The major rail companies in North America release a weekly metric railroad performance metric, which among other things measures the total number of rail cars on line. I briefly mentioned this metric in a piece several weeks ago, showing the strong correlation between CSX's (CSX - commentary - Trade Now) cars on line and the BDI:

Baltic Dry Index vs. CSX Railcars On Line Source: Bloomberg; Capital Link; CSX

However, to gauge potential overall economic performance we would need to include more than just CSX, hence I created an aggregate index with cars on line data from the following companies: Burlington Northern Santa Fe (BNI - commentary - Trade Now), Canadian Pacific (CP - commentary - Trade Now), CSX, Kansas City Southern (KSU - commentary - Trade Now), Norfolk Southern (NSC - commentary - Trade Now) and Union Pacific Railroad (UNP - commentary - Trade Now). Once you factor in these additional companies, the relationship becomes far less apparent:.

Baltic Dry Index vs. Railcars On Line Source: Bloomberg; Capital Link; Company reports

The reason behind this will be fodder for another article, but it is possible that CSX has a higher exposure to those commodities that were in high demand from China.

Nevertheless, what has been a horrible year in terms of rail volumes looks to be bottoming. I recently heard from executives in most of the companies within this aggregate index whose outlooks confirmed they are anticipating a bottom but by no means a rapid recovery. They are also optimistic on the effects the potential record U.S. harvest could have on rail volumes, a view that is echoed in the panamax sector. This is more or less in line with my view that the U.S. and developed nations will return to growth, albeit at a measured pace, with developing nations continuing to outpace the developed world.

On a more microeconomic note, despite showing some support this morning, capesize rates have continued to plummet, falling 35.9% over the past month. This morning, capesize rates came in at $22,251, compared to their 2009 high of about $90,000. The BDI is down 0.6% this morning, realizing a monthly decline of 10.8%, mostly due to reduced activity in the capesize sector as China's demand for iron ore appears to be diminishing. Additionally, Vale (VALE - commentary - Trade Now) has begun transporting all of its ore orders in-house, reducing the company's need to tap the fixture market.