Idle rail cars in siding

[Anonymous]

jwm,
I know you didn't imply that demurrage was an offset to per diem. The reason I mentioned that was that in many of the station closing hearings that was brought up and that the idea of a per diem/demurrage relationship was so pervasive that many though that was the purpose of demurrage.
Of course, this is incorrect. Demurrage is a miscellaneous charge to customers, supported by tariff, to encourage the expeditious loading or unloading of rail equipment. It's next of kin is detention used in intermodal ops. Tim Argubright has asked me to write an explanation of demurrage. I will do so under a new thread since this is a subject that would have limited interest. I would welcome any comments you have.
Regards and have a safe day. gdc

[Anonymous]

TIM A--a rough explanation of demurrage was part of my post just above gdc's, on 1-26 at 6:05 PM.

[Anonymous]

gdc--upon reflection, as far as per diem is concerned, you may be right. It has been many years since I looked it up. I would have corrected the post I just entered, but unlike some other forums, this one does not seem to have a provision for editing/deleting one's errors.

As you put it, rr company A RECEIVES per diem from other rr's using A's cars, and likewise company A would owe/pay per diem to those companies whose cars were occupying A's tracks.

Even if I had that backwards, though, the comment about offsetting per diem payments is still accurate, and I think we both agree as to the meaning of demurrage and that it has nothing to do with per diem or offsets thereof.

Thanx again for yr clarification. jwm

[Anonymous]

Thanx, gdc, but if you'll re-read my post, I thought I wrote that the rr owning a car OWES/PAYS per diem to the company on whose tracks the car is sitting. (Company A owes per diem to company B for A's cars occupying B's tracks, correct?)

In turn, Company B would owe company A per diem for B's cars sitting on A's tracks. This is the offset I mentioned--there would likely be a net amount due from one company to the other because it is most unlikely that the same number of cars would be on each other's tracks.

I never meant to imply anything about demurrage being an offset of per diem. If I wasn't clear, I apologize, but I think you may have read something that I didn't write! (Or didn't mean to write, if you want to put it that way.)

Sincerely, jwm

[Anonymous]

Tim, It's not a bother. I'll start a new thread...tomorrow.
Regards and have a safe day. gdc

[Anonymous]

gdc, If it's not a bother, Could you please explain Demurrage?
TIM A

[Anonymous]

Sir, I you have per diem backwards. Car owners receive payments for each day a car is not on their own line. Fifty years ago, per diem was a daily charge only for each 24 hours. Today it is based in both time and mileage with fractions of a day. I'm not sure what the daily segments are, either 8 or 12 hours, methinks.
Demurrage is a charge to customers for not expeditiously utilizing freight cars. It should not be confused with per diem and was never intended to be an offset. There are three basic types of demurrage, average agreement, straight plan and special. I would launch into a more detailed description if someone wants to hear it, but it's really not a sexy subject.
The decision(s) to store cars is based on the commodity for which they are designed. Much railroad business is seasonal. For instance, grain is shippped at certain times of the year. To have enough cars to meet demand, a railroad may own, say, 3,000 covered hoppers. In the off season, there is not much for these cars to do, so they are stored waiting for when they are needed. Sometimes cars are stored for pending business opportunities that never materialize. When that's the case, a decision is made whether or not to scrap some or all of them. Cars that are to be cut up are moved to the scrap yard after a contact is signed detailing what will be done, such as return of certain parts. These may be brake parts such as reservoirs, valves, retainers, trucks, etc. These can be reconditioned and used on other cars. There are many opportunities for abuse in this practice. If a close eye is not kept on the contractor, it is easy to lose count of all the parts that are supposed to be returned.
But then this is another long saga and usually requires yet another night or two away from home.
Regards and have a safe day. gdc

[Anonymous]

One subject I didn't see mentioned on the various replies was that of "per diem." I don't know if that still applies these days, but 50-odd years ago, when there were over 100 Class 1 US railroads, every railcar that was "off line" would cost its owner a daily rate payable to the company whose tracks the car was occupying.

Railroads employed hundreds of clerks to keep track of all their rolling stock, and payments by RR "X" owed to other companies would be offset against receiveables from those companies owed to Company "X" for their cars on "X's" tracks.

Another term which may still apply is "demurrage." A consignee receiving a rail shipment had a certain amount of time in which to unload the car so it could be returned to service. If the car could not be unloaded by the deadline, the business firm would have to pay the railroad a certain sum for each day the car was being held.

This system is/was applicable, I believe, to business firms with their own sidings. It may have been applicable also to cars on railroad-owned tracks, such as team tracks & freight house tracks, if the car was a full load for one consignee and could not be unloaded within the allowable time.

You also asked how railroads could find out who had space available to store cars. I think smaller roads could advertise in RY AGE, and I am sure there are personal contacts between the smaller roads and the big companies with whom they interchange.

It doesn't make much sense to me, for example, for NS or CSX to store their surplus cars in California, or for UP or BNSF to store their cars in Maine. I think it would be more logical and less costly for them to store equipment on their own tracks or on tracks of a shortline or regional in their own territory.

Hope this helps answer yr quesion.

[Anonymous]

No one but the last posting brought up one of the RR's financial problems- they don't make an adiquite return on their invested capital, and millions of dollars in cars parked on a siding are making no return on capital. RR's have often had the idea that if you owned it there was "no cost" as long as there was no out of pocket expenditure ( I can tell you thet govt. works the same way) But there is a very real cost- the money I could have been making if I had invested in something else besides standing rail cars. The bean counters can tell you the cost. I like the posting that said to auction them off on a regular basis.

[Anonymous]

UP has stored almost six miles of auto racks on a piece of former Mopac trackage just west of Herington, KS. The cars have been there for several months, probably awaiting the auto business to recover. The storage track feeds into UP's Golden State route to the west coast. All I can think of is what a waste of assets!

[Anonymous]

As a car owner, there is no real tax break until they are retired and removed from your roster. The savings come from having them out of the way, no maintenance, no repairs, etc. I was never in favor of storing cars on unused sidings. I believe they should be regionally located and offered for periodic sale. These sales are usually auctions where anyone seriously interested can bid.
I've seen them in large groups down some unused branch covered with kudzu. There's no way anyone could go in there without snake chaps, long sleeves, etc.
Another hazard of stored cars is that they are more likely to become shelters for homeless people, some of whom are criminals, fugitives, etc. Sometimes cars are placed in sidings in anticipation of business that never develops. The cars sit there until they are depreciated and then retired.
After these cars are retired, there is the problem of what to do with them. You can try to find a scrap yard that will cut them. This can all hinge on the price of scrap, how well you can trust the cutter, how far you have to move them to scrap, etc.
gdc

[Anonymous]

Yes you have been very informative!! Question: IF you have cars sitting in storage. Can you remove them from your profitabe assets. In other words is there a Tax break or some advantage in reporting profits to the goverment by placing cars in storage? Or even while in storage are they considered overhead and lost revenue on a companies finacial reports?
TIM A

[Anonymous]

This is another example of the dangers in over extending a market need. Really, this is the railroads version of the .com collapse. Too many people thought this was easy money and rushed in to build freight cars, then when the business climate changed, there was nothing for these cars to do, so they ended up stored. A lot of professionals such as doctors and lawyers got in on the car owners' boat and sank with it when storage costs were more than per diem. It's not a very shining page in rail history. gdc

[Anonymous]

Tim,
Storing itself usually is not very expensive. Obviously, if your own cars are stored on your own line, storage is minimal. The real cost would be to prepare the cars for movement. Mechanical inspections, repairs, etc. Then there's the cost of digging them out. Are cars stored is a remote siding? These are the kinds of questions you would have to ask. We've had cars stored so long that you couldn't find them in the summer because of kudzu growth.
If the stored cars were especially designed for your movement, then the railroad may find it more advantageous to go and get the number needed. Except for moving cars around to find a good one, and that may not be necessary, only the cars needed would be moved.
Probably, though, the railroad would use whatever was needed from the existing active equipment. If they could load a foreign empty back to home rails, they would probably do that.
Does that answer your question? gdc

[Anonymous]

Hi Gary.Back in 1979,at the start of the recession,shortlines ordered many more boxcars then they needed.The idea was to let class 1 railroads use the cars and pay the shortline per-diem fees.The Pickens and NSL shortlines built hundreds of such cars,even though there weren't users for them or need for them.So in 1979 a lot of these new cars were stored on the old EL by the Chicago & Indiana shortline.In December 1979 the C&I shutdown,partly because Pickens didn't pay storage fees.

[Anonymous]

gdc,
Is storage very expensive? Let say, I as a railroad owner have 50 boxcars sitting in storage. My railroad company gets a order for a one time movement of 45 boxcars of whiskey. Do I have to pull all 50 cars out of storage to do this movement? Also, being that this is a one time movement would it be cheaper for me to lease 45 boxcars else were rather then pay the expence of moving these cars out of storage?
TIM A

[Soo2610]

ED,
Correct me if I'm wrong, but don't railroads pay a usage fee for foreign cars on their line?

[edblysard]

Hi Red,
Its on the supply and demand side that controls it.
Also keep in mind that a lot of the railcars you see are leased, and when the lease ends, the owners have to store them somewhere. Any railcar you see where the reporting initals ends with an X is a leased car. Often the car belongs to the car maker, almost every gray hopper you see is made by either trinity industries or american car and foundry. Notice a bunch of cars with initals acfx on them, their owned by American Car and Foundry, and leased (X) to someone, check close and you will see the lessors name stenciled somewhere on the car. In some instances, the lessor can have their own reporting marks, FIN(X) for fina, DOW(X) for dow, you get the idea. GATX corp dosnt make any cars, but buys lots, and leases them out, and Union Tank Car company leases the cars they make under UTLX, Union Tankcar Leasing, (X). As the demand for certain cars can decrease due to economic reasons, or seasonal use, (beet hoppers come to mind), they are often stored against a upswing in business. And often a car maker will retire a type of car to insure purchase or lease of their newer car. So say AC&F have a new three bay hopper they want Dow to lease from them, when the lease on the cars Dow currently uses runs out, AC&F will pull them from service, and offer the newer car to Dow to lease. The older cars are either scrapped, or sold to short lines or industries for private use. As for returning cars, GRR, Georgetown railroad does that with their open hoppers. They are a private road in Texas, owned by Georgetown Industries, a limestone and rock quarry. They ship their rock in their own cars all over the US, mainly as ballast, and the cars are marked, "when empty, return to agent, GRR". When the cars are emptied by whoever bought the ballast or rock, they contact GRR's agent, and he determines if the car can be used to backhaul something to Texas, or if it is returned empty. As to keeping your car in service, most railroads and shippers work on the idea of , first one emptied is the first one loaded. So owning your own cars, unless you have a huge fleet like Trinity or ACF, is pretty much a risky business, unless you own cars that are build for a specialized or unique business, (again, beet hoppers come to mind). Even railroads dont "own" their cars, they have equipment trust that own or lease them, as a seperate business. Charter Bank in New York may own more railcars than anyone in the world, as they handle the trust for most of the class 1 roads.
Ed

[Anonymous]

Your question is many faceted. I assume you are talking about stored empties. Business ebbs and flos create needs for rail cars stored or in
service. A lot of rail business is seasonal such as grain, coal, auto parts, perishables, etc. Since rail car owners prepare to be able to reasonably furnish shippers'needs, ebbs of the economy create surplus equipment. All of these cars have to be somewhere and if it appears that they will not be needed for a while, the owner may prefer to store them in an out-of-the-way place. Placing them on a branch line or in sidings is a good way to keep them ready for use if necessary and still be out of the way of day-to-day business.
Railroads may store their own cars on their own tracks, in which case, obviously there is no charge. A car owner may wi***o lease track space from someone else. The owner of the storage track sets the amount and that may depend on where the track is, how fast the owner may need the car back, etc. Some cars may be leased by railroads other than the host carrier and stored. In that case, the only $$$ changing hands would be that of the car lease. Of course, that's not an optimum business condition, but sometimes you just can't help it.
An owner should know where his cars are stored and will have received a car movement record of them. If the owner would like to verify the cars are actually there, he could contact the railroad where they are and request permission to physically inventory them. In any event, if the cars were moving without his permission, he would receive notification by the railroads moving them. Ownership is determined by reporting marks (i.e. Norfolk Southern - NS, Union Pacific - UP, etc. the same is true with intermodal trailers stored in parking lots.
Hope this helps some. As with most railroad subjects, this post could go on for a long time.
gdc

[REDDYK]

Thank so much for the reply. It still boggle my limited mind to think of all the places any given car may be, or on the other hand these cars in storage sure aren't making any money, but costing someone. Who controls this? is it just the luck of the draw/ Or can the owner of any car assure that the car will be returned or kept in service as they might wish?

[Anonymous]

Hi.I don't think there is a standard charge.I have seen ads for storage at www.railswap.org.Back in the late 1970's shortlines like Chicago & Indiana,and the Spencerville& Elgin used the old EL main for storage.For some reason the figure of 75 cents or a dollar per car per day comes to mind.

[REDDYK]

When cars not being used for an extended period are put into a siding of a host RR, is there money changing hands. For example, is there a flat standardized charge all over the country?
I notice that the KB&S, a regional in this part of the world [Indiana, Illinois] has lightly used main lines with a lot of sidings parked full. How do customers know about this linear parking lot?
Appreciate any information.