Photography by Frederick Manfred Simon © www.steelwheels.photography
Inside This Issue
· Late and Switch: STB [Finally] Delivers Proposal on Reciprocal Switching
· STB’s Threat: If No On-Time Arrival, Lose Business to a Rival
· Railroads Relieved: Regarding the STB’s Plan, Class Is Feared Something Worse
· Revival Revealed: CSX Sees Signs of Life for Domestic Intermodal
· Attila the Hub: Intermodal Giant Hub Group Sees “Pockets of Tightness”
· Grain Shoots: CSX Encouraged as it Enters Peak Harvest Season
· The Health of Nations: The Latest on N. America’s Surprisingly Strong Economy
· Short Report: Shortlines Share their Cares, Fears, Plans, and Potential
Track Talk
“It’s a mixed bag. We’re seeing some strength and some weakness.”
-CSX chief Joe Hinrichs, speaking at last week’s TD Cowen Transportation conference in Boston
Publisher’s Note: I hope everyone enjoyed their summer breaks! Lots of exciting railroad developments to cover this fall. I’ll be attending FTR’s event in Indianapolis this week so for anyone else attending, please reach out and introduce yourself. Looking forward to meeting many of you there! -Jay
Read American Places, a book with deep insights into the most important trends and developments throughout the U.S. economy -Jay Shabat, Publisher, Railroad Weekly
The Latest
· Just a few weeks remain before the start of 2023’s final quarter. Summer vacations are over, and North American railroads are hoping and praying that the year will end better than it started. Yes, Class Is continue to earn strong profit margins. Yes, the service debacle of 2022 is largely in the rearview mirror. And yes, certain lines of business like hauling autos, construction material, and coal remain healthy, supported by a North American economy that’s faring much better than many expected. Still, that doesn’t compensate for 2023’s long lineup of headaches, setbacks, and frustrations—the East Palestine derailment, the industry’s heightened regulatory and Congressional scrutiny, the labor unrest at Pacific seaports, rising costs, declining unit revenues, falling stock prices, extreme weather, a deep intermodal slump, weakness in key markets like chemicals and forestry products, plummeting natural gas prices (impacting domestic coal demand), and an overall contraction in rail freight volumes. The latest AAR figures through Sept. 2nd show North American carload and intermodal volumes down 4% y/y (with U.S. volumes alone down 5%, Canada down 3%, and Mexico—boosted by ag and auto growth—up 5%).
· The industry’s regulatory threat resurfaced last week as the STB issued a new reciprocal switching proposal. It appears, however, less burdensome than railroads feared (see below).
· With autumn essentially here (fall officially starts Sept. 23rd), the continent’s peak grain harvest is getting underway. It should normally be peak season for intermodal shipments too, though the peak seems elusive this year. CSX presented to investors last week, providing its latest market commentary (see below). This week, FTR Transportation Intelligence will hold its annual gathering in Indianapolis, featuring two days of rail content. Also this week, several railroad executives (including UP’s new chief Jim Vena and CPKC’s Keith Creel) will present at a Morgan Stanley event in California.
· As Vena starts his tenure at the helm of Union Pacific, CSX appointed Mike Cory—another former Canadian National veteran—as chief operating officer. Recall that Jamie Boychuk resigned as CSX’s ops chief last month.
· America’s west coast dockworkers voted to accept their new contract, ending a long period of uncertainty for shippers. In other recent developments, Norfolk Southern suffered a momentary tech outage while separately announcing an $8m investment in DrayNow, which claims to be “revolutionizing intermodal’s first- and final-mile journey through an app that provides customers with real-time shipment tracking and document capture of drayage shipments.”
· Mexico's Former Secretary of Economy and Current Federal Deputy Ildefonso Guajardo, speaking last month at the Woodrow Wilson Center, warned that the North American USMCA trade agreement is at risk from noncompliance: Canada trying to bend the rules with dairy products, the U.S. with auto parts, and Mexico with energy and most recently corn. He also said Mexico’s unhelpful energy policies are inhibiting supply of clean energy, which foreign manufacturers are demanding.
· CSX and the Georgia Ports Authority unveiled a new daily rail option for shippers connecting Savannah’s Mason Mega Rail Terminal with CSX’s “Carolina Connector.” That’s its intermodal terminal near Rocky Mount, North Carolina, located about 60 miles northeast of the booming Raleigh-Durham metro.
· Genesee & Wyoming, the owner of many shortline railroads, detailed its plans to test autonomous railcar technology. In a filing with the FRA last month, two Class III G&W properties—the Georgia Central and the Heart of Georgia—described its work with Los Angeles-based Parallel Systems, a startup building self-propelled, zero-emission, battery-electric railcars to move intermodal containers. The filings explain how the technology works, plans for a proposed pilot program to test it, and efforts the railroads are undertaking to keep employees engaged and informed—labor-free railcars can be a sensitive topic. The goal, they say, is to serve shorthaul markets (sub-500 miles) where trucks currently dominate. “The Program is an important opportunity to test a novel new railroad technology with significant potential benefits for the environment, economic development, roadway congestion and safety, and quality of life in often disadvantaged neighborhoods adversely impacted by the current concentrated highway movement of containers.” You can see how the new railcars would work on Parallel’s website.
courtesy: Parallel Systems
The Economy
· What’s the latest economic situation? Most U.S. indicators suggest ongoing resilience in the face of rising interest rates. The August employment report was again pretty good, with 187k newly created jobs, a large portion of them in health care
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