CN Iowa Line

Well, you cannot just give up and let the truckers haul the loads. Especially if you’ve got a greatly underutilized railroad, as CN does in Iowa.

You’ve got to overcome the “Class 1 Mindset” that will quickly concede Cedar Rapids to the truckers. Ed uses the “Class 1 Mindset” in his dismissal of the intermodal opportunities at Cedar Rapids (and nearby Waterloo). No shame in that. That’s just what the CN is doing.

300 miles Cedar Rapids to Chicago? Not worth the bother. That’s the current culture on the Class 1’s. That’s how they think.

I was pondering how to write a decent reply when my May 2015 issue of Trains arrived via email. In the emag is another excellent article by Fred Frailey (citing the aforementioned “Class 1 Mindset”). It’s about the success of intermodal on the Indiana Rail Road. The Indiana is being successful at 153 miles. Now, if the IRR can successfuly compete with trucks using IM service between Chicago and Indianapolis, just why can’t the CN offer a truck competitive service between Cedar Rapids/Waterloo and Chicago connections?

In fact, it may not be possible. But it’s something that certainly deserves good analysis and study. It’s not something that should be quickly dismissed becaus

If you go further west along the same rail line, even more product is being handled by truck. According to the USDA, Iowa’s red meat production for 2013 was 6,571 million tons (2nd place among the states). Nebraska was first at 7,353 mil tons. A substantial portion of that comes out of Tyson’s plant near Sioux City.

Ken: Very informative post. One point I would like to see clarified, however. Is the Indiana RR service strictly IM terminal to terminal (CHI and IND)? If so, why could not IC/CN intermodal compete with loads of meat, for example, from a meat packing center, to one of the several distribution centers in Chicago?

nb: I have never done a 24-hour count, but it seems to me there is more than one train each way on the IC line.

The folks in the Sabin’s organization are good railroaders, pro-active, driven and have a much flatter internal corporate to deal with when they innovate.

Ken:

I always appreciate your comments on the transportation industy and particularly your passion for handling meat out of Iowa. So, I will bite on this and let me ask you a few questions (because I think this would work, but probably not on the CN):

  1. Cost for establishing a terminal in Cedar Rapids?

  2. Average drayage costs to Cedar Rapids terminal? I have lost touch with the trucking costs, but it seems as if a $200 drayage in the CR area (city limits) would cover it.

  3. I would assume a thru rate would be necessary from CR to CSX east coast facilities. What is the average container rate for 931 miles? I have no idea but would assume a cost of $1 per mile, perhaps? How would that revenue be split between CN and CSX? If it is on the per mileage basis then CN would garner $271. A trainload of 45 containers to CSX would yield revenue of $12195.

  4. How is that $12195 going to stack up vs the fixed costs of a locomotive (how much is a locomotive lease per day? I have no idea).

  5. Per diem charge for TTX tables?

  6. Labor cost for one crew member? What about labor costs for CR terminal?

  7. Backhaul from Chicago to CR? What can be expected for container freight to the middle of Iowa? Perhaps work out a deal with some TL carriers in Chicago (wait, CRST and Heartland are looking for the same freight).

I agree with quite a bit of your points, primarily the IC line needs some traffic to support the heavy fixed costs, but I am not sure that 45 containers a day (one way) is going to cover costs and add a contribution so that I can continue to recieve my healthy CN dividend check in March, June, September and December (which has been growing greatly the past 10 years).

I think Indiana Railroad is perfect for what is happening there. I have not read the article as digital delivery is quicker than the USPS, but as I unde

Does this work?

Average

Eastbound

Eastbound

Train Miles (Round Trip) 542

Eastbound

Revenue

Only

Loads

@ $1.00

Revenue

This will be fun.

Ed

I don’t know how much “fun” this will be. It looks like the work I did in days gone by - for pay.

I was trying to show the gross revenue per train mile at various levels of eastbound and westbound loadings. It assumes $1.00/container mile eastbound and $0.75/container mile westbound.

This whole thing will be, at best, one big SWAG. Determining the costs of specific rail movements remains very imprecise. Since we do not have access to real data, we’re going to have to make many assumptions that may or may not be valid.

Such as: the cost of an IM terminal at Cedar Rapids. In the real world I could get a projection. Here, the best we can do is an assumption. If we guess $2,000,000 (Let’s be cheap with this terminal. It’s only designed for an average of 40 loads per day.), a 25 year life, and a 18% interest rate, I get an annual ownership costs of $364,183.19. In Excel it’s: 12 x (=PMT((0.18/12),(25*12),2000000).

I don’t like using guesstimates. Are you sure you want to “have fun” with this?

Anyway, if we make another assumption of a six day/week operation, while allowing for holidays, and 40 loads per 300 workdays, we get 12,000 loads per year. Dividing the $364,183.19 annual ownership cost of the terminal by the 12,000 annual loads we get a Cedar Rapids terminal ownership cost of $30.35 per load. That figue will go down if we can put more annual loads through the terminal, particularly westbound loads.

This is one big SWAG guesstimate. Anyone, please feel free to point out errors on my part. I’m kind of rusty at this.

Shall we continue?

[quote user=“greyhounds”]

MP173
This will be fun.

I don’t know how much “fun” this will be. It looks like the work I did in days gone by - for pay.

I was trying to show the gross revenue per train mile at various levels of eastbound and westbound loadings. It assumes $1.00/container mile eastbound and $0.75/container mile westbound.

This whole thing will be, at best, one big SWAG. Determining the costs of specific rail movements remains very imprecise. Since we do not have access to real data, we’re going to have to make many assumptions that may or may not be valid.

Such as: the cost of an IM terminal at Cedar Rapids. In the real world I could get a projection. Here, the best we can do is an assumption. If we guess $2,000,000 (Let’s be cheap with this terminal. It’s only designed for an average of 40 loads per day.), a 25 year life, and a 18% interest rate, I get an annual ownership costs of $364,183.19. In Excel it’s: 12 x (=PMT((0.18/12),(25*12),2000000).

I don’t like using guesstimates. Are you sure you want to “have fun” with this?

Anyway, if we make another assumption of a six day/week operation, while allowing for holidays, and 40 loads per 300 workdays, we get 12,000 loads per year. Dividing the $364,183.19 annual ownership cost of the terminal by the 12,000 annual loads we get a Cedar Rapids terminal ownership cost of $30.35 per load. That figue will go down if we can put more annual loads through the terminal, particularly westbound loads.

This is one big SWAG guesstimate. Anyone, please feel free to point out errors on my part. I’m kind of rusty at this.

Shall we continue

Our price targets.

According to www.truckloadrate.com the minimum dry van truckload rate from Cedar Rapids to Tobyhanna, PA is $2.01/mile + $0.29/mile fuel surcharge. It’s 941 miles. The total truckload cost to the customer is $2,164.30.

We’re going for a 10% discount to switch the freight over to intermodal. That discount will be $216.40/load. So that puts our target door to door intermodal rate at $1,947.87

From Waterloo, IA (Tyson pork drayed via the Cedar Rapids ramp.) to Tobyhanna, PA the minimum truckload reefer rate shows as:

955 miles at $2.19/mile = $2,091.45 line haul revenue.

955 miles at $0.33/mile = $ 328.35 Fuel Surcharge

955 miles at $2.52/mile = $2,419.80 Total over the road trucking charge

With the 10% discount our target rate is $2,177.82, a savings of $241.98 per load. That’s what we’ve got to work with here.

There are 6 shuttle grain loaders west of Iowa Falls on the IC. Since that is Iowa they likely load Corn bound for either export via Louisiana or Poultry feeder operations in the SE. It is my understanding that this is one of the major reasons the IC bought back the Chicago Central.

As always, Greyhounds provides us with excellent analysis and I WISH so much that the CN would be smart enough to take a hard look at this. My only question and concern would be the tunnel at East Dubuque, Illinois. Am guessing that there would have to be some work done on this to accomodate double-stack (presumably anyway) traffic.

I wonder if this line would be a good triple crown roadrailer candidate? There would be a lower initial cost for a terminal.

Great discussion and number crunching.

LA Ram…I knew there was a tunnel on that line, but it flew right by me and I drove right past the tunnel 10 days ago.

I think that tunnel is a game changer. Perhaps the Roadrailer system would work.

Anyone have an idea of drayage costs on both ends? Also, gotta figure in the refer lease costs for containers.

I will be in contact with a couple of my industry folks about lease rates.

Ed

Yes…

I thought the reason that IC/CN Officially gave for buyback of this line was increasing the line haul of Iowa products via their routing to Gulf Coast Ports from Chicago to Iowa itself. Only going off long-term memory here so I could be wrong.

Just checked the map for Tobyanna, Pa…not a good fit for CN/CSX. It is about an hour north of the Bethlehem, Pa. intermodal terminal, but that is on the NS. I dont see CSX working without a huge drayage charge.

I would think the drayage charges for Iowa and out of Bethlehem would consume about $500-600 of the line haul charge of $1800. That leaves about $1200 perhaps a little less.

What kind of backhaul opportunity exists out of that area to Chicago/Iowa?

What kind of ROI hurdle rate do the rails have these days for new projects, particularly when there seems to be a need for capital?

Ed

I think greyhounds would have known about the tunnel in East Dubuque, since tunnels are rare in the midwest. These days a lot of the loads are ethanol. Today I saw an afternoon WB with UP power up front hauling mostly grain cars.

Regarding your Council Bluffs questions, BNSF does have an intermodal facility at Gibson Yard and Iowa Interstate has a fairly robust intermodal business, with room for more growth.

As far as the CN trackage, there is carload traffic on the Omaha side, but not much. Word is that they have filed to abandon the Iowa trackage west of the yard to the bridge and the Omaha trackage. Supposedly this is the first step to getting the old bridge removed across the Missouri River as the Corps of Engineers has deemed it a navigation hazard.

I like the way this discussion is going. Good questions and ideas with no flaming.

Ed, I perceive you are way high with the drayage costs in Iowa. Slightly too high in the northeast. I’ll try to get to them next. It’s true that Tobyhanna would be better served off the NS instead of CSX. But remember we’re going “Everywhere East” out of Cedar Rapids. Not just Tobyhanna. I’d like to run the CN train in to a Chicago IM terminal of an eastern carrier, either CSX or NS, to avoid the Chicago transfer charges an delays. So we may have to suboptimize a few destinations, such as Tobyhanna, for the overall efficiency of our system.

I have no idea what CN’s ROI “hurdle rate” is. (That’s the rate of return a capital investment must be projected to earn in order to have a chance of getting funded.) I used a 18% annual rate for the Cedar Rapids terminal calculations.

I know about the tunnel at E. Dubuque. I rode through it twice in a locomotive cab. AFAIK, it will not clear full height double stacks. But right now I do not conceptualize use of DS west of Chicago. I’m thinking of “TEEING UP” the containers west of Chicago. They’ll go TOFC on their chassis on that part of the trip. &nb

The IAIS does the intermodal work for the UP in Council Bluffs.

The buzz has been that the old IC bridge is going away. Although I’m less sure of them (CN) abandoning trackage in Omaha that they actually use to serve their customers. They have been using the UP and BNSF to access the Omaha side for years.

Jeff