Freight car evolution

[Murphy Siding]

     Given that thought, it makes me wonder how a utility handles price renegotiations with a railroad.  It seems they might not have much bargaining power, other than making a lot of noise.

     Is it conceivable, for a railroad to pay for the upgrades of captive carsets, knowing that the railroad is the one who will receive the benefits of the investment?  The examples given earlier, of Cartier, for example, are they of mining companies that own their own railroads, or of railroads hauling for a specific customer?

[Railway Man]

Yes and no.

First, there are ultimate caps to what the railroad can charge before the business goes away.  If the coal transportation rate is too high, the utility shuts down the coal plant and runs its natural gas units, or buys wheeled power from another utility.  If the utility is regulated, to some extent it can just pass the increase on to the ratepayers and comes out even.  And both the utility and the state regulators have ability to pressure the railroad politically as invariably the railroad is seeking something somewhere else from the state, and the railroad is very aware of the pain level that the utility and state have, because it has public-affairs representatives that talk with the politicians and big shippers in each state every day, attend every public hearing involving railroads, every public committee meeting for every agency, sit on shipper-transportation-agency advisory boards, etc.

Second, the railroad is going to charge a rate that will make the coal internally competitive (at the railroad) with all the other traffic potential on the routes that coal will travel over.  For example (very simplified), the railroad will calculate that the route will handle 30 trains per day as-is on an on-going basis covering all of its operating, maintenance, and renewal costs, and the traffic potential consists only of double-stacks and coal.  There's shippers out there who will pay $1500/train-mile and fill up 10 double-stack trains, another group of shippers who will pay $1000 per train/mile and fill up 10 more double-stack trains, and a third group of shippers who will pay $800 per train/mile and fill up 20 more double-stack trains.  If the railroad attempts to charge more than $800 per train/mile to the third group of container shippers, they'll switch to a different port.  That adds up to 40 trains, so the railroad takes all of group 1 at $1500, all of group 2 at $1000, and some of group 3 at $800.  Now, a utility comes along and wants to move 2 coal trains a day, and just to make it simple let's say that the operating and maintenance cost on the coal trains is identical to the double-stack trains.  The railroad under no circumstance will charge it less than $800/train because that's the minimum value of the train slot.  If the utility is willing to pay at least $800/train, two of those last ten slots will likely be made available because it's more reliable business than the double-stack business, and simpler to handle.  But before the railroad offers that rate, it will calculate what the threshold cost is for the utility to switch to gas or wheeled power.  If the threshold cost is $700/train, the coal probably won't move; neither the railroad nor the utility is incentived at that price.  If the threshold cost is $1000/train, the utility will probably pay somewhere around $900/train -- the utility and the railroad will share the market opportunity.

Third, your observation that the utility does not seem like it has a lot of bargaining power over the railroad because there's (usually) only one railroad that can provide it service.  But that's a red herring.  The utility bids for the track space like everyone else.  The railroad sets the strike price for each shipper to get the optimum revenue and profit.  There's a lot of people who feel that because there's only one railroad the railroad is not incentived to be efficient and has unlimited power to charge whatever it wants, but in fact the railroad is brutally efficient and will charge to fill up its plant 100% plus the market opportunity that people are willing to pay.  Emotionally, it drives a lot of people nuts because they're used to being able to threaten their vendors, and yell at them, and switch to another vendor at a whim.

RWM

[Anonymous]

These two statements are in the full report in different locations:

Real-time train status reporting is possible utilizing the ECP brake system's wire-based communications platform to transmit information from each car back to the locomotive. This could include such information as bearing condition or wheel problems, with resulting benefits for safety.

The key to monitoring all of the benefits (and costs) of ECP brake systems will be to design a data capture program as part of the initial installation process so that each potential benefit and cost can be addressed in terms of pre- and post-ECP measurement and comparison.

 

I assume that the data capture program will be dependent on the wire-based communications platform of the ECP brake system.  But if the data capture program is intended to enable the comparison of pre- and post-ECP performance, I wonder how the data will be captured from conventional, non-ECP trains.  Apparently, the data capture program would also include the wiring, monitoring, and testing of several conventional trains.  I would think they would have already done this testing of conventional trains. 

[CShaveRR]

UP just announced that it will be equipping two sets of double-stack cars with ECP brakes for test runs between LA and Dallas.  According to the report:

First runs are scheduled for mid-September between the ICTF container yard near Long Beach, Calif., and the Dallas Intermodal Terminal. The two ECP-equipped trains will evaluate different operating methods, including alternative ways of using ECP brakes and dynamic brakes, the impact of ECP brake technology on train-run times and locomotive fuel consumption. ECP training for TE&Y crews, mechanical employees and managers in this corridor will begin late summer.

[Murphy Siding]

     In the brand new, June 2008 issue of Trains Magazine, Don Phillips' column mentions that those jolly fellows at TCI,  CSX's nemesis at the moment, favor re-equipping the entire U.S. freight fleet with ECP brakes; they claim this would increase rail capacity 20% (!)(?)

     I presume they would be in favor of re-equipping the freight fleets of Mexico and Canada as well.

[Anonymous]

     In the brand new, June 2008 issue of Trains Magazine, Don Phillips' column mentions that those jolly fellows at TCI,  CSX's nemesis at the moment, favor re-equipping the entire U.S. freight fleet with ECP brakes; they claim this would increase rail capacity 20% (!)(?)

     I presume they would be in favor of re-equipping the freight fleets of Mexico and Canada as well.

I am curious about how this would be funded.  Is there a simple answer?  Is there enough willing private investment to get the job done?

The ECP concept offers a lot of advantages, and it is being strongly promoted, but I wonder if it will ever get beyond limited application in select types of service.  As I read the full report, and contemplate the bewildering complexity of the logisitcs and cost of a full conversion, my hunch is that it will never happen. 

[Murphy Siding]

    I'm not sure where anybody came up with the idea that it would improve capacity by 20%.  Would that be enough of an inducement to change?  I have a hard time believing the railroad industry would go for such a big, universal change, even if the investment capital could be found.

[shawnee]

Most of the new boxcars being built are for paper and forest products. The 60' excess height TBOX and FBOX cars, built a few years back are for general freight service and I have seen them loaded with just about everything from toys to beer to lumber. They are very popular with a variety of shippers. I remember a Conrail exec saying boxcars will be gone by the year 2000, I am glad he was wrong and that they are still being built and used. The reports of the boxcar being dead are pre-mature. The class 1 RR I work for has put a lot of effort into actually growing boxcar business. They are still a very efficient way to move freight. ( 3 to 5 truckloads per car has its advantages)

With the inevitable rise in fuel prices due to world supply and demand, I tend to think there will be some serious adjustments in the freight transportation paradigm in the future.  I think that's the wild card you have to think about.  The "golden era" of trucking may be waning, and more fuel/cost efficient rail will probably be a more and more attractive option.  As industries - especially smaller ones that abandoned rail decades ago - take another look at rail options, won't this have an effect on the type of freight cars utilized?  I agree that means that the impending death of boxcars might be a bit overstated. 

I also guess it's probably also a good time to be in the shortline business.  And that there might be plenty of places that regret the may rue the tearing up of their local lines.