A wave of Q2 earnings reports from Class 1 railroads shows broad-based volume growth, while strategic agreements between Canadian National (CN) and Union Pacific (UP) — tied to the proposed Norfolk Southern (NS)-UP merger — promise to reshape domestic and cross-border rail networks, according to freight rail analyst Bill Stevens told FreightWaves.
Volume Growth Across Class 1 Railroads
Four of the six Class 1 carriers reported earnings this week, with each showing volume improvement. CSX volumes were up 6%, Norfolk Southern up 4%, Canadian National up 5% on a revenue-ton-mile basis (flat at 0.35% on a carload basis), and Union Pacific up 2%. Three of the four railroads raised their financial or volume outlooks for the year.
| Railroad | Total Volume Change | Intermodal Change |
|---|---|---|
| CSX | +6% | +9% |
| Norfolk Southern | +4% | +5% |
| Canadian National | +5% (RTM) / 0.35% (carload) | Lagged peers (per Drysdale) |
| Union Pacific | +2% | Domestic: double-digit growth, fourth straight quarterly record |
Intermodal Leads the Gains
Intermodal was the standout across carriers. CSX intermodal rose 9%, Union Pacific domestic intermodal posted its fourth straight quarterly volume record with double-digit growth, and Norfolk Southern intermodal climbed 5%, driven in part by truck-to-rail conversions tied to high fuel prices, according to FreightWaves. On the industrial side, Norfolk Southern said new plant openings and expansions across its network are running at double last year’s pace, while CSX cited data center construction as a driver of construction-related traffic. Union Pacific also pointed to manufacturing gains it expects will outpace overall industrial production, implying market share gains from truck.
Coal Performance Diverges
Coal results varied sharply. Norfolk Southern coal was up significantly on exports of metallurgical coal, while Union Pacific coal fell due to high utility stockpiles and low natural gas prices. CN’s Chief Commercial Officer Janet Drysdale noted on the railroad’s earnings call that truck capacity in Canada is not as tight as in the U.S., explaining why CN’s domestic intermodal performance lagged its American peers. CN flagged tariff uncertainty, forest products weakness tied to slow U.S. housing starts, and strength in petroleum, chemicals, and grain as the key variables shaping its outlook.
Merger Agreements Unlock New Routes
CN will not oppose the proposed Norfolk Southern-Union Pacific merger after reaching two separate agreements with Union Pacific — one tied directly to the merger and one that stands on its own — that give CN a faster route to Mexico and a first-ever foothold in Kansas City, rail analyst Bill Stevens told FreightWaves. The independent deal grants CN haulage rights over Union Pacific’s tracks between Memphis and the Mexican border crossing at Eagle Pass, Texas, covering traffic moving between Canadian origins or destinations and Mexico. The arrangement gives CN a faster, more direct route to compete against CPKC, which already offers single-line service across Canada, the U.S., and Mexico. Currently, CN hands traffic to Union Pacific in Chicago, resulting in a shorter length of haul. In exchange, Union Pacific gains rights to use CN’s Chicago bypass — the EJ&E corridor acquired in 2009 — to avoid the city’s notoriously congested rail network.
“CEO Jim Vena said at times when he was at CN, they could get a train faster from British Columbia to Chicago than it took to get from one side of town to the other,” Stevens reported. The merger-contingent piece grants CN trackage rights over Union Pacific through Missouri, running two parallel routes across the state. CN gains access to the Kansas City market for the first time operating its own trains and gets the use of Union Pacific’s underutilized Neff Yard in Kansas City. The arrangement addresses competitive concerns for roughly five shippers whose railroad options would drop from two to one under a NS-UP combination, and approximately two dozen shippers — mostly in the St. Louis area — who would go from three options to two. “CN said, hey, this solves our competitive concerns about the merger. We get growth opportunities out of it, and as a result, we will not oppose the merger,” Stevens said.
Shipper Implications and Watch List
For shippers, the CN-UP deals create new competitive options on key north-south lanes and could ease congestion at Chicago. The independent haulage rights offer a direct CN route to Eagle Pass, bypassing the Chicago handoff, potentially reducing transit times for Canada-Mexico freight. The Surface Transportation Board is set to receive the merger application. Rail analyst Stevens noted that the deals specifically protect shippers in Missouri and the St. Louis area from losing rail competition. Operations teams should monitor tariff developments and forest products demand, as flagged by CN, along with the pace of U.S. housing starts and grain movements.
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