Rail rates dropping

By Staff -- Logistics Management, 1/1/2001

Railroad rates continued their multiyear decline in 1999, led by reductions in the rates charged for coal in the East and grain in the West, according to a study by the U.S. Surface Transportation Board. After being adjusted for inflation, rail rates fell 2.7 percent in 1999, the study found, with rates in the East declining 2.6 percent and rates in the West falling 2.8 percent.

Since 1984, inflation-adjusted U.S. rail rates have fallen 45.3 percent, the STB says. A portion of this decline can be attributed to the shifting of costs (such as ownership of railcars and investment in loading/unloading facilities) away from railroads and onto shippers. The STB's analysis, however, concludes that the key factors leading to rate reductions have been the significant efficiencies and productivity gains achieved by the railroads since passage of the Staggers Act in 1980.

The National Industrial Transportation League has a different take on the situation. It says rail rates, measured as revenue per ton-mile, have been falling virtually continuously since 1900, whether during periods of deregulation or of heavy regulation.

League President Ed Emmett faulted the STB for attributing rate reductions to the impact of the Staggers Act and for complacency in the face of change. "The STB - and, perhaps, railroads and shippers - has trouble understanding that the industry is completely changed from 1980," he charges. "When is it going to creatively look forward to the needs of the new North American rail industry and its customers? What conclusions are to be drawn from this study with regard to the railroads' ability to reinvent themselves to provide more reliable service in a more competitive environment?"