Edit post

Edit your reply below.

Post Body
Enter your post below.
[quote]QUOTE: Originally posted by beaulieu [quote]QUOTE: Originally posted by futuremodal [quote]QUOTE: Originally posted by PNWRMNM Future, I presume you would agree that DME coal will all be rail competitive. How is DME going to show any profit hauling competitive coal at 102% of variable cost, even with RRIF funding? Mac [/quote] Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment. [/quote] The trouble for DM&E is that there are no captive powerplants of any size on its lines, and only one on the IC&E. [/quote] DM&E may not have a number of captive plants (yet), but if the theories regarding DM&E being a planned conduit for the other Class I's sans UP and BNSF, then they may still be the recipient of a portion of a captive rate of one of it's connections. My understanding is that coal RVC numbers are higher than RVC numbers for other commodities, regardless of the ratio of captive to non-captive coal customers. Hauling coal in unit trains makes money for the railroad even if it's customers have a competitive hedge with another railroad's connection. The variable costs associated with unit trains are much lower than other commodity hauls, so the RVC ration should always be relatively high. Plus, we are in a period of rising demand for coal. It is an interesting take on the old supply-demand theories, in that the supply of coal is as high as the demand for coal (which in theory would keep prices constant), yet the railroad bottlenecks have serverly restricted the ability to have that ample supply of coal delivered to the customers. Neither BNSF nor UP can add capacity fast enough, nor do they seem to want to add coal hauling capacity all that badly, so DM&E's PRB project looks like it is being timed perfectly.
Tags (Optional)
Tags are keywords that get attached to your post. They are used to categorize your submission and make it easier to search for. To add tags to your post type a tag into the box below and click the "Add Tag" button.
Add Tag