piacente, OmniTRAX; and Chuck Baker, American Short Line and Regional Railroad Association, stating customer satisfaction, though improved, is still at a low baseline. Recall that truck service is the benchmark.
In her morning keynote address, BNSF President and CEO Katie Farmer emphasized that their premium service Quantum product is aimed at freight with the highest cost of failure and represents a five-million-shipment opportunity for service-sensitive shippers to convert from truck. We expect the railroad to continue to attack this market over time. BNSF was also asked about potential PSR plans but refrained from offering much direction.
In his afternoon keynote address, CSX President and CEO Joe Hinrichs again spoke to a stakeholder approach at the railroad and the ongoing cultural shift aimed at making service the focal point of operations.
Railroads are optimistic on the regulatory front as it relates to unleashing technological advancement in the industry. CSX noted that tech initiatives were effectively handcuffed over the past four years. Both CSX and BNSF see the new FRA leadership, led by incoming Administrator David Fink, as supporting technological development. Initiatives include utilization of AI to automate certain operational decisions and re-allocating human resources to fixing problems instead of detecting problems (manual track inspection) as automation takes over the latter. Positive sentiment on the FRA and regulatory outlook was shared by Union Pacific at the recent investor dinner noted above.
Rail equipment puts and takes: Chemicals, a major customer for tank car manufacturers, has seen strong core demand, notwithstanding potential tariff impacts. One panelist sees 130,000 cars reaching end of life going forward (~40,000 annually, economically useful life) but only 35,000 deliveries projected in 2025 (down from ~42,500 in 2024). High interest rates and volatile car prices, however, are dampening the build book. Indeed, Railroad Financial Corporation Senior Vice President Will Geiger stated that in a manner of less than a month, the expected price for one railcar type fluctuated between $120,000-$165,000, finally setting just below $160,000, due to changes in expected tariffs. Clearly, this makes planning difficult for shippers, railroads and lessors.
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