Reader TTS

   The decline in coal traffic this year is having the salutary effect of improving overall service on freight railroads in North America, according to Larry Gross, a senior consultant for

Indianapolis-based econometrics firm FTR Associates.    Railroads are running about 8 percent faster than in 2011 because there are fewer unit coal trains on the system. As reported last

week, utilities are turning to cheaper natural gas as a substitute for coal. A mild winter, large utility stockpiles, and competition from other countries for exports have also combined to

reduce demand for the traditional fuel for electricity, experts say.    Coal carloads are down about 10 percent so far this year and at one point were 15 percent off last year’s pace.   

Coal trains tend to be slower than those hauling containers or other commodities and take up line capacity by essentially creating rolling roadblocks or forcing other trains onto sidings to

get past, Gross said during a Monday conference call with _American Shipper_’s editorial team.    Average train speeds above 25 mph are a sign that the rail network is fluid.    “Service is

the silver lining in the current situation with coal,” he said.     In recent weeks, coal volume has improved and is greater than the comparable period a year ago, when railroads had to

contend with network restrictions due to the flooding of the Missouri River.    Gross predicted carloadings for coal will increase in the coming weeks as the heat wave griping the country

increases demand for electricity to power air conditioning in homes and businesses.    Dwell time, a metric of how long railcars sit in a yard each trip, was also down almost 10 percent to

21 hours in May from last year.     In addition to coal, railroads are also suffering from a downturn in grain shipments since last year due to the drought affecting large swaths of the

Midwest.     On the bright side, railroads are experiencing growth in petroleum, motor vehicles and metals. Petroleum traffic is up more than 40 percent versus this time a year ago because

western railroads are being hired by energy companies to move crude oil from North Dakota and Montana, which are experiencing an oil and gas boom from recent finds in the Bakken Shale field

but lack adequate pipeline infrastructure.    But metals shipments are beginning to taper off since the spring, a sign that the U.S. economy is softening, Gross said.    Lumber shipments,

which have been depressed for several years since the housing market collapse, are starting to show signs of life compared to last year.    Meanwhile, crushed stone, sand and gravel, which

had been a source of recent growth are also fading. Aggregates had been on the upswing because they are being heavily used by energy companies to develop oil and natural gas fields around

the country by injecting high pressure water, sand and chemicals into the ground to crack shale formations and release the trapped fossil fuels - a process known as "fracking."   

Drilling activity has subsided in recent weeks because the low price of natural gas has created a supply glut and lowered profit margins for energy developers, Gross told _American Shipper_.

       Carloadings are down about 1 percent year-to-date, but cars online is down about 4 percent from last year. The figure is a measure of railroads' productivity and shows that they

are using fewer assets to move freight.    FTR is forecasting that growth in rail carload traffic will be negative in 2012 due to the falloff of coal, grain and chemical shipments. After a

0.5 decline this year, total rail carloads will increase 2.8 percent in 2013. But even at the end of 2013, rail will still be 7 percent behind where it was at the end of 2007, Gross said in

a FTR webinar on freight data last week.    Railroads have done a good job resisting the urge to lower rates to attract more carload volume. They have rightly concluded the amount of

commodities that could be converted from highway transport to the rails is minimal and price competition would only result in railroads stealing market share from each other, Gross said.   

"Their pricing discipline has been extremely impressive," he said.    Data from the Association of American Railroads and Intermodal Association of North America also shows that

growth in intermodal service, a major driver of rail business and growth sector in recent years, has plateaued along with the economy.    Intermodal loadings have stayed at about a 10

percent growth rate since last year.    Gross, who also does freight consulting through his company Gross Transportation, said the rate at which intermodal has grown is decelerating because

lower diesel fuel prices make trucks a competitive option for shippers and the tepid economy has left an adequate supply of trucks to haul goods.    Railroads have an opportunity to capture

more intermodal business in the intermediate length-of-haul segment, Gross said.     Rail carriers like BNSF Railway and Union Pacific have traditionally had a strong grip on transportation

moves of 2,000 to 2,500 miles. In recent years, railroads have invested in terminals, technology, equipment and personnel to improve intermodal service and offer more competitive truck-like

service for distances of 750 to 1,000 miles. Eastern railroads like CSX and Norfolk Southern primarily move intermodal loads shorter distances on their networks.    The "donut

hole" between the 1,000 and 2,000-mile distances reflects trips that require an interchange between two railroads.    Gross said railroads have a "major opportunity" to gain

business if they can figure out how to more efficiently manage car transfers between railroads. - Eric Kulisch TO CONTINUE READING THIS ARTICLE... ALREADY HAVE AN ACCOUNT? SIGN IN CREATE A

FREE ACCOUNT No payment required NEED HELP? CONTACT US