Inside This Issue
· Phoenix Fervor: BNSF Bets Big on Arizona’s Capital
· Wall Street Retreat: Why are RR Stocks Losing Value?
· Assessment of the Derailment: NTSB Prepares Final Say on E. Palestine
· More CARB Commentary: Opinions Abound on New Calif. Loco Law
· Giving Him the Business: Joe Hinrichs’ Plan to Bait More Freight
· Iron Orr: NS Ops Chief Pushing with Urgency to Boost Efficiency
· Rail Tank Talk: An Update on the Tanker Market
· Overseas Breeze: Healthy Exports Easing Sting from Coal Collapse
Track Talk
“I got here, and people thought if you got there 60% of the time, you’re doing a good job. I mean, that’s horrible… We have to change our whole thinking.”
-CSX CEO Joe Hinrichs, speaking at last week’s Railway Age Rail Insights conference
The Latest
· The second quarter ends in just a few days. But not before Union Pacific delivers one last Q2 investor presentation. The Nebraska-based railroad will speak at a Bank of America event on Tuesday—in London. Investors aren’t particularly happy with UP this year—its stock is down 7% since January 1st. They certainly aren’t happy with what’s happening with coal traffic—UP’s volumes have dropped by roughly a quarter this year. Investors were surely expecting higher truck prices by now. They likely expected a few interest rate cuts. Perhaps they expected industrial production and housing markets to show more of a revival. Who knows? Maybe some worry about Robert Primus as STB chair, mindful of his pro-shipper voting record. Of course, it’s not just UP. CSX stock is down 4% since the start of the year. Norfolk Southern’s stock is down 5%. As for Canadian railroad stocks, their still-unresolved dispute with the Teamsters union has had investors concerned in recent months. CN and CPKC stocks are down 7% and 1% this year, respectively. (See chart below for additional stock trends).
· The NTSB, charged with investigating accidents, will be back in East Palestine this week, to issue a final report on what happened with Norfolk Southern and its derailment in February 2023. In advance of the report, NS published a report of its own that reviews the company’s safety initiatives in the first half of 2024. The AAR, meanwhile, said in a statement on Friday: “While railroads will need time to review the final report, we anticipate [it] will focus at least in part on bearings and wayside detectors, tank car standards, and supporting first responders. In each of these areas, the industry has responded.”
Highlights from Norfolk Southern’s first-half 2024 safety review
· The Wall Street Journal’s editorial board weighed in on the CARB controversy (see last week’s issue of Railroad Weekly). Their article echoed many of the rail sector’s arguments, calling California’s proposed zero-emissions locomotive regulation not “ready for prime time.” It writes: “Zero-emission locomotives would require batteries six to 10 times bigger than those now available commercially.” It also quotes ASLRAA chief Chuck Baker who represents shortlines: “These are not Tesla EVs moving a few bags of groceries around the neighborhood,” Baker said. Locomotives, by contrast, must be able to haul thousands of tons “of stone, grain, chemicals and other heavy goods and commodities in demanding weather conditions” in high heat or “through California’s Sierra Nevada mountains in the depths of winter, for hours on end.”
· In other news, a federal judge ordered BNSF to pay a giant fine—$395m—to an Indian tribal government in Washington state. The judge said the railroad violated a 1991 agreement assuring it wouldn’t run crude oil trains across the tribe’s land. BNSF will surely appeal the ruling.
· Speaking of BNSF, CEO Katie Farmer was on CNBC last month, discussing volume trends and other business topics. She flagged coal’s decline and weak domestic intermodal pricing as the two key reasons for the company’s recent margin pressures. She also shared her thoughts on the California locomotive regulation. She thinks it’s a GREAT idea. Just kidding.
· Separately, Bloomberg reports that ocean shipping rates are on the rise. The spot price of moving a container from Shanghai to Los Angeles, for example, has increased now for seven straight weeks. “While not all freight is moving at such elevated prices, the spot market for containers reflects the supply of available space on ships and the demand from importers.” A major reason for the rise is the ongoing avoidance of sailing through the Red Sea due to safety concerns. Pricing pressure could further escalate if there’s labor unrest at U.S. east and Gulf coast ports later this year.
Phoenix Fervor
· Phoenix is hot. And not just the weather. It’s also a scorching hot economy and an equally hot location for railroad investment. BNSF last week announced plans to develop a Phoenix-area logistics hub serving the “greater southwest.” The hub will feature three major projects: 1) an intermodal facility (for transferring rail shipments of containers and trailers), 2) a logistics park (where developers can build warehouses and distribution centers), and 3) a logistics center (serving local companies wanting to build facilities directly on the railroad’s network). As Bill Stephens writes in Trains magazine, “This is the first time BNSF has combined a logistics park, which serves intermodal customers, and a logistics center, which are multi-commodity sites for carload and bulk customers.”
· “We identified a need for additional rail capacity in the Phoenix metro area,” said BNSF’s VP of Service Design Jon Gabriel. “Arizona is an important region to expand and advance our intermodal network capacity. This is a long-term investment and commitment to our customers and consumers in Arizona and beyond.”
BNSF’s Major Logistic Parks (intermodal) and Logistic Centers (carload)
source: BNSF website
· BNSF’s largest development project is just east of California’s Inland Empire, on
Keep reading with a 7-day free trial
Subscribe to Railroad Weekly to keep reading this post and get 7 days of free access to the full post archives.