Photo credit Jerry Huddleston
Publisher’s Note: A reminder that Railroad Weekly publishes 48 issues per year. The last issue of 2023 will be on Dec. 18th. There will be no issues on Dec 25th and Jan 1st.
Inside This Issue
· Corn State Freight: CN Buys the Iowa Northern
· November to Remember: Volume Trends Last Month Were Encouraging
· From Gloom to Boom? Not Quite Yet, but Intermodal Market Clearly Reviving
· The “Colossal” Apostle: Huge Growth Beckons, Says AAR Chief Jefferies
· The Scrooge of Omaha? BMWED Union Blasts UP for Holiday Furloughs
· Work In Progress: More Job Gains for the U.S. Economy
· All Aboard: More Federal Money for Passenger Rail
· Charlie Choo-Choo: Railroad Wisdom from the Late Charlie Munger
Track Talk
“IANR is an integral part of agriculture and industry in Iowa and is a proud link in the chain from the farmer´s field to the end product. From the grain railed in for production, to ethanol and other co-products railed out to market, IANR provides quality service on both ends of the process for agricultural producers.”
- The Iowa Northern Railway (courtesy: Iowa DOT)
Know anyone interested in economic development? Or who wants a deeper understanding of how the U.S. economy works today? Consider American Places a great holiday gift! It’s a quick read but packed with lots of trends, facts, insights, history, and other goodies!
-Jay Shabat, Publisher, Railroad Weekly
Canadian National Makes a Move in Iowa
· In the spotlight last week: The state of Iowa. And it has nothing to do with electing the next U.S. president. It’s got everything to do with Canadian National, which announced a deal to buy the Iowa Northern Railway (IANR) from its local owners. The IANR is a Class III railroad with about 275 miles of track running diagonally between northwest and southeast Iowa, covering markets like Cedar Rapids and its home city Waterloo (located northeast of the capital Des Moines). It currently handles more than 60,000 railcars annually, interchanging not just with CN but also Canadian Pacific, Union Pacific, and another shortline called the Cedar Rapids and Iowa City Railway. You can read more details about the IANR here.
Below: The IANR Network, and CN’s Overall Iowa Network:
courtesy: Iowa DOT
· Yes, the deal does need STB approval. And before that’s granted, all IANR stock will be held in an independent voting trust, and the railroad will continue to be managed independently. CN appointed longtime rail executive and recent FRA chief Ronald Batory to serve as trustee. It’s unlikely that the STB would have objections to approving the takeover, though Iowa shippers will have their chance to express a view. Some are surely happy to get a direct link to CN’s vast network. Others are perhaps concerned about the implications for local service, given the reputation of shortlines of being very close to their customers. One observer wrote on LinkedIn: “If I was a shipper-receiver being serviced by a reliable shortline, I would be concerned having a Class 1 take over my local yard and switching.” In any case, CN expects an STB ruling sometime in 2024.
· Most of the IANR’s customers are midwestern farmers and agricultural cooperatives, many shipping grains and biofuels. Recall that just last month, CN agreed to buy a stake in Canada’s Cape Breton & Central Nova Scotia Railway, likely enticed by the prospect of new renewal energy business in Canada’s far east. CN and other Class I railroads indeed view biofuels and other clean energy products as a future growth opportunity. As you can see from the pie chart below, almost a quarter of the IANR’s traffic is hazardous material, which is often high-yielding business for railroads. In addition, the IANR says “major industrial expansion” has occurred along its lines, with traffic having more than tripled during the past decade. You can see why that would spark CN’s interest.
IANR’s Traffic Mix:
· A few other facts about IANR: It serves 20 grain elevators, two ethanol plants, two mineral processing facilities, and handles other commodities such as fertilizer, farm machinery, food, chemicals, lumber, and more. One of its strengths, a terminal in the town of Manley, sits in the “heart of ethanol production in the United States.” The Manley terminal is a liquids storage and transloading facility serving biofuel production industries handling fuels, chemicals, and co-products. It also features a 20-acre wind turbine component distribution center, supporting additional growth in the renewable energy space. Keep in mind that clean energy projects across the U.S. are getting showered with federal money, further spearheading the sector’s expansion, not to mention the railroad sector’s enthusiasm.
· As Bill Stephens of Trains magazine points out here, “Canadian National’s proposed acquisition of Iowa Northern is the sixth between Class I’s and short lines and regionals since 2020” (See below). The final two paragraphs of the article are especially insightful: “The Staggers Act of 1980, which made it easier for Class I’s to spin off trackage, led to a golden age for short line and regional railroads. The most successful of today’s 600 or so short lines have revived forlorn branches, reversed their fortunes, and become key contributors to the carload network. Now the pendulum seems to have swung in the other direction, with Class I railroads snapping up short lines and regionals. But in a trend within a trend, Class I lines are leaving short lines in charge of local service on acquired lines where it makes sense to do so. It should be a formula for growth.”
courtesy: Bill Stephens, Trains Magazine
· The Gazette, a newspaper in Cedar Rapids, interviewed Iowa Northern director Joshua Sabin in 2022 after the company received a federal infrastructure grant. Sabin said the railroad serves mostly shippers in agriculture-related industries, including the ethanol producers ADM and POET. It also, he said, moves John Deere tractors, Tyson frozen foods, and egg products.
November Traffic Trends
· The AAR summarized rail traffic trends for November. During the month, carload volumes were essentially flat y/y, while container and trailer traffic was up a welcome 5%. Keep in mind that y/y comparisons are starting to get easier; already by last fall, the intermodal business was in a deep funk. But still, it’s now been three straight months of y/y intermodal growth, following 18 straight months of declines. Added the
AAR’s John Gray: “Overall, the last week of November had the highest carload plus intermodal volumes in two years.” Railroads, he continued, “are hopeful November will provide much-needed momentum for the rest of 2023 and into 2024.”
· Combined, total North American rail traffic last month was up about 3%.
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