Railroads Seeing a Surge in Freight Business

(Associated Press, 11/04/04) The convergence of an improving economy, increased international trade, bumper crops and higher fuel prices has led to a record-setting year for U.S. railroads. During one week last month, the rail industry moved the most freight volume in its history - 33.1 billion ton-miles, just eclipsing the 32.7 billion ton-miles mark set a week earlier, according to the Association of American Railroads.

Through the end of October, railroads had moved 1.3 trillion ton-miles this year, or 4 percent more than at the same period last year. A ton-mile is an industry standard measurement of one ton of goods moving one mile. That boom in volume has led to rising profits for railroad companies - Kansas City Southern last week reported a $6.8 million, or 158 percent, increase in third quarter profits from a year ago - and many new jobs. But it's also caused headaches for both the companies and their customers.

Companies said they've had to scramble to buy new locomotives, schedule more trains and hire more people. "The rail industry has been carrying record tonnage, but the growth had been a more measured pace, 3 to 5 percent," said Steve Forsberg, a spokesman for Fort Worth, Texas-based Burlington Northern and Santa Fe Corp., which hired 2,300 entry-level conductors this year compared to the normal class of 800. "This year, in terms of BNSF, we're experiencing three
years of normal growth in a single year. That's being hit with a very big wave. We take our hats off to our operations department."

Not everyone does. Yellow Roadway Corp., one of the nation's largest trucking companies, uses the rails as a way to save money on moving trailers of goods long distances. But chief executive Bill Zollars said Kansas City-based Yellow has had to move 20,000 shipments back onto highways this year because there wasn't room on railroad networks. "We usually move 26 percent of our (shipping) miles over the rail," Zollars said. "We've had to be a lot more selective this year because the rail service has been so poor."

The biggest surges have come from a recovering economy that's shipping more manufactured goods and needing more raw materials. In addition, increased imports from Asia have required more trains to deliver goods entering the country at West Coast ports. Coal shipments have also increased as power plants, suffering from the high price of natural gas, are turning back to coal to power their generators. CSX Corp., based in Jacksonville, Fla., said it saw a 5.7 percent increase in coal shipments this year, compared to the 1.3 percent increase officials were expecting. Spokesman Gary Sease said moving coal makes up almost a quarter of the company's revenues.

The only types of material that haven't seen an overall increase on the rails this year are motor vehicles and grain. While Yellow has struggled to find room for its shipments on the rails, many other trucking and container companies have continued to turn to railroads in response to high fuel prices. Intermodal volume, or the amount of trucking trailers and other containers carried on the rails, is up 9.6 percent from the same period a year ago.

The high cost of fuel has also affected railroads; diesel fuel prices have risen more than 70 percent from a year ago. John Bromley, a spokesman at Omaha, Neb.-based Union Pacific Corp., said the company's trains consume between 1.3 billion and 1.4 billion gallons of fuel a year. "That has had a huge impact on us," Bromley said. "If it goes up or down a penny (per gallon), that's $13 million."

Railroad officials said they will have to solve their labor and capacity problems soon as they foresee the current growth surge extending well into 2005. "We've reached the capacity our grandfathers invested in transportation infrastructure," BNSF's Forsberg said.

Posted: 11/09/04