Rails See Benefits From Longer Trains

Mark Szakonyi | Dec 22, 2011 5:28PM GMT The Journal of Commerce Magazine - News Story Major railroads, dwelling on economies of scale, plan to invest billions in sidings and locomotives. With freight rail efficiency pretty much at its limits in stacking containers vertically, railroads increasingly are looking for improvements in the other direction. North American rail carriers are running longer trains to gain the sort of economies of scale ocean carriers are getting from their new giant container ships. Longer trains reduce fuel consumption and reduce capital maintenance and labor costs, while improving safety and efficiency, railroad executives say. But rail shippers are less likely to benefit from the adoption of super-sized equipment than they are on the water. Longer trains can translate into longer dwell times for shipments. Containers can be held from shipment until there are enough boxes to put together a longer train. Railroad executives say a slightly longer dwell time won’t throw off the delivery of a container. Still, even if deadlines are met, many containers will arrive later than they would have if the railroad ran shorter trains. However, longer trains can benefit shippers whose loads arrive later. “Longer trains allow us to respond to volume variability without adding extra train starts or leaving business behind, thus improving service for our customers,” said Mike Francszak, executive vice president of operations at Canadian Pacific Railway. CP is in the midst of a drive to improve its operating efficiency by extending trains, especially those serving the relatively low-yield bulk commodities such as potash that are the railroad’s core business. It’s part of an effort to make the business more financially efficient. But in general, rail industry observers say, rail shippers are also unlikely to get a break in rates through the use of larger equipment. Although the use of larger vessels has fostered enormous rate competition on the water, railroads are under little pressure to cut rates because of the lack of competition they face from other railroads and other transportation modes, such as trucks or barges. The Class I rail industry’s pricing power has been reflected in railroads’ quarterly earnings in recent years, with the latest round of earnings reports as the strongest testament. Many major railroads in the third quarter saw their profit margins rise by double digits on single-digit freight gains. Some rail customers, especially coal shippers, could see a break in rates if contracts call for shared savings. But trains carrying coal and agriculture shipments often are limited in length by the size of the utilities and grain terminals. The economies of scale don’t come cheap for the major North American railroads. The railroads will spend billions of dollars in coming years on siding and locomotive improvements so that trains can use what they call distributed power. That means getting more control of a train’s speed and movement dynamics by interspersing locomotives throughout a train, with the lead unit controlling them all. Slack and railcar coupling is reduced by spreading the power units throughout the train. Running longer trains can save Union Pacific Railroad 4 to 6 percent in fuel costs depending on the route, spokesman Tom Lange said this year. He said running distributed power has allowed the railroad to run intermodal trains 7 percent longer (154 to 165 cars) and coal trains 2 percent longer (126 to 128 cars). CP will spend more than $450 million on new and expanded siding so it can operate 11 percent longer trains by 2013. The Calgary, Alberta-based railroad currently operates intermodal trains up to 12,000 feet, a 40 percent increase since 2008. Previous siding improvements on the western end of the railroad’s network have allowed CP to run 20 percent longer potash trains and 18 percent longer coal trains. BNSF runs intermodal trains between 7,000 and 10,000 feet on the railroad’s line from the ports of Los Angeles and Long Beach to Chicago, but the goal is to run more trains closer to the high-end, said Bob Lease, vice president of service design and performance. The railroad also is making siding improvements to run longer trains on its route from Chicago to Seattle and from Birmingham, Ala., to Atlanta. Railroads operating between the Midwest and the East Coast are more limited to how long they can run trains because “the length of haul is shorter and the network is more complex,” said Robert Huffman, Norfolk Southern Railway’s vice president of intermodal operations. He said most NS intermodal trains are between 7,000 and 9,000 feet long, but the railroad is improving track so the new range will be between 8,000 and 10,000 feet. Huffman said. “It’s not just that we want to run trains 11 percent bigger. We have a lot of capacity in our existing network,” he said. NS is working not only to double-stack more containers but also to improve the matching of various container sizes to the appropriate sized railcar. Longer trains come with a hidden cost: Communities the trains pass through dislike them, particularly when they go by at-grade road-rail crossings. Container lines, of course, don’t have to worry about their megaships crowding out other maritime traffic.

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