Chief Marketing Officer at Norfolk Southern
Thank you, Cindy, and good morning, everyone. All right. Turning to Slide 12, let's review our results for the third-quarter, where we achieved record quarterly results in several categories. Total revenue improved 17% year-over-year to $3.3 billion, as fuel surcharge and favorable price conditions more than offset a 2% decline in volume. Most notably, revenue per unit excluding fuel increased significantly and established a new record in both our merchandise sector and for Norfolk Southern overall. These results reflect a strong price environment and the deliberate efforts of our commercial teams to pursue these opportunities.
Before I comment on our individual business groups, I would like to address the impact of our collaborative mitigation efforts in response to potential labor disruption this quarter. Coming out of August, we were encouraged by the upward trajectory of our volumes. As we moved through September and concerns of a labor disruption grew stronger, we acted to guard against the potentially negative impact on our customers and the communities that we serve in keeping with our no-surprises approach to customer engagement. We spoke with our customers early on about our plans to limit the risk of stranded, hazardous materials and security-sensitive freight like intermodal by restricting service for these products.
We estimate that this approach accounted for roughly 40% to 50% of the volume decline in the quarter or $20 million to $25 million in lost revenue, mostly in our intermodal markets. Our goal as a customer-centric organization is to gain credibility as a transparent and trusted service provider so that our customers integrate NS further into their supply-chain needs. We can only achieve that goal with proactive communication and planning that minimizes disruption. Our customers told us that they appreciated our industry-leading communication and we're confident that our approach will deliver long-term value for Norfolk Southern, for our shareholders and for our customers.
We are pleased that a labor disruption was avoided and we remain committed to providing quality service that our customers can rely on for their supply-chain needs. Now continuing to our business group's performance in the third-quarter merchandise volume was down 2% year-over-year, driven by declines in our steel and ethanol markets that were partially offset by higher demand for sand and aggregates. With respect to steel, service challenges related to equipment availability negatively impacted our ability to meet demand. Ethanol shipments were also down as consumption of gasoline declined in the third-quarter on a year-over-year basis.
On the positive side, shipments of sand increased more than 43% year-over-year on higher demand related to the strong market for natural gas production. Aggregates were also up due to higher levels of construction activity. Merchandise revenue improved percent year-over-year to a quarterly record of $1.9 billion on higher revenue from fuel surcharges and from price gains.
Moving on to intermodal, revenue improved 16% for the quarter despite a 5% decline in volume. Revenue per unit reached a record level this quarter driven by higher revenue from fuel surcharge and price. Intermodal shipments continue to be pressured by supply-chain congestion and equipment shortages. This temporary shift was felt most strongly in our domestic business where volume was down 4% year-over-year. International intermodal volume declines were driven primarily by car supply and private chassis shortages both reducing customers' demand for inland point intermodal and limiting our ability to satisfy that demand.
Lastly, coal market conditions were again favorable for us this quarter, enabling us to deliver 43% growth in revenue for the franchise from volume growth, price improvement and fuel surcharge revenue. Volume growth was led by shipments of utility coal that were up on higher demand spurred by high natural gas prices. Export coal volume was also up due to some carryover from the second-quarter and generally improved coal supply. Coal volume growth was partially offset by year-over-year declines in coke shipments due to facility closures. Overall, our performance for the quarter reflects continued progress on our strategic plan to drive value for our customers and shareholders, while simultaneously working to address pressures related to volume.
Moving to our outlook for the remainder of the year-on Slide 13. Our service is trending in the right direction and we expect that to be a tailwind to volumes in the fourth-quarter. Additionally, we are optimistic that consumer spending in manufacturing activity will support volumes for the remainder of the year. Those expectations are somewhat muted in light of looming recession risks and tightening financial conditions that are pressuring economic activity, especially in interest rate sensitive markets like housing.
Volume in our merchandise segment will benefit from growing activity in automotive markets with U.S. light-vehicle production currently expected to increase in the fourth-quarter of '22 compared to 2021. Also contributing to growth will be new opportunities to move corn and other grains, much of the southeast corn crop is down significantly versus last year. This is likely to increase demand for Midwest-originated corn by rail. Since emerging from the pandemic low, manufacturing activity has been increasing at a steady rate. But we're beginning to see that growth level-off with forecast calling for growth to moderate to a 3% year-over-year in the fourth-quarter.
As the Fed tightens interest rates, mortgage rates have increased to levels that are cooling the housing market. This reduced demand affect several of our merchandise as well as Intermodal markets. Overall, we expect merchandise volumes to be relatively flat in the fourth-quarter with some upside potential as service continues to recover. Within Intermodal our expectation is for volume to be down slightly year-over-year. With opportunities from easing terminal congestion and equipment supply being offset by expectations for weaker demand and a softening truck market.
On the domestic side, national Intermodal volume trends are showing signs of slowing, suggesting weaker peak season demand. However, consumer spending, which has historically been a big driver of this market is currently forcarted to hold steady through the end of the year, providing underlying support for our domestic Intermodal volumes. We continue to see volume opportunity for domestic Intermodal as our service recovers and we expect customers to shift loads from the highway to rail as we intently focus on improving domestic Intermodal service.
International Intermodal will continue to struggle with congestion and equipment supply, and we expect Intermodal storage charges to remain elevated so long as those issues continue. When supply chain congestion does ease, we expect to deliver additional international volume for customers as inland point Intermodal, or IPI becomes more attractive.
And finally, our expectations for coal are that volumes will continue to improve year-over-year in the fourth quarter, driven by strength in the markets for both utility and export coal. EIA's latest forecast is for natural gas prices to remain elevated through the end of the year. This will increase demand for coal as a competitive alternative. Seaborne coal prices are expected to remain at relatively high levels through the end of the year, indicating continued demand for U.S. coals abroad. We also anticipate increased coal supply in the fourth quarter primarily for export, which will create opportunities for coal volume growth.
To summarize, we have a number of uncertain market signals in front of us right now, but our focus remains on impacting the things that we can control to deliver quality service to our customers and increased value for our shareholders. Overall, we have a fantastic portfolio of customers, and as always, I want to take this opportunity to thank them for their business and for their ongoing partnership.
I will now turn it over to Mark for an update on our financial results.