Railroads optimistic heading into peak shipping season
Carriers say plans for service and infrastructure improvements will allow them to meet rising demand for capacity.
By Jeff Berman, Senior Editor -- Logistics Management, 8/1/2006
WASHINGTON — In letters to the chairman of the Surface Transportation Board (STB), top management of U.S. and Canadian Class I railroads assured the federal agency that they would be able to meet the anticipated increase in service demands during the peak shipping season.
Their upbeat assessment came in response to a letter sent by STB Chairman W. Douglas Buttrey to the seven Class I railroads and the American Short Line and Regional Railroad Association (ASLRRA).
In his letter, Buttrey asked the rail carriers to provide him with summaries of their service plans and operational goals for the impending peak season. The STB chairman noted that the feedback from the railroads “will contribute to the STB’s confidence level that appropriate planning is being done to ensure that spikes in rail traffic demand that are expected for the remainder of the year can be handled as efficiently as possible.”
With freight volumes expected to reach unprecedented levels during the second half of 2006, the STB’s concerns are valid. But in their responses, the railroads stressed that they are taking the necessary steps to handle increased capacity and service requirements, citing infrastructure and service improvements they have made or plan to implement. A very brief sample of the improvements mentioned in their response letters includes:
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Canadian National’s $80 million investment in a siding extension, and a line-capacity improvement program that will eliminate pinch points and improve network velocity;
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“CREATE,” a $1.5 billion joint project of the city of Chicago, the state of Illinois, and several railroads, which will reduce freight traffic and transit times through the city;
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Kansas City Southern’s addition of two new intermodal service offerings connecting Marion, Ohio, with Kansas City, Mo., and the port of Lazaro Cardenas, Mexico, with Jackson, Miss.;
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The National Industrial Transportation League’s “first mile/last mile” collaboration with railroads to improve local service for shippers; and
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Norfolk Southern’s joint venture with Kansas City Southern, which will increase intermodal capacity on the Meridian Speedway line between Meridian, Miss., and Shreveport, La.
In his response letter, BNSF Railway Chairman Matthew Rose pointed out that his company has invested nearly $10 billion in infrastructure and capacity-related initiatives over the last four years, with more than 33 percent of that investment devoted to expanding BNSF’s locomotive fleet, main lines, and terminal facilities.
“We do not foresee any systemic congestion issues for the remainder of this year, including peak season,” Rose wrote. But, he added, although the company’s return on invested capital continues to improve, it may not be enough to fund the long-term investments that will be needed to meet future demand for rail service.
The time, money, and effort rail carriers say they’re putting into service and infrastructure improvements are beginning to pay off, according to Jay Roman, president of Escalation Consultants, an energy and railroad consultancy. “Railroad service is better now than it was six months ago,” he said in an interview. “If you look at things like terminal dwell time and train speed, things seem to be improving a bit from where they were before.”
The recent dwell-time and track-speed improvements are indeed a sign that service is getting better, agreed Carl Van Dyke, director of Mercer Management’s multimodal systems practice. But is enough progress being made to eliminate all of the problems?
Van Dyke said he believes that maintaining these and other types of service improvements during a time of tight capacity and growing congestion will be increasingly difficult. “With the sustained growth environment we’re seeing, all the railways feel like they’re operating at peak-season levels all the time,” he said.
Some much-needed relief from peak-season congestion may actually end up coming from the shippers themselves. To avoid earlier problems, many shippers have changed when, how, and where they are moving their shipments, especially containerized imports that move to the interior via intermodal transportation.
“Concerns about rail and port congestion have forced shippers to change their strategy and move goods into the country earlier to avoid congestion and traffic,” Van Dyke said. “That will have a long-term impact.”
The railroads’ responses to Chairman Buttrey’s letter include detailed information about their current operations and future improvement plans. The text of those responses, including graphics, can be accessed through the STB’s website.
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