China ditches Maglev project

[Anonymous]

Well John, I'm suprised you've made a bit of an error in defining "unit".  There is a difference between a unit and a platform, and for a single well car the proper definition is 1 unit and 2 platforms - a bottom platform and a top platform.  Therefore, if BNSF's FS for intermodal lists revenues per unit, that would include both platforms (aka, two containers) as one unit.

So your saying that a well with only one box in it is 1/2 a unit? or is it one unit at only half the revenue. What about a well with 2 20 ft. in the bottom and a 40 ft on top, Still just one unit? How would you figure cost/price if one was empty? Big revenue difference. Also what you are in effect saying is that there is no difference between a unit and a car. The other interesting thing is that Consumer Products is nearly equal to coal in revenues per car/unit in 2006.

 

The revenues for import intermodal is the volume number, not the revenue per unit number which is more descriptive of rate comparisons.  For example, you'll see the revenues per import intermodal unit is half that for domestic intermodal per unit.

BNSF 2006 Annual Report gives the total revenues for the category Consumer Products as $5,613 million, this is on page 18. On page 19 it lists the split as 46 percent of the total revenue for International Intermodal and 46 percent for Domestic Intermodal, the balance is Automotive. Please cite the report where you find the different per unit rates. 

Well, the report is 4.79MB, and I'm on a 56k modem, so I'm not going to waste a whole hour to download it, but I do remember that you or Michael had posted the report on this forum a while back, and I remember that the intermodal numbers, when divided between import and domestic, showed that the per unit revenues were lowest for the import intermodal, roughly half that of everything else, something like $800 per unit for import intermodal and $1200 to $1500 for everything else. 

But for the sake of staying up to date, let's start with this....

http://www.marketwatch.com/news/story/10-q-bnsf-railway-co/story.aspx?guid=%7B4CE724D2-7AB5-4A1F-A42B-7EC6EC60847C%7D

BNSF average revenue per car/unit for 2007 1st Quarter

Consumer products    $1,028

Industrial products     $2,167

Coal                        $1,279

Ag products              $2,530

As you can see, of the four catagories provided by this analysis, Ag is bringing over double the per car/unit revenues of consumer products, which I assume is inclusive of intermodal.  Coal indeed is down over historical levels, but is still more than intermodal.

As for the split cited between import intermodal and domestic intermodal, wasn't it you that stated that much of the import product was being restuffed into domestic boxes, thus being counted as domestic?  Wouldn't that obfuscate the difference between import intermodal and domestic intermodal numbers? 

There was an interesting item in ProgressiveRailroading.com about a year ago in which BNSF officials infer that intermodal still wasn't earning a positive return on investment....

http://www.progressiverailroading.com/commentary/article.asp?id=6463

"Senior managers have been emphasizing the need to seek higher intermodal rates to the point the traffic segment becomes a value-creation business, capable of earning returns exceeding its costs of capital."

"For BNSF, intermodal - its lowest-return segment, but biggest in terms of revenue and carloads - has the greatest potential for price increases in the current rate environment."

Now, are you telling me that BNSF has turned things completely around in 2007 regarding the inability for intermodal to return positive on investment?

[n012944]

Similarly, before I retired I traveled frequently between Washington, DC, and Syracuse, NY.  The government rate fare for round trip air was about $600, while the roundtrip fare for Washington, DC, to Los Angeles was about $375.  The Syracuse flights were usually nearly full.  There is no way that can be fair and reasonable.  I took great offense at that kind of pricing, again assuming no logical explanation.

There is a very logical explanation, that is both fair and reasonable.  Most airlines have either a freight or a mail contract for flights between large cities.  The income from these contracts help cover the cost of the flight, allowing the airline to charge the passengers less.  The flights to smaller cities rarley have freight or mail contracts so the airline has to have the passenger try to cover the price of the flight and make a profit also. I am sure if all the facts were put on the table, the BNSF capital expenditers would make perfect sense, no matter what some of the conspiracy theorists on this site might think.

 

Bert

[GregPoch]

I think it more of the case of too much electrical power required. And not enough power plants.  Some areas have rolling blackouts.  China is already scheduling to build nuclear power plants. As far as "radiation". It's better to blame someone other then themselves.

[Suburban Station]

Conspiracy theories aside, China's peg to our currency leads them to purchase extremely large amounts of dollar denominated assets. This practice actually props up the value of the dollar not devalue it. Recently the chinese have tired of treasuries (one could argue that the chinese-and saudi arabia-appetite for treasuries has allowed our government to spend far too freely and financed asset bubbles like the housing bubble) and are moving on to companies and other assets. back in the 1980's people were worried about the japanese buying america...those fears turned out to be unwarranted. japan is another contry that keeps its currency "artificially" low. I put that in quotes because the united states also manipulates its currency. thus, currency speculators are only private sector equivalents of the governments that issue and back the currency. there is no such thing as a fixed currency. it has to be based on some value, be it the value of gold or the value that the government says its worth (and is willing to arrest you if you don't take it). however, internationally, the government's ability to force others to accept the currency at a fixe rate is limited. thus, our current devaluation is forcing the chinese to buy more dollars. our largest problem is mainly arrogance. we think that we are the most powerful country and that we don't need to worry about being competitive. why is it that we have one of the higest corp tax rates in the developed world?

As for BNSF, I don't buy the conspiracy theories. my guess is that management made a strategic decision that they felt woudl translate into profits. right or wrong. however, are any of the other railroads aggressively doing anything? I mean, other than allowing their railroad to rot away while they wait for uncle sam to give them money?

Back to the topic at hand, it's my understanding that China's priorities have shifted. they intend on extending rail access to large swaths of the country that are still poor and unconnected. to this end,it doesn't make sense to spend the money on technology that is clearly limited in use and in an already wealthy area of the country when just getting decent rail access in most areas is elusive. China is keen on bringing the revolution to the rest of the country...in order to stay in power and quell unrest.

[cordon]

Why would the Chinese be buying dollars when we already are giving them more than they can use?

 

[Suburban Station]

Why would the Chinese be buying dollars when we already are giving them more than they can use?

 

to keep the value of their currency reasonably in line with their targets. When currencies are freely convertable, what happens is that we purchase goods from, say, Spain. those goods are priced and paid for in euros (either we pay in euros or the company changes the payment to their home currency, euros). thus, when we buy foreign goods, we are demanding their currency. Now, in China, the currency is not freely convertible and the major holder of foreign currency is the government. The government accepts payment in dollars. the problem is, their currency is the yuan. Either they hold in dollars or they hold in yuan. the problem is, holding dollars is a bad investment. It has lost a significant amount of value the past several years and shows no signs of abating. They can't change it to yuan because that's linked to the dollar. Changing it to the yuan woudl increase the supply of dollars relative to the yuan...in other words, it would increase the value of the yuan...exactly what they don't want. Caught between a bad investment (the dollar) and their own fixed exchange rate they are forced to buy dollar denominated assets which are not eroded in value by inflation...hence they are buying US assets. by purchasing US assets they are demanding dollars propping up the demand for dollars. moreover, they have been buying massive amounts of treasuries to prop up the value of the dollar (which they are a large holder of) to keep pressure off the yuan to appreciate. This has led to artificially low borrowing costs which has led our government and our home buyers to borrow more than they otherwise would. (note: saudi arabia, I believe, is actually the largest buyer of treasuries). that's how I understand it.

[solzrules]

Sounds like the Chinese markets had a bit of a 'correction' today.  Funny the US markets didn't really reflect it.

[cordon]

Thanks for the explanation.  I guess I have a simpler view.  We give them dollars for Chinese products.  They have pockets full of dollars, which they need to use (spend) or invest.  When they come to the U.S. to buy things, they find that our companies have quit producing things they may want to buy.  What to do?  Invest in U.S treasuries is one thing.  Invest in RRs is another.  Etc.  In short, we are trading off our properties for Chinese manufactured goods.

I liked it better when our industries made more products and sold them successfully all around the world.

 

 

[Suburban Station]

=Thanks for the explanation.  I guess I have a simpler view.  We give them dollars for Chinese products.  They have pockets full of dollars, which they need to use (spend) or invest.  When they come to the U.S. to buy things, they find that our companies have quit producing things they may want to buy.  What to do?  Invest in U.S treasuries is one thing.  Invest in RRs is another.  Etc.  In short, we are trading off our properties for Chinese manufactured goods.

I liked it better when our industries made more products and sold them successfully all around the world. 

[cordon]

Thank you.  I think I understand it better.

That doesn't mean I like it any better.

 

 

 

[beaulieu]

Well John, I'm suprised you've made a bit of an error in defining "unit".  There is a difference between a unit and a platform, and for a single well car the proper definition is 1 unit and 2 platforms - a bottom platform and a top platform.  Therefore, if BNSF's FS for intermodal lists revenues per unit, that would include both platforms (aka, two containers) as one unit.

Its taken a while but I finally got an official answer back from BNSF today Thursday June 6th.  One "Unit" is one Intermodal box whether it is a 20 ft. container, or a 53 ft. trailer. So a doublestack well will hold at least two "units".

 

[Anonymous]

Well John, I'm suprised you've made a bit of an error in defining "unit".  There is a difference between a unit and a platform, and for a single well car the proper definition is 1 unit and 2 platforms - a bottom platform and a top platform.  Therefore, if BNSF's FS for intermodal lists revenues per unit, that would include both platforms (aka, two containers) as one unit.

Its taken a while but I finally got an official answer back from BNSF today Thursday June 6th.  One "Unit" is one Intermodal box whether it is a 20 ft. container, or a 53 ft. trailer. So a doublestack well will hold at least two "units".

I believe you John.  I believe you contacted BNSF and I believe the BNSF guy gave you that answer. 

Problem is, there's a technical oversight in that definition.  The railcar builders all define an intermodal "unit" as that section of railcar between the trucks, and define "platform" as the space necessary to hold one 40'-53' box or trailer.  So a 3 pack well car has 3 units and 6 platforms, while a 5 pack spine car has 5 units and 5 platforms, ect.  Two 20's would therefore occupy one platform, and 2 20's in the bottom well and one 40' on top are occupying two platforms and one unit.  That's why I am doubting BNSF's ostensible accounting of what is and isn't a "unit".

The other thing that raises an eyebrow or two is that, if a "unit" is any single container or trailer, then those numbers given in the financial statement do not mesh with other internal analysis of the true profitability of intermodal.  You know, when BNSF's own people are quoted a year ago as saying they "hope intermodal will start to see positive returns on investment."

Two sets of books, perhaps?

[beaulieu]

Well John, I'm suprised you've made a bit of an error in defining "unit".  There is a difference between a unit and a platform, and for a single well car the proper definition is 1 unit and 2 platforms - a bottom platform and a top platform.  Therefore, if BNSF's FS for intermodal lists revenues per unit, that would include both platforms (aka, two containers) as one unit.

Its taken a while but I finally got an official answer back from BNSF today Thursday June 6th.  One "Unit" is one Intermodal box whether it is a 20 ft. container, or a 53 ft. trailer. So a doublestack well will hold at least two "units".

I believe you John.  I believe you contacted BNSF and I believe the BNSF guy gave you that answer. 

Problem is, there's a technical oversight in that definition.  The railcar builders all define an intermodal "unit" as that section of railcar between the trucks, and define "platform" as the space necessary to hold one 40'-53' box or trailer.  So a 3 pack well car has 3 units and 6 platforms, while a 5 pack spine car has 5 units and 5 platforms, ect.  Two 20's would therefore occupy one platform, and 2 20's in the bottom well and one 40' on top are occupying two platforms and one unit.  That's why I am doubting BNSF's ostensible accounting of what is and isn't a "unit".

I don't know about the railcar builders, but to the railroads "well" and "platform" are the same. In BNSF's case it started with the 10-section Flatcars Santa Fe developed to reduce Tare weight when handling TOFC. One Flatcar could handle 10 trailers, each car was just a skeletal centersill except for the "platform" to support the trailer wheels, hence the description as a 10 platform car. 

 

 

The other thing that raises an eyebrow or two is that, if a "unit" is any single container or trailer, then those numbers given in the financial statement do not mesh with other internal analysis of the true profitability of intermodal.  You know, when BNSF's own people are quoted a year ago as saying they "hope intermodal will start to see positive returns on investment."

Two sets of books, perhaps?

Not likely, but very hard to know the cost side. They put the revenue side out there, but their costs are a lumped, not broken down. Another point about the definition of "unit" this establishes a direct correlation with the "lifts" reported at their terminal facilities. Coversely many containers that are loaded on-dock are loaded at facilities owned by the shippers, who would directly pay the facility operator, since BNSF wouldn't have to pay for the loading, they would charge a lower price to haul the containers, this is why it is hard to compare domestic and International Intermodal, we have no good idea of the cost side. Remember it can be high revenue per unit, it can also be higher cost per unit, there is no way to be sure.