There is a lot of pessimism in the rail industry these days. It seems less and less is being shipped by rail as time goes by. Branch lines and rail spurs close. Trucks begin moving cargo that once moved by rail. Intermodal fails to take adequate market share to make a difference in road traffic. Even as trucking volumes surge ahead to record highs, rail is stagnating and even shrinking. A lot of people blame this on PSR, but PSR was the symptom, not the cause. It was the trend that finally allowed people to see what was really going on. For a long time, longer than people realize, there has been a widespread modal shift from rail to road. We aren’t talking about a span of years, but decades. This has been going on for over half a century. As time goes on and at an accelerating pace, shippers increasingly choose road over rail. In the modern world, rail service is too slow and cumbersome to be useful for most shippers. There really isn’t anything to remedy this, it is fundamental to the modal competition dynamic.
This trend show itseld throught the decline in carloads from the peak before the last recession. As has been asked many times before, how is it that in a growing economy, one mode of transport shrinks? People often bring up intermodal as a counterpoint. It did have a high rate of growth for a period, but recent events have shown its weaknesses. The first is that a large portion of intermodal growth just cannibalized carload volumes instead of actually diverting freight from the highways. Even in the strongest intermodal lanes, market share against trucking is rather poor. The second is low profit margin. Intermodal is well known to not give railroads a good
Mr Doom and Gloom strikes again. Should we start pulling up rails now, or wait a week?
Traffic is down at Deshler, from over 50 to around 40 trains a day. Then, again, many of the industries these trains serve are closed.
Maybe we can talk about how transit is going to go belly up because of all the people who will be working at home. For that matter, railroad auto racks will disappear for the same reason.
I would be greatly surprised if railroads are gone in my grandchildren’s lifetimes. (I know - I’ll be long gone by then…)
When I read the gloom and doom in a “traffic” post (sorry, I’m not buying the extra letters); I’m reminded of President Carter’s famed “malaise” speech back in the '70’s. An appropriate paragraph has been excepted and pasted below:
“The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation.”
Whatever dude. If the statistics don’t prove your theory, simply change the rules. Using your illusion, the vacuum tubes at banks move more freight than railroads do.
I agree that the gloom and doom is overblown. But if the freight railroads want to still be a key player and not have to resort to national defense reasons alone to make their case, there has to be a willingness to look beyond just cutting labor and other costs for the future.
All industry faces a problem in that Wall Street’s concern these days is getting a stock price as high as possible. Its not just the RR’s that are under the gun. It is possible to bring about a change, especially if the government really does try much harder to give American industry a more level playing field both domestically and abroad. Among other things, it will require changes to delist those foreign companies (mainly China) from both US and the world stock exchanges that don’t play or report fair, prohibit ownership of shares or other investment in those companies, eliminte asset “looting” takeovers, and clamping down on the Hedge fund giants. The trick is to have a government that can do it without it over regulating/moving left to the point the economic progress slows down to a trickle or goes negative.
Europe is not an example the US wants to copy when it comes to RR’s. Their nationalization of rail service resulted in the passenger side totaly dominating and freight rail reduced to a distant afterthought. So of course rail freight traffice fell off to practically nothing. It has rebounded some, often due to freight service being spun-off in some countries to independent operators. The US is different in that Passenger rail service in the US only meaningly impacts some very populated areas and corridors between them. Goverment supported High Speed Rail won’t happen in the US as the US federal government is now $25 Trillion in debt, soon to be $28 Trillion or more. And that’s just the Federal existing debt.
There is a lot of pessimism in the rail industry these days. It seems less and less is being shipped by rail as time goes by. Branch lines and rail spurs close. Trucks begin moving cargo that once moved by rail. Intermodal fails to take adequate market share to make a difference in road traffic. Even as trucking volumes surge ahead to record highs, rail is stagnating and even shrinking. A lot of people blame this on PSR, but PSR was the symptom, not the cause. It was the trend that finally allowed people to see what was really going on. For a long time, longer than people realize, there has been a widespread modal shift from rail to road. We aren’t talking about a span of years, but decades. This has been going on for over half a century. As time goes on and at an accelerating pace, shippers increasingly choose road over rail. In the modern world, rail service is too slow and cumbersome to be useful for most shippers. There really isn’t anything to remedy this, it is fundamental to the modal competition dynamic.
This trend show itseld throught the decline in carloads from the peak before the last recession. As has been asked many times before, how is it that in a growing economy, one mode of transport shrinks? People often bring up intermodal as a counterpoint. It did have a high rate of growth for a period, but recent events have shown its weaknesses. The first is that a large portion of intermodal growth just cannibalized carload volumes instead of actually diverting freight from the highways. Even in the strongest intermodal lanes, market share against trucking is rather poor. The second is low profit margin. Intermod
Rail ton miles are up 500% over the last 50 years…with fewer people and less track…I would hardly call that a dying industry. Sure… longhaul trucking was far less important 100 years ago… largely because there were no hlghways and trucks around then. Lots of positive developments on the rail side if one cares to look, and most have moved past their obsession with PSR and the OR. I remain bullish on the rail industry…lots of good things happening that keep me optimistic.
None of the existing modes of freight transportation are going away, now or in the future. They each have the strong points and their weak points. Shippers are always looking for maximum tonnage and minimum costs consistent with their needs for speed and/or reliability. There is no one size fits all. Each existing mode will continue to ‘reinvent’ themselves as they have done since forever.
The reality of human existence portends that there may be additional modes of freight transportation created and put into the overall mix of transportation options available to those that need to move something from one place to another.
Carload traffic is dying off. What’ll be left is boutique products moving in specific equipment for very specific commodities in very specific lanes. Examples would be plastic pelets, sheet steel, chicken feed, chemicals. The king of bulk, coal, is dying and just going to be another carload, niche market.
So, what’s left? Intermodal. The railroads, as they are right now, have what they are going to get, plus or minus a bit. It’ll grow with the economy. Diruption from autonomous trucks? No. Diruption from networked highways systems? Sure, but that’s a long ways off.
So, if RRs are going to stick around, they have to figure out how to improve what they do to stay competitive. Status quo won’t hunt. They need a 20 year capital plan, not just a 5 year one.
The problem at the moment is that, unlike trucking, railroads have enormous investments tied up in physical assets. Capital investment groups find these “get rich NOW” targets. Railroad managers now have to generate an unsustainable annual return of 40% (39% won’t cut it) on operations to service the return on the invested capital; failing that, they will be replaced by those will cash out those assets and pass the proceeds onward.
Just as in the 60’s and 70’s, railroads are down to pricing for cash - if they destroy the customer base and dispose of assets beyond the bare-bones minimum to handle this week’s traffic, so be it.
Frankly, i expect half of the current railroad mileage to be gone in 25 years - there will be a few, skeletal main lines to tow containers moving at least 1000 miles, plus a few bulk commodities over which rails have absolute pricing control. Granted, the remaining mileage will look like the Chicago Loop in terms of frequency.
Some of you need to do some research on the trucking industry. They have just as many problems as the railroad industry. They include being squeezed for savings by the big shippers like Walmart and Amazon. Driving a truck used to be a middle class career. Not anymore. It’s working class. Companies are advertising for drivers and offering such “benefits” as 1-3 days home after 2-3 weeks on the road. Driver pay is only 35-40cpm in many companies. I know there are some small companies with good customers like STCO post here. I’m talking about the 800# gorillas of the industry like Swift, Prime, CR England, etc. They don’t get layover or breakdown pay or much of anything else.
The reasons for rail traffic being pretty much an afterthought is likely the same reasons that the local freight dropping off a boxcar here and there on North American railroads, under private ownership, has also mostly disappeared. The railroads are not interested in single car movements over a relatively short distance. That has virtually all gone to trucks. Perhaps fortunately in Europe government support of passenger rail has kept the network in place so that it is still available for freight where it makes economic sense.