newsworthy
improvement. Service remains “stable at unsatisfactory levels,” Gross said.
Hub Group Inc., one of the nation’s biggest intermodal
marketing companies and a huge rail user, is one of many
firms afflicted by bad rail service. In a government filing in
early September, Oak Brook, Ill.-based Hub said “worse
than anticipated” rail service levels slowed its equipment
utilization in July and August over the same period in 2013.
Hub’s year-over-year intermodal volumes fell 3 percent
during the same two-month period. Hub said in the filing
that unless rail operations and its fleet utilization quickly
improved, its earnings per share will be hit by 4 to 6 cents
as it incurs higher operating costs to serve intermodal
shippers. As of early October, there was no indication that
service levels were getting better.
The challenges for intermodal service are well known.
Bad winter weather paralyzed large portions of the rail
network. A surge in pre-holiday season volume that would
normally have hit the U.S. in early fall came early this year,
a result of retailers’ desire to speed up deliveries of goods to
avoid possible port labor disruptions along the West Coast.
Through it all, though, demand for intermodal services
remained strong.
The railroads’ operational problems are not for lack
of resources. For example, BNSF this year is slated to
spend more than $5 billion, a record for any rail, on cap-
ital improvements. A decent chunk of those funds are
earmarked for widening and modernizing infrastructure
along its northern corridor. While the projects should
yield significant long-term benefits, for now the mess
accompanying the construction is having the perverse
effect of compounding the slowdown. “The infrastructure
work is causing its own congestion,” said Jim Filter, senior
vice president, intermodal commercial management for
Schneider National Inc., the truckload and logistics giant.
Top rail executives are confident that the problems are
fixable. However, they are loath to commit to sending
an all-clear signal. “We are making modest, incremental
improvement every week,” Lance M. Fritz, president and
chief operating officer of Union Pacific Railroad Co. (UP),
the main unit of Union Pacific Corp., told the IANA gathering. Yet Fritz refused to be pinned down to a specific
time frame as to when service would be restored to normal
levels.
UP has allocated $4.1 billion in capital investment during
2014, $2 billion of which Fritz described as “replacement
capital.” Fritz said UP has been adding crews, a shortage
of which contributed to its service issues. UP, the nation’s
largest railroad, has adequate resources to overcome its
problems, Fritz said.
RATES ON THE RISE
At the same time that railroads are coping with service problems, intermodal rates continue to climb. Intermodal rates
in July rose 3. 4 percent from year-earlier levels, according
to a monthly index published by investment firm Avondale
Partners LLC and Cass Information Systems, a freight-bill
auditing firm. Avondale said it expects intermodal rates in
2014 to climb at a low single-digit pace as tighter truckload
capacity creates cover for intermodal price hikes. The recent
significant decline in diesel fuel prices might help moderate
future intermodal rate increases because the index takes
diesel prices into account when calculating “
all-in” intermodal prices.
The concern, according to one long-time
intermodal executive who asked not to be
identified, is that railroads will be perceived
as acting with impunity by raising rates while
service remains sub-par. “Intermodal rates are
going up everywhere, and the service continues
to be terrible,” the executive said.
The last time rail service took such a hard
hit was in 2004, when a surging tide of Asian
imports entering the West Coast overwhelmed
their networks. Before that, one would have to
go back to 1996 to find a period when service
was this poor for this long, according to the
executive. The predicament may have been
summed up best in a comment made by an
executive of a privately held intermodal marketing company to Albrecht, the BB&T analyst:
“Except for a shortage of locomotives, railcars,
crews, and track, the railroads are doing fine.”
—Mark Solomon
UniCarriers Americas Corp. has recognized the following dealers
with its Nissan Forklift Nine, Dealer of Excellence Award: Capital
Equipment & Handling of Hartland, Wis.; CFE Equipment Corp. of
Norfolk, Va.; Forklift Systems Inc. of Nashville, Tenn.; Forklifts of
Minnesota Inc. of Bloomington, Minn.; Hoj Forklift Systems of Salt
Lake City, Utah; J.M. Equipment Co. Inc. of Manteca, Calif.; J.V.
Equipment Inc. of Edinburg, Texas; M&L Industries LLC of Houma,
La.; and MSB Leon S.A. de C.V. of Leon, Guanajuato, Mexico. …
Randall Manufacturing’s insulated curtain wall, InsulWall, has
received an ASTM E-84, Class A fire rating, enabling it to meet
many different local, state, and national building product codes.
… Baldor Electric Co., a manufacturer of motors used in conveyor systems, has received the Arkansas Governor’s Quality Award
for Performance Excellence. … Toyota North American Parts has
recognized less-than-truckload (LTL) service providers Holland and
Reddaway as its 2014 LTL Logistics Partners of the Year in their
respective service regions.
accolades
