Leaders of North American railroads look to a solid future for intermodal activity, with their companies investing in infrastructure and expanding service offerings to accommodate growing volumes.
Thanks to the Obama administration’s war on coal, railroads find they can rely less and less on moving what has long represented a significant profit center for many, so they increasingly are turning to intermodal as a revenue generator.
Rail leaders appear to be remaining confident about future intermodal sector growth despite recent reports from the Intermodal Association of North America showing overall intermodal traffic falling 6.1 percent in the three-month period ended June 30, 2016, compared with the second quarter of 2015, marking the first such decline after 25 consecutive quarters of growth.
As railroad officials are quick to point out, intermodal offerings are providing shippers an efficient, reliable alternative to trucking in many lanes, averting highway congestion with environmentally friendly moves, including for cargo arriving at ports on larger-than-ever containerships.
Executives of each North American Class I railroad, plus the Class II railroad most engaged in the intermodal sector, offered their respective companies’ input to the American Journal of Transportation in response to three questions:
• How is your company currently enhancing its intermodal offerings, including infrastructure projects and new/enhanced services? (150 words)
• What impacts do you see related to the completion of Panama Canal expansion? (50 words)
• How do you view the future of North American intermodal? (50 words)
To maintain balanced coverage, replies have been edited and/or paraphrased where necessary so that every railroad company is furnished opportunity for the same number of words in reply to each question.
Here’s what each had to say, with railroads ordered from east to west, based upon the location of the headquarters city of the respective company:
Canadian National Railway
The latest: CN is investing in a $250 million intermodal terminal in Milton, Ontario, west of Toronto, augmenting its existing Brampton hub, intending to create more inland freight capacity to better connect domestic and global supply chains linking Canada’s West and East coasts while meeting needs of the growing Toronto-Hamilton region.
“A CN team has been on the ground in the U.S. Gulf region for many months, working with customers and stakeholders to strengthen two key gateways in anticipation of new freight transportation opportunities flowing from the expansion of the Panama Canal.
“CN, along with APM Terminals, the operator of the container terminal at the Port of Mobile gateway, have also been reaching out through meetings with beneficial cargo owners to review their service requirements through the Gulf. This reflects CN’s ‘third-coast’ container strategy to draw increased volumes of container traffic entering the interior of North America via the Gulf of Mexico.”
Panama Canal: CN is “seeing clear steamship liner interest” in serving the Port of Mobile from Asia via the Panama Canal, with swift transits to Memphis and Chicago. Agreements have been signed with Alabama State Port Authority and APM Terminals, as well as the Port of New Orleans and its Class III.
The future: Strong volume growth at Port of Halifax… Overall flat volumes on West Coast… New Panama Canal service opportunities from Asia to Port of Mobile… Strength in retail segment… Expanding cold supply chain reefer product… Pre-selling port expansion at Prince Rupert, Vancouver, Mobile and New Orleans… Benefits from weaker Canadian dollar.
Norfolk Southern Railway
Jeff Heller, vice president of intermodal and automotive marketing at Norfolk, Virginia-based Norfolk Southern Corp.:
The latest: “Norfolk Southern has spent the past 10 years building its intermodal network making major investments in the Heartland Corridor, the Crescent Corridor and, most recently, enhancing the Premier Corridor – one of the busiest and fastest links on our network, connecting New York and Chicago – as well as construction of four major intermodal facilities.
“Currently, we continue to make improvements to enhance existing facilities at three key points on our network: Harrisburg, Pennsylvania; Atlanta and Chicago.
“NS is also rolling out technology upgrades to make doing business with the railroad easier and faster. A significant initiative is the new optimized intermodal terminal operating system, including an industry-first mobile app for drayage truckers.
“These improvements include express lanes and automatic gate systems outfitted with high-resolution cameras and optical scanners… In 2015, Norfolk Southern introduced ExpressNS, an app that speeds truck drivers’ pickup and delivery of trailers and containers at NS intermodal facilities…”
Panama Canal: “There is not likely to be a large-scale shift in traffic from West Coast to East, either in the short or medium term. Individual ports, however, may see changes in volumes. We expect that Panama Canal volumes will grow in line with the growth in global trade.”
The future: “As the economy recovers, intermodal will continue to grow. There are undeniable benefits of moving 280 boxes on one train: eliminating highway congestion, lowering emissions and retaining available drivers.”
Wesley Ann Barton, director of intermodal marketing at Jacksonville, Florida-based CSX Transportation:
The latest: “CSX’s strategy combines the efficiency of corridors for high-density lanes with a hub-and-spoke model anchored by our Northwest Ohio Intermodal Terminal, which creates capacity and enables greater flexibility and connectivity.”
CSX is investing in the hub-and-spoke model by building a second hub, the $270 million-plus Carolina Connector, in Rocky Mount, North Carolina, providing increased local service as well as expansive connectivity across the CSXT-served intermodal network. CSX also is building the Pittsburgh Intermodal Rail Terminal for Midwest-bound freight entering East Coast ports and linking Western Pennsylvania shippers with global markets.
Corridor-wise, CSX just introduced faster service along its I-95 corridor between the Atlanta market and the Northeast. The new truck-competitive service offers third-day morning availability along the corridor.
“Infrastructure investment is also improving cross-border shipping. The only steel-wheel intermodal service between Montréal and the U.S. is further streamlined by on-site customs inspections at the CSXT-served intermodal terminal in Salaberry-de-Valleyfield, Québec.”
Panama Canal: “Expanding Panama Canal capacity is unlocking improved, big-vessel efficiencies for steamship lines. Significant infrastructure development is under way at East Coast ports, and efficient rail connectivity will be a key to success. CSX’s broad, flexible network supports customer supply chain diversity and changes at both West and East coast ports.”
The future: “CSX is building the intermodal network of the future, [including] significant investments into new and expanded terminals. CSX has invested more than $700 million [over five years] in its intermodal network, aimed at capturing additional share of 9 million truckloads in the East [seen as] good candidates for intermodal conversion.”
Florida East Coast Railway
Jim Hertwig, chief executive officer of Jacksonville, Florida-based Class II Florida East Coast Railway:
The latest: “Florida East Coast Railway has invested in infrastructure to support multimodal shipping and global trade into and out of South Florida. This includes investments in on-dock intermodal rail at PortMiami and near-dock at Port Everglades, running multiple daily trains to and from the ports, delivering speed to market for both import and export cargo. Investments by FECR and South Florida ports have resulted in the ability for cargo to reach 70 percent of the U.S. population in less than four days.
“FECR has introduced to its customers EZ Buy, an online price quote and booking system for customers to buy door-to-door intermodal transactional freight between the Southeast U.S. and South Florida markets. EZ Buy is easy for customers as it allows users to receive access to dynamic price quotes, while having the ability to negotiate that price and book an order in one quick, easy transaction.”
Panama Canal: “The first neo-Panamax ships are now transiting the expanded Panama Canal and have begun to call on PortMiami and Port Everglades. We see those ships making South Florida a load center, discharging cargo for the entire Southeast and taking advantage of Florida’s dense population and back-haul economics.”
The future: “Rail intermodal is increasingly becoming the option of choice… due to shortage in truck drivers and increased road congestion. Shippers will utilize capacity advantages of shipping by rail from ports receiving neo-Panamax vessels, [facilitating] transloading of international freight into fewer domestic containers for inland ‘truck-like’ moves to key U.S. markets.”
Kansas City Southern Railway
Erik Hansen, vice president of sales and marketing for intermodal at Kansas City, Missouri-based Kansas City Southern Railway Co.:
The latest: “In July 2015, KCS opened a new, state-of-the-art intermodal terminal in Wylie, Texas, providing significantly increased capacity for our intermodal customers. The new Wylie Intermodal Terminal provides an annual lift capacity of 342,000 containers, 1,500 parking spaces and 400 container stack spots. To maximize operational efficiency, the terminal utilizes an automated gate system with high-definition imagers, optical character recognition and biometric driver identification.
“Furthermore, KCS is working closely with our interline railroad partners to develop expanded capacity and better service products in key markets. In Mexico, several projects are under way to expand capacity and provide improved service, including but not limited to Sanchez outside Nuevo Laredo at the U.S.-Mexico border, where a new rail yard has been built and is being expanded now and over the coming years.”
Panama Canal: “KCS does not anticipate a material impact to its rail traffic as a result of the widening of the Panama Canal but continues to offer Lázaro Cárdenas [on Mexico’s Pacific Coast] as a viable gateway to South Texas and beyond. Overall, North American intermodal patterns could change, though.”
The future: “Intermodal will continue to provide capacity and service security for shippers. KCS is constantly investing in infrastructure build-out, technology and continued training and education of the workforce to ensure capacity and overall performance keeps up with demand.”
Union Pacific Railroad
Kristen South, manager of media relations at Omaha, Nebraska-based Union Pacific Railroad:
The latest: “Union Pacific in partnership with Katoen Natie recently announced Dallas to Dock service, which provides plastic producers with a low-cost export solution for plastic pellets, expanding their reach overseas.
“Dallas to Dock service transports plastic pellets in hopper cars from the Gulf region and ships the product to Dallas, where pellets are packaged and transferred into intermodal containers, and shipped via UP’s premium intermodal service.
“To support this service, a state-of-the-art plastic packaging facility will be constructed adjacent to UP’s Dallas Intermodal Terminal, with completion expected in third quarter 2017.
“With 32,000 miles of track, Union Pacific’s vast network provides extensive access to intermodal ramps in growing population centers across the Western United States.”
Panama Canal: “Union Pacific expects any impact from the expanded Panama Canal to be muted. West Coast ports are equipped to handle larger vessels, and transit time to U.S. markets is almost two weeks less through West Coast ports than through the Panama Canal. Additionally, Panama Canal fees aren’t yet fully defined.”
The future: “Union Pacific’s intermodal network reaches more markets, more frequently than any other North American railroad. We continue to be optimistic about growth opportunities from highway conversions. On the international side, volumes will likely continue to be negatively impacted by excess ship capacity, ocean carrier financial challenges and resulting industry consolidation.”
Katie Farmer, group vice president for consumer products at Fort Worth, Texas-based BNSF Railway Co.:
The latest: Beginning Sept. 12, BNSF began offering intermodal customers a new service option to move freight between the Pacific Northwest and Texas. Shippers moving various commodities and a wide range of consumer goods between Portland, Oregon, or Seattle and BNSF’s AllianceTexas facility in the Dallas/Fort Worth area may reduce transit times by as many as two days compared with rail transit options that had previously been in the marketplace.
“This new BNSF service will be comparable in speed to single-driver, over-the-road options.
“We regularly work with our customers to identify and offer new and better transportation solutions to make their supply chains more effective. So we are constantly looking for opportunities to help meet consumer demands, and this new service checks all the right boxes for adding efficiency to the marketplace… BNSF is focused on delivering options that strengthen the competitive advantage of U.S. companies through our country’s supply chain.”
Panama Canal: “U.S. West Coast ports along with strong western inland transportation capabilities, including rail, will continue to play a critical role in the Asia/U.S. supply chain. The most direct and fastest access to U.S. markets from Asia will continue to be through the West Coast.”
The future: “We are confident that the demand for intermodal transportation will continue to rise. BNSF is working to become more ‘truck-like’ with our intermodal service, capturing every efficiency we can and leveraging the significant investments we have made in our infrastructure to provide our customers with consistent, reliable service.”
Leónor Torres Dueñas, director of communications and public relations at Mexico City-based Ferromex:
The latest: Following its growth strategy, Ferromex has successfully launched new services in 2016, including new international export service from the Coatzacoalcos area to the Port of Veracruz. In its inter-Pacific realm, Ferromex has complemented its existing service to Mexicali from Mexico City/Guadalajara with a new stop in Culiacán.
Ferromex also is increasing terminal capacity in multiple locations, including Monterrey, up 38 percent, to handle as many as 99,000 containers per year; Silao, up 364 percent, to handle as many as 102,000 containers per year; and Chihuahua, up 187 percent, to handle as many as 43,000 containers per year.
Panama Canal: “Ocean carriers have some routing changes and bigger vessels arriving to Mexican ports. Since we have strong operations on the Pacific (Manzanillo) and the Gulf of Mexico (Altamira and Veracruz), for us, this translates into more business opportunities.”
The future: “Mexico has a unique geographical advantage which keeps attracting a lot of foreign direct investment. All these new industries are increasing the demand for transportation services. As an example, the cross-border service has been a great success for our company, growing from 8,000 containers in 2008 to 70,000 in 2015.”
Canadian Pacific Railway
Keith Creel, president and chief operating officer of Calgary, Alberta-based Canadian Pacific Railway: The latest: CP has shaved 20 hours off its regular Toronto-Calgary intermodal transit, now offering origin to destination in 61 hours.
“I think we’ll… inflect a positive year-over-year growth [in intermodal volume, including domestic]. I would have said six months ago that it would have been strong single-digit growth. Now maybe it’s low-single-digit growth…
“The service is compelling. The lanes are shorter out versus our competitors – single-truck-driver-competitive – and we’re doing it faster than we ever have and we’re being reliable…
“Some of what has underperformed is just the organic growth with our existing customers… They’re facing the same headwinds everybody else is facing, but, through our initiatives selling in growing cross-border domestic, through our initiatives picking up additional wholesale customers, or our initiatives picking out customers we never enjoyed because we got service, we’re doing a little bit better than everyone else, but overall, obviously, the market is what the market is.”
Panama Canal: (No comment on this question.)
The future: “At the end of the day, consumer consumption drives intermodal. I’m not going to suggest that it doesn’t… I see what’s different and unique for this franchise is an ability to compete with truck, the strength of our network. Again, we’ve got to get that reliability there, which we have…”