Skip to comments.Surge in Freight Business Strains Railroads
Posted on 07/04/2006 12:43:45 PM PDT by Incorrigible
Surge in Freight Business Strains Railroads
BY PETER KROUSE
[Cleveland, OH] -- Shippers across the country have been putting more and more freight on trains as the economics of hauling by rail have become more favorable.
The increased traffic has meant strong profits for the railroads. But for many who rely on trains to ship their goods it has been -- at times -- a hassle.
Congestion on the tracks and a shortage of rail cars, not to mention rising prices, have all contributed to headaches for shippers and their customers. It has also brought to a head the need for improved rail infrastructure in the United States and perhaps a public-private partnership when it comes to paying for it.
Rail's good fortune extends across the spectrum, from the major carriers such as Norfolk Southern and CSX in the East, to the many regionals and short lines.
The Wheeling & Lake Erie Railway, which serves northern Ohio and parts of Pennsylvania, West Virginia and Maryland, has seen steady growth turn explosive in the last two years, said Bill Callison, the railroad's chief operating officer. It handled about 115,000 carloads in 2004, while this year it expects to increase volume by about 30 percent to 150,000 carloads.
Over that time, employment at the W&LE has jumped more than 10 percent to around 400.
The high price of oil and diesel fuel has been a major factor in making railroads more competitive, Callison said, because trains are typically about three times more fuel-efficient than trucks. But the overall strength of the economy, including the demand for bulk commodities such as coal, stone and scrap metal, has contributed, too.
With more freight moving through a rail system that has not been able to grow with demand, there has been occasional tension between railroads and their customers.
At Mittal Steel USA in Cleveland, shipments of coke and scrap metal still arrive pretty much on schedule, but the rail car shortage and general rail congestion requires a lot more hustle and coordination to keep on time.
Mittal owns a short-line track called the Cleveland Works Railway, that serves the mill and three other companies in the Flats.
The short line takes possession of the freight after it's deposited in adjacent railyards by either the Norfolk Southern, CSX or the W&LE. The short line then positions the empties or any outgoing loads for the long-haul railroads to pick up.
With certain kinds of rail cars in short supply, the railroads now closely monitor turnaround times. That requires Mittal and its track workers to unload cars as quickly as they can to get them back to the railroads without costly delays.
"We are out to make them our friends so they will give us better service," said Dan Hereda, who heads up logistics at Mittal Steel-Cleveland. "And it's working."
With greater profits, the railroads have been able to pump a lot more money into infrastructure.
The seven largest railroads that operate in the United States expect to spend $8.3 billion this year on such improvements as additional track, better switching yards and more locomotives.
CSX, for example, is putting in new siding along its main line from Chicago to Florida.
Smaller railroads are putting up dough, too. The Wheeling & Lake Erie recently borrowed $25 million to make improvements to its infrastructure that will increase the speed and efficiency of its trains. It also has ordered 150 open-top hopper cars.
But will all the investment and coordination be enough?
One of the biggest critics of the railroads is United Parcel Service, which complained to the Surface Transportation Board in Washington, D.C., last year that federal response is needed to address the capacity crunch. One proposal is a rail transportation fund akin to the highway transportation fund that applies gas taxes to road improvements.
UPS is the largest corporate customer of the railroads, shipping trailers and containers from U.S. ports to inland terminals where they are attached to trucks and delivered to customers around the country.
But the Association of American Railroads, which represents the major railroads, opposes such a tax. It could make the railroads uncompetitive with trucks and barges, said the association's president, Edward Hamberger. Also, bureaucrats and politicians would determine how the money is spent, not the railroads.
Hamberger said the association would like Congress to provide tax credits to the railroads when they expand.
The industry's problems stem from deregulation, which occurred in 1980. Railroads consolidated and restructured, and a lot of track that was deemed unprofitable was taken out of service.
Wall Street pressured the railroads to operate much leaner, said Carl Martland, a senior research associate in the department of civil and environmental engineering at Massachusetts Institute of Technology, and they did. Also, prices rose, but only for a few years. They then began a steady decline in the face of competition from trucking, only to start rising again in 2004.
Martland believes Congress should finance more research on rail issues and that ultimately a blueprint for a system that includes multiple tracks, efficient switching yards and both long-haul and short-line railroads should be established.
Clearly, the railroads can't be asked to do it all, Martland said. The public should help pay for the benefits of increased rail use, which include less highway congestion, less energy consumption and cleaner air.
"The railroads won't invest enough to get the full public benefits," he said.
CSX spokesman Gary Sease laid out the economic reality: While railroads may be constrained now, they won't be when the economy cycles downward, and yet the debt on any infrastructure improvements will still have to be paid.
There's a saying in the industry, he said. "You don't build the church for Easter Sunday."
July 1, 2006
(Peter Krouse is a reporter for The Plain Dealer of Cleveland. He can be contacted at email@example.com.)
Not for commercial use. For educational and discussion purposes only.
Ping to the ghost of Willie Green!
I have been fascinated with the railroads.
Yeah. If you're lurking, happy Independence Day!
Union Pacific is busy laying new track through our area, they are adding a high speed track parallel to the old and refurbishing the old track and replacing bridges. I am happy to see the improvements and the increase in rail traffic. I think if the railroad can take up the slack we can get some of the trucks off the freeway, or at least not add more. I have nothing against trucks, but when there are a lot of them it gets scary on the road with them.
Amen to that.
If you ever looked up the stats on the damage heavy trucks cause on the highways, you would be appalled.
He would have been torn over this thread. It involves railroads, but is also an indication that our economy is doing well.
My Dad drove semis and my brother does but I'm not a fan. We've been run off of the highway twice and I hate I-80 in Pa.
I'm all for trains as Hubby is a fan. Loved Steamtown in Scranton too. Semis will mow you down. Train engineers wave. ;)
This train makes tourist passenger trips across the Des Moines River at Boone, Iowa every day from Memorial Day through October 31. They also run "dinner trips".......nice!
If one industry is given tax incentives or government handouts, then other competing industries need them as well in order to compete.
This causes normally free-market-loving companies to compete through lobbying efforts for the largest amount of government goodies.
Leading in the end to an even larger welfare state and less competition overall.
Tweaking Willie was one of my favorite pastimes! It would have been fun to see him experience the cognitive dissonance on this one!
I can testify to the number and length of trains along the "Chemical Coast" line in New Jersey.
Part of the line is shared with a NJ Transit commuter service. We've been getting delayed more frequently since freight traffic take precedence on that line.
I prefer to be on time though!
Does anyone think we are going to go back to railroads if the oil sheikhs keep raising prices every few months? At least we don't have to worry about outlaws on horses riding up to rob us every so often.
What's your general area that UP is woking track? We have projects going on in a lot of places right now.
A little Union Pacific info....
Route Miles - 32,400
Employees - 50,000 (and HIRING)
Payroll - $3.6 Billion
Purchases - $3.9 Billion
Locomotives - 8,000 (new $$$ 2.5 million each)
Freight cars - 107,000
Increased volumes with out increased capacity results in slower transit times. Shippers want "overnight" door to door service but sometimes you just don't get what you want. More main line tracks - more capacity in the major yards, employees with a good work ethic (good 1/3 of the train and engine svc employees "took" the holiday "off").. no employee - no trains move. At 400am this morning we have over 200 trains laid down, over 50 were waiting for a crew to mark up or get rested to run.. They are coming back now but slowly..
I think that an investment in barges and towboats might be good if you have money to speculate with. The rising price of fuel has shippers reviewing how they move things, and rail is looking better due to it greater efficiency per ton-mile. Barges are even more efficient than rail per ton-mile, however, they have highly restricted service areas and are much slower. The late 1980s through 2000 were lean years for the railroads due to very low fuel costs that reduced the cost spread between transportation modes.