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Issue 5 2020 - FBJNA


BNSF is enhancing its equipment at its Alliance Intermodal Facility in Fort Worth, Texas, where the company recently added three cantilever rubber-tired gantry cranes. (BNSF photo.)


///INTERMODALISM


Railroads Roll with the Punches By Peter Buxbaum


The United States economy was at a turning point at the beginning of 2020. Some thought it was headed for a downturn, thanks to slack manufacturing and general global economic weakness. Others, including many in the railroad industry, were more optimistic, anticipating an improvement in international trade thanks to the signing of the Phase One U.S.- China trade deal. Then the COVID-19 pandemic


hit. China’s Lunar New Year factory shutdowns lasted longer than usual, causing a drop in supply. Since then, overseas


factories


began coming back online, but the U.S. economy remains a wild card. Some economic reopenings have led to renewed pandemic spikes, leaving the recovery period for U.S. demand unclear.


Volumes Down


Not surprisingly, U.S. rail traffic for the first half of 2020 suffered as a result. The 11.7 million carloads and intermodal units handled in the first six months represented a decrease of 13.2% compared to last year, with carload traffic down 15.9% and intermodal units down 10.9%. Coal, autos, steel, chemicals, petroleum products, sand, and stone were among the goods worst hit from the perspective of rail traffic. Most Class I railroads reported


recent double-digit decreases in traffic and all of them withdrew their financial guidance for the


rest of this year. As James Foote, chief executive officer of CSX put it, in a conference call with investors, analysts and reporters, “The potential range of outcomes for both production and demand as well as the potential shape of the recovery are too wide to predict at this time.” John Gray, senior vice president


of the American Association of Railroads, agreed that “there remain more unknowns than knowns about the next few months,” but that “there are tidbits of encouraging news. “June was a month in which the


slow recovery process that began in early May, began to accelerate,” he added. “By the end of June, freight loadings had improved by about 60,000 carload and intermodal units weekly over where they had been in late April.” It


is not surprising that this


has been a tough year for North American


railroads, as traffic


plummeted in the face of a shut- down economy. But, as Gray suggested, it would be useless to paint too gloomy of a picture. The railroads have distinguished themselves in delivering critical supplies connected to pandemic protection and treatment, as well as food. Some have even set records for carrying certain commodities. Railroads, like others involved in transportation and trade, by necessity must play a long game, so they continue to make improvements to their facilities and services,


looking


forward to the day when COVID-19 is under control. North American railroads have


been called upon to distribute essential goods, sometimes in unusual ways. Union


Pacific


helped out by giving medical supplies priority status, updating its code system, and attaching a priority label to ten medical shippers. “The priority code ensures


the container gets into the ramp without a reservation, is added to the train first, and that the train is among the fastest moving across UP’s


system,” explained Steve


Gallaher, Union Pacific’s general director for premium sales. “Upon arrival at the intermodal terminal, it’s offloaded first and readied for pick up.” Union Pacific also put its engineering and supply chain departments at the disposal of Brickway Brewery & Distillery, a company located in Omaha, to manufacturer 400,000 ounces of hand sanitizer for UP employees. The Canadian National


Railway built its own production line to produce and distribute sanitization kits for employees and locomotives. CN’s supply- chain team realized early on that it would be difficult to procure these materials, so they acquired 13,000 gallons of disinfecting material and large quantities of dry wipes and formed an assembly line to create CN’s own canisters of disinfecting wipes. Some consumers, facing


lockdowns, avoided store-bought bread, and turned instead to baking. Ardent Mills, the largest


U.S. flour miller, and a customer of Burlington Northern Santa Fe, saw shiſting patterns in consumption. BNSF contacted the company to find out how business might shiſt and made service changes to accommodate that. Similar adjustments were also


needed to accommodate meat packers. “Early on, there was increased production to keep up with demand, which required us to adjust our resources accordingly,” said Kristin Hansen, a BNSF economic development director. “The shelves, which were low or empty for weeks, were replenished and we remained laser-focused on meeting our customers’ service needs.” As pandemic restrictions liſt


and consumers began feeling comfortable with


returning to


work, dining out, and shopping, the ability to react to a surge in demand will be critical. “We anticipate pent-up consumer demand for many items the railroad moves in intermodal containers,” said Jim Bishop, a Union Pacific marketing and sales director. “People will want a new couch or end table, and many are ready to throw out their old clothes.”


Infrastructure, Service Investments


The pandemic aside, North


American railroads continue to make investments


to enhance


their infrastructures and services. Earlier this year, BNSF announced its newest logistics center,


Logistics Center North Houston in Cleveland, Texas. The rail-served development is designed to help businesses increase their reach and speed to the Houston-area market. BNSF is also enhancing its equipment at its Alliance Intermodal Facility in Fort Worth, Texas, where the company recently added three cantilever rubber-tired gantry cranes. The North Houston business


park, located next to I-69 and State Highway 105 and with more than 1,100 acres, is capable of handling multiple commodities with mixed freight and unit trains. BNSF’s economic development team “strategically selects logistics center locations for the convergence of rail and road at underserved and key growing markets,” said Hansen. “Customers can expect to save significant time and money when locating their facilities at these prime locations.” Investments by BNSF customers at logistics parks totaled $1.2 billion in 2019, including large investments


from Ag Processing Inc., SeaCa Packaging, and Hostess Brands. Genesee & Wyoming


Inc., which owns or leases 105 regional and local freight railroads, said its 2019 industrial development efforts resulted in customers investing $1.1 billion in new projects. The 2019 industrial developments support industries that move commodities like grain, plastic pellets, lumber, paper, rock, and wind turbine components. AMG Vanadium, Melvin Stone, Plastic Express, Vestas American Wind Technology, and Weyerhaeuser were among the companies making those investments. “Access to national and


international markets is still the key to attracting new rail-served industrial development projects,” said Mike Peters, the G&W chief commercial officer. “Landing over a billion dollars of customer investment is testimony to their critical role in the supply chain.” The U.S. Department of


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Port of Long Beach Looks to Pier B Updates


The U.S. Maritime Administration has released a draſt study on environmental impacts of the Pier B On-Dock Rail Support Facility, a Port of Long Beach project. Port officials initiated the process for the report, a Draſt Environmental Impact Study, to make the project eligible for federal grant funding. Located southwest of


Anaheim Street and the 710 Freeway, the Pier B On-Dock


Rail Support Facility would shiſt more cargo to “on-dock rail,” which places containers directly on trains at marine terminals. Currently, the ability to build long trains is limited. The Pier B facility would


change this by providing track space to join together trains assembled at terminals. No cargo trucks would visit the facility. A 1-mile-long train can take as many as 2,000 trucks off the roadways.


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