According to the report, overall US rail freight shipment volumes, including carloads and intermodal containers/trailers, decreased by 2.2% through November compared with the first 11 months of 2007. The report notes, however, that the decline accelerated in the fourth quarter, with volumes down by 5.6% from the previous year. Fitch attributes the overall decline to pronounced drops in volumes related to the automotive and residential construction industries combined with a falloff in imported consumer goods.

Yet despite weakening volumes, Fitch emphasizes that pricing has held up, with Class I railroads generally reporting double-digit percentage yield increases in Q3. According to the report, the top four US railroads - Union Pacific Corp., Burlington Northern Santa Fe Corp., CSX Corp. and Norfolk Southern Corp.) all produced EBITDA margins in the 28% to 35% range during the 12 months ended Sept. 30.

The report says rail operators have been able to sustain price levels through a combination of effective capacity control, relative fuel efficiency and greater dependence on less cyclical commodities, such as coal and agricultural products, for which demand has held up. It predicts that continued demand for cyclical commodities will help the railroads compensate for lower volumes of autos and auto parts, wood products and international intermodal shipments, which it expects to remain weak.