Which trains make money for the railroad?

[Modelcar]

....I really haven't noted recently just what shipping costs are on the sticker of a new car....but I'd expect it to be somewhere in the range of $600 to $800 or so, and with a full auto carrier I'd certainly think it would be a decent "profit" to carry them to their destination.  Kind of surprising to see it as 9th on the list.

[Murphy Siding]

This is out of my league but I'm going to guess that any train that moves makes money for the railroad

     The answer to that might be "not neccesarily".  MichaelSol recommended a book about Chicago, from the economic point of view.  In it, a good case was made, for running some trains at what you and I migh consider *below cost*.  The justification was, that while maybe the train didn't make a profit in the accounting sense, it did add some dollars to the bottom line, to cover some fixed costs that would be there whether a train was run or not.

[MP173]

This is a great topic.  Profitability has always been an interesting discussion.  A few years ago Trains had an excellent article (going to have to look it up) comparing intermodal vs carload traffic and how the margins on carloads was high and paid considerable amount of overhead.

The Trains map a few months ago outlining the movement of four cars was also very interesting, perhaps the most interesting map ever in that series.  I was intrigued by the time it took to move individual cars from Tx to the Northeast. 

Have the railroads begun to move pricing higher on the container business?  Talk a couple years ago was that when the contracts with the container lines were up, the pricing was moving up.

Had an interesting talk with a fellow this past weekend who owns four grain elevators in East Central Illinois.  We discussed the wild commodity price swings and how it affects him and his business (his take is it based on hedge funds moving away from equities and into commodities, thus artificially moving those prices).  Anyway, he is currently paying $3200 a car in 65 car lots to move grain from his elevator to the Gulf of Mexico for export.   At $208,000 per train, I would think that is extremely profitable. 

CSX seems to move grain in 65 car unit trains.  Anyone know why?

ed

[bobwilcox]

    My interest in profit measures was always based on how it impacted my paycheck. I was hired to manage a market at the C&NW, SP and UP. I was measured on four numbers : units per year, revenue per year, revenue per unit and contribution to overheard per year or "profit". Please notice I was measured on all four measures with a shift in emphasis at different parts of the business cycle. 

      Also, my experience was from 1969-2003 or before the plant filled up with traffic.  We would take all business that had any profit margin if that was the best we could get from the customer.  I beleve that world, like the Shasta Daylight at 9:30 am, is long gone.

[jeaton]

     On the thread about Iowa lines to Chicago,  Bob-Fryml mentioned the railroads running several types of trains over the same track at the same time, noting their differing prestiege,power,speed, and profitability.  It made me start to wonder...

     I work for a lumberyard.  We have a pretty good idea of which customers, and what kind of business makes us money, and which really don't.

     Which trains make money for the railroad?  Which ones are run for the prestiege?  Which ones are run to help pay the light bill?

   

Prestige doesn't count -- there's no one to impress.  You're also asking about profit, not revenue, correct?

It's not feasible to break down profit on a "train" basis but only on a by-shipper basis because many shippers of identical commodities have a very different profit basis and distance, geography, and competition of source, material, and mode all affect the profit margin.

In extremely rough terms, commodities ranked in terms of profit, high to low, are:

1. chemicals
   
2. international containers
3. high-value bulk commodities, e.g., fertilizer, concentrates
   
4. grain
5. coal
6. domestic containers and LTL
7. highly truck-competitive commodities such as lumber and hard perishables
   
8. low-value bulk commodities, e.g. scrap metal, cottonseed, waste paper
9. autos
10. Amtrak -- the worst by far.

RWM

There you go again, picking on Amtrak! .

I suspect we will soon get a stern lecture on how international containers ought to be slotted somewhere down about 9.5, or how R/VC is the only way to measure profitability. 

Perhaps more than profitability, it might be a question of the need for speed.  COFC/TOFC trains run at higher speeds in part because of need to provide transit times that will be somewhat competitive with truck, but there is also the fact that speed over the road for those trains can make a real difference in the productivity of the railroad equipment used for that service. 

That is not so with trains of "loose car" freight.  Suppose you have about 100 cars a day from various shippers in and around point "A" going to shippers around point "B" which is 1000 miles from point "A".  You run the train to get an average of say 40 MPH and it takes about 25 hours to get from "A" to "B", however, assuming great planning, it will take at least a day to get each car from the shipper put on the train ready to go and another day to get the car off the train and spotted on the consignee's track.  Call it three day service. 

Now suppose you up the power so that you can get 60MPH average between "A" and "B".  You have now increased the power requirement (locomotives) and fuel, but you are only going to reduce the over the road time by about 8 hours.  Given that most industry switches are a once a day event, even with the reduction in the over the road time, you still are only getting three day service, but now the cars are just setting in the yard for 8 hours waiting for the industry jobs to make the delivery.

Granted, I have described a very unrealistic scenerio-carload service a thousand miles in three days??? but the point is that there is nothing to be gained by increasing train speeds for that service.

I think such matters as I have mentioned have more to do with establishing what's hot and what's not than profitability.

[Soo 6604]

This is out of my league but I'm going to guess that any train that moves makes money for the railroad

[greyhounds]

Prestige doesn't count -- there's no one to impress.  You're also asking about profit, not revenue, correct?

It's not feasible to break down profit on a "train" basis but only on a by-shipper basis because many shippers of identical commodities have a very different profit basis and distance, geography, and competition of source, material, and mode all affect the profit margin.

In extremely rough terms, commodities ranked in terms of profit, high to low, are:

1. chemicals
   
2. international containers
3. high-value bulk commodities, e.g., fertilizer, concentrates
   
4. grain
5. coal
6. domestic containers and LTL
7. highly truck-competitive commodities such as lumber and hard perishables
   
8. low-value bulk commodities, e.g. scrap metal, cottonseed, waste paper
9. autos
10. Amtrak -- the worst by far.

RWM

That's interesting.  I would have never guessed autos to be toward the bottom.

Anyway, since people sometimes use words to mean similar but slightly different things, in this case how is "profit" being used.  Is it the R/VC ratio, the total commodity contribution, or ?.

[Railway Man]

     On the thread about Iowa lines to Chicago,  Bob-Fryml mentioned the railroads running several types of trains over the same track at the same time, noting their differing prestiege,power,speed, and profitability.  It made me start to wonder...

     I work for a lumberyard.  We have a pretty good idea of which customers, and what kind of business makes us money, and which really don't.

     Which trains make money for the railroad?  Which ones are run for the prestiege?  Which ones are run to help pay the light bill?

   

Prestige doesn't count -- there's no one to impress.  You're also asking about profit, not revenue, correct?

It's not feasible to break down profit on a "train" basis but only on a by-shipper basis because many shippers of identical commodities have a very different profit basis and distance, geography, and competition of source, material, and mode all affect the profit margin.

In extremely rough terms, commodities ranked in terms of profit, high to low, are:

1. chemicals
   
2. international containers
3. high-value bulk commodities, e.g., fertilizer, concentrates
   
4. grain
5. coal
6. domestic containers and LTL
7. highly truck-competitive commodities such as lumber and hard perishables
   
8. low-value bulk commodities, e.g. scrap metal, cottonseed, waste paper
9. autos
10. Amtrak -- the worst by far.

RWM

[passengerfan]

On the BNSF the UPS trains, TFC, Double stacks, Coal, Ethanol, Chemical and Lumber are the biggest producers of revenue. General freight it depends on the actual commodity. Those boxcars loaded by a freight forwarder don't make the kind of money they used to and are in steady decline.

[Murphy Siding]

     On the thread about Iowa lines to Chicago,  Bob-Fryml mentioned the railroads running several types of trains over the same track at the same time, noting their differing prestiege,power,speed, and profitability.  It made me start to wonder...

     I work for a lumberyard.  We have a pretty good idea of which customers, and what kind of business makes us money, and which really don't.

     Which trains make money for the railroad?  Which ones are run for the prestiege?  Which ones are run to help pay the light bill?