Slowing US rail deliveries frustrate shippers

Rail shipments of US commodities are becoming increasingly delayed by domestic and global supply chain disruptions, including intermodal container congestion.

Shippers are increasingly complaining about railroads' inability to meet a surge in demand, as well as longer delivery times for existing freight volume. Coal shippers, in the midst of a rare increase in demand, have tried to add more trains to increase shipments but say railroads have refused.

The drivers of these problems are myriad, but intermodal congestion is getting much of the attention.

A rise in US intermodal imports has left containers spread across the US. The sector's typical peaks and valleys have been "replaced by one continuous wave of cargo that started in July 2020 and has not let up since," Port of Long Beach chief operating officer Noel Hacegaba said. The California port is one of the largest in the US.

Railroads are devoting more and more time to sorting out the situation. Western carriers BNSF and Union Pacific (UP) have met with ports, international shipping companies and customers as they try to resolve the situation.

UP put a temporary hold on west coast container movements to Chicago, and BNSF just announced a $50/container incentive to its ocean carrier customers to participate in a test of extended container handling hours at Long Beach and Los Angeles.

Container data from Long Beach highlight the growth in demand. Container imports at Long Beach slowed in the first half of 2020 because of the Covid-19 pandemic, but volume rebounded in the second half, and total traffic rose above 2019 levels. Imports have continued strongly this year. Volume during the first eight months of 2021 exceeded 75pc of 2020 imports and 80pc of 2019 imports.

That strength "will continue through the lunar new year of next year, at which point it will ease up, but continue through next summer," Hacegaba said.

Meanwhile, ports and inland intermodal terminals do not have enough chassis, which are frames upon which containers are mounted when hauled by trucks. A lack of truck drivers has also contributed to a build-up of containers. And railroads say shippers have been slow to pick up containers, adding to delays.

Railroads are facing other problems that have contributed to transportation delays.

"Supply chain disruptions and mother nature have placed pressure on the network," UP chief executive Lance Fritz said on 14 September. The intermodal supply chain has become congested, a result of a shortage of labor, chassis and warehouse space. But UP has started to recover in response to steps the railroad has taken. Fritz also credited the railroad's use of precision scheduled railroading for helping the railroad bounce back.

Hurricanes Ida and Nicholas flooded a number of tracks in Gulf coast states, forcing railroads to reroute and hold trains. Some CSX railcars ended up underwater.

Forest fires in northern California forced UP's Dry Canyon bridge north of Redding, California, out of service for weeks because of significant structural damage. And the Dixie fire in northern California has forced trains to be rerouted as far east as Wyoming and Colorado. Repairs may be extensive, including a damaged BNSF tunnel just north of Keddie, California.

And a lengthy blockage of Kansas City Southern De Mexico's main line to Mexico's Pacific coast port of Lazaro Cardenas has cost companies an estimated $1.7bn in losses, according to a key industrial chamber. A protest over teacher pay has affected rail-delivered fuel exports, as well as US-Mexico cross-border trade.

Some of these difficulties are localized but cause problems throughout the entire North American rail network.

"An event that impacts our brother and sister [railroads] in the west, whether it be in Texas or wherever, or forest fires — you name it — it ripples across," CSX chief executive James Foote said on 10 September.

Western railroad reroutings because of forest fires have affected coal shipments. The weekly average of loaded coal railcars that did not move for more than 48 hours rose from 80 in May, to 129 in June, 146 in July and down to 136 in August, according to Surface Transportation Board (STB) data.

Shippers of different commodities have complained of delays just as they are trying to increase train shipments. Many shippers say railroads are slow to pick up loaded trains and have pinned the blame on a lack of crews.

Railroads say they have been hiring, but STB employment data for August show Class I railroad employment fell to 114,431 workers in August, down by 1pc compared with July. Volume was also down by 2.8pc and by 18pc compared with August 2020 and 2019, respectively.

Shippers are also pointing to a system-wide increase in train speed at most Class I railroads compared with the year-earlier period. Slower times mean fewer trains are being delivered.

But many rail customers do not realize that railroads cannot increase the number of trains delivered because customer demand has increased, said a veteran shipper that has also worked for railroads.

"I do not think [delays are] because the railroads are not putting on enough crew and power," the shipper said. "There is just not sufficient capacity to meet the demand surge."

By Abby Caplan