The only trains that are running at full capacity are the train sets in your basements. The real trains that move a substantial portion of our goods are in second gear. The Association of American Railroads estimates that 30% of their boxcars – 206,000 – have been placed in storage. Put end to end these cars would stretch from New York to Salt Lake City.
The cars are hiding in small towns throughout the country.
New Castle, Indiana has a mile long stretch of about a hundred rail cars.
A small New Jersey town found a two mile line of rail cars resting on an unused rail line in Cape May, New Jersey.
In December Union Pacific Corp (NYSE: UNP) parked a three mile long string of cars in the small town of Thornton, Colorado.
Dennis Duffy, Union Pacific executive vice president, said that in normal times the railroad would have from 5,000 to 8,000 cars in storage. Now it has 48,000 cars being parked on 60 rail sidings around the country.
The small town of New Castle, Indiana had seen a dramatic change in the past few years. It was a Chrysler factory town and also had auto supply companies like Visteon, a major Ford Motor Company (NYSE:
QUESTION: To what extent are all of these idle freight cars
due to a fall-off in economic activity or
is it more due to that the fact that the more service-reliable truckers are once again gaining market share - especially for the high value / high tariff freight - because their fuel costs have dropped about 50% since last July?
I own a trucking business, and I can assure you that things are slow with us as well. Lots of carriers not renewing their permits…lots of carriers going out of business. This is going to get ugly.
Following-up and expanding on Bob_Fryml’s valid points above:
30 % of boxcars is not the same as 30% of the total car fleet, and nowhere near as good an indicator of economic activity as it once would have been. It’s been remarked on before that boxcars are no longer as universal as they used to be - they’re not dodo birds by any means, but it’s only a small and specialized niche that they now fill in the total transportation marketplace;
obsolete and not really needed any more - but no one wants to say so and write them off ? (or they still have time to go on their financing -“equipment trusts”) - see previous threads on stored intermodal or well or flat cars or similar;
not needed because of improved productivity = “velocity” = more miles / day (or less days/ trip) and hence more trips or miles per year ? As CShaveRR noted earlier today in the concurrent “Railroads in the future” thread, UP has improved its system velocity enough to not need 200 of its many (more) stored locos. Same thing can - and should - happen with cars - not all those that are stored are really needed anymore, I suspect, even if they are still in good condition. I believe the aver
[:O] I wondered where my boxcar load of real freight went. Now I know. It’s somewhere in N.J., being stalked by gloom & doom reporters.[V]
This downturn is like no other!!! This one now has the internet/media/up to the minute feature installed. My new pet peeve: every poorly written news story that sounds like this- “The median price for widgets dropped last hour by THE BIGGEST DROP IN 46 HOURS!!!” My glass is still 1/2 full, but then, I don’t watch TV either.[}:)]
Truckers can’t haul at rail rates…and I don’t think shippers are raising their rates now in order to move boxcar freight onto the road… And if all those parked boxcars are indeed due to transference from rail to road then you would see a very busy trucking industry…yet we don’t.
In the manufacturing sector, the glass is spilled and broken. TV news has spent billions of dollars in advertising to promote a recession. They have told people to stop spending and that is what the people have done. Advertising works. If it weren’t for the evening news, people would not even know about the recession unless they had lost their job.
While I’m sure there are box cars stored, I think 30% of the entire freight car fleet is in storage, not 30% of the box car fleet. Looking at the article and picture, that one particular location has auto racks stored, not box cars. The reporter probably doesn’t know the difference.
Around here, the cars in storage are flat cars, mostly bulkhead type. Brian Hanel had some photos of cars stored over by Cedar Rapids. There are also some at Clinton and Tama. A couple of weeks ago the dispatcher wanted to put a train away at Tama, but couldn’t because the siding was full of stored cars. I’ve heard that there are auto racks stored in the siding at Carroll, IA.
Both. Of course. But the second point is particularly well-taken. Historically, recessions have been periods of significant rail market share loss to trucks. The 1980-1982 “double-dip” recession saw enormous share loss in truck-competitive markets from food to paper and beyond. This, ironically, was immediately post 1980 Staggers Act, post 1979 “oil shock”, and post AAR, et al, declarations in the 1970’s that long-haul freight (over 600 miles) would soon be all rail. Particularly pernicious was the full fruition of cost-based railroad pricing policies driven by “Ex Parte” general freight rate increases (that vastly out-paced truck rate increases) and “rate-of-return” edicts by railroad CFO’s which dumped millions of tons of freight that didn’t “earn cost of capital.”
Is history repeating? Of course. For example, see today’s Wall Street Journal article on the burgeoning truck driver surplus. It happens every cycle. In that same article, there was a humorously erroneous statement that 137,650 trucking rigs had “vanished” from the roads because their owners had gone out of business. If only they had vanished. The trucks exist, driven by those hoardes of low-cost drivers, and they can be r
Made a trip from Maryland to Savannah, GA a week ago. A number of the trucking terminals that are visable from I-95 were shut down and out of business. Transportation of any kind is operating at signifigantly reduced volumes.
I guess those guys weren’t hauling the freight that is idling all those boxcars… Ah shucks…I can’t find it either… but that’s okay…still hauling for 1.60 - 2.00 per mile, and I’m still getting a fuel surcharge.
100% due to general decline in economic activity. Nothing is shifting from rail to truck. Rail service reliability has continued to increase, while truck service reliability has no where to go, and transit times by truck have in many markets declined significantly because it’s no longer cost-effective to pay for team drivers, handoffs, and small terminals used to obtain fast transit in the past. The market share of railways (measured in net earnings) is increasing dramatically because it’s increasingly the best buy for shippers. The only freight business to report strong profits last year is North American Class I railways. Profit last year in the air freight business, LTL trucking business, and liner business (international container freight) was essentially zero.
The cost pressure on shippers and consigners is enormous, resulting in freight cascading down from fastest to cheapest. Freight that moved by air is dropping to two-day LTL, two-day LTL to three-day, three-day LTL to truckload, truckload to rail. Some international container liner service is now moving at a base rate of ZERO, the shipper paying only for the fuel and the handling.
Starting with air freight, with the best service but the highest price, domestic declined 18.7% year-to-year in
100% due to general decline in economic activity. Nothing is shifting from rail to truck. Rail service reliability has continued to increase, while truck service reliability has no where to go, and transit times by truck have in many markets declined significantly because it’s no longer cost-effective to pay for team drivers, handoffs, and small terminals used to obtain fast transit in the past. The market share of railways (measured in net earnings) is increasing dramatically because it’s increasingly the best buy for shippers. The only freight business to report strong profits last year is North American Class I railways. Profit last year in the air freight business, LTL trucking business, and liner business (international container freight) was essentially zero.
The cost pressure on shippers and consigners is enormous, resulting in freight cascading down from fastest to cheapest. Freight that moved by air is dropping to two-day LTL, two-day LTL to three-day, three-day LTL to truckload, truckload to rail. Some international container liner service is now moving at a base rate of ZERO, the shipper paying only for the fuel and the handling.
Starting with air freight, with the best service but the h
I’d like to see this article – copy the URL from the address bar and paste it into your post.
The article might be partly true. In late 2008 fuel surcharges were lagging the market and were generating a positive cash flow for railways – and for truckers, ocean liner and bulk trades, and airlines, too. Did the article mention that?
But fuel surcharges now reflect the current lower market price of fuel for every mode of transportation – road, rail, water, and air alike. None of them were not charging them, and none of them have not reduced them to current market price for fuel. Fuel surcharges by necessity lag the market. They can’t be instituted until fuel goes up and the shippers see that fuel is going up. Thus when fuel prices are rising the transportation provider is actually selling the transportation more cheaply compared to what it costs it deliver it. When fuel prices are declining, the transportation provider won’t drop the surcharge until it is sure the prices is really going down for good, and the shipper tacitly agrees to this. So, when fuel prices are going up, transportation providers are losing money, and when they’re going down they’re making money. But, and this is a big but, over time the transportation service provider is not making money on fuel surcharges; it all nets out over the long term. If the transportation provider is showing a profit on fuel charges over the long term, that is because it has chosen to lower its profit on its base rate. It’s n
RWM, thank you for your extensive report about fuel surcharges.
Your established credentials at this site give great weight to your postings and this one was one of your best. Too many, including many paid journalists, allow their prejudices, their laziness or their lack of knowledge to dictate what they say.
It’s going to be hard to live up to your compliment, because I am still learning about railways from people like you and Mudchicken (just ask him). I love this business because of the people in it.