This post was inspired by Bill Stephens' blog post about the likely outcome for rail traffic in the face of this pandemic so I will link to that in case you haven't seen it: http://cs.trains.com/trn/b/observation-tower/archive/2020/05/19/history-suggests-rail-traffic-won-t-fully-rebound-after-recession.aspx There is a lot of pessimism in the rail industry these days. It seems less and less is being shipped by rail as time goes by. Branch lines and rail spurs close. Trucks begin moving cargo that once moved by rail. Intermodal fails to take adequate market share to make a difference in road traffic. Even as trucking volumes surge ahead to record highs, rail is stagnating and even shrinking. A lot of people blame this on PSR, but PSR was the symptom, not the cause. It was the trend that finally allowed people to see what was really going on. For a long time, longer than people realize, there has been a widespread modal shift from rail to road. We aren't talking about a span of years, but decades. This has been going on for over half a century. As time goes on and at an accelerating pace, shippers increasingly choose road over rail. In the modern world, rail service is too slow and cumbersome to be useful for most shippers. There really isn't anything to remedy this, it is fundamental to the modal competition dynamic. This trend show itseld throught the decline in carloads from the peak before the last recession. As has been asked many times before, how is it that in a growing economy, one mode of transport shrinks? People often bring up intermodal as a counterpoint. It did have a high rate of growth for a period, but recent events have shown its weaknesses. The first is that a large portion of intermodal growth just cannibalized carload volumes instead of actually diverting freight from the highways. Even in the strongest intermodal lanes, market share against trucking is rather poor. The second is low profit margin. Intermodal is well known to not give railroads a good profit margin. The third is value to the shipper. Generally a shipper will save only about 15% compared to trucking with intermodal. In exchange, they have to deal with slow transit times and poor service. Is it really worth it to use intermodal then? As we have seen over the past year with large amounts of rail intermodal jumping to highways, that answer is a resounding no. In general, the whole concept of intermodal is on the brink of obsolescence. As trucks electrify, costs associated with fuel and maintenance will drop, bringing costs down at least 15%, completely eliminating rail's advantage. The same goes for automation. With this, intermodal will likely die off quite soon. Another thing working against the railroads is highway size and weight limits. There has been a great deal of talk about increasing highway size and weight limits recently. As the size of trucks increase, their efficiency does as well. This reduces the cost of trucking greatly and severely hurts rail's value proposition. People complain about this and not without good reason, but the reality is that there isn't any way to stop this. Truck size and weight limits will increase eventually and this is certain. As freight shifts from rail to road, many worry if the infrastructure would be able to handle it, but this isn't as much of an issue as many think. Currently railroads move less than 10% of all tons of freight in the USA. People will quickly jump to ask about ton-miles, but when measuring market share, it isn't a good statistic. It isn't much use to move freight far if you aren't moving much freight in the first place. Of course, rail's share of tonnage is projected to continue to decline in coming decades. But even if freight rail ceased to exist, the increase to highway tonnage would only be modest. If you want to see a similar situation, look at Europe. Rail freight is essentially non-existent there and things are fine. Sure, the highways have more trucks on them, but their infrastructure handles it fine. There isn't any reason to think things would be different here. The reality is that during this pandemic, huge amounts of freight will shift from rail to road and never come back. That isn't necessarily a new thing, but just as the pandemic is excellerating other existing trends, so too will the trend of the freight modal shift to road. When it comes to railroads, the only accurate market outlook is pessimism.
Yeah, yeah, yeah: truck truck truck. We get it.
I wonder if this is Ed Benton's son?
It's been fun. But it isn't much fun anymore. Signing off for now.
The opinions expressed here represent my own and not those of my employer, any other railroad, company, or person.t fun any
I notice all we have is bupkis and crickets about how you get to pervasive autonomous electric trucking on $1.57 per mile.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Yet animal drawn vehicles continue to exist......
https://www.youtube.com/watch?v=R0KbqMKluCA
Never too old to have a happy childhood!
BaltACDYet animal drawn vehicles continue to exist......
Indeed. They go by my house every day... In fact, there was an auction up the road from me today at an Amish farm. Lots of buggies in attendance...
When I read the gloom and doom in a "traffic" post (sorry, I'm not buying the extra letters); I'm reminded of President Carter's famed "malaise" speech back in the '70's. An appropriate paragraph has been excepted and pasted below:
"The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will. We can see this crisis in the growing doubt about the meaning of our own lives and in the loss of a unity of purpose for our nation."
ttrraaffiicc People will quickly jump to ask about ton-miles, but when measuring market share, it isn't a good statistic.
Thanks to Chris / CopCarSS for my avatar.
I agree that the gloom and doom is overblown. But if the freight railroads want to still be a key player and not have to resort to national defense reasons alone to make their case, there has to be a willingness to look beyond just cutting labor and other costs for the future.
All industry faces a problem in that Wall Street's concern these days is getting a stock price as high as possible. Its not just the RR's that are under the gun. It is possible to bring about a change, especially if the government really does try much harder to give American industry a more level playing field both domestically and abroad. Among other things, it will require changes to delist those foreign companies (mainly China) from both US and the world stock exchanges that don't play or report fair, prohibit ownership of shares or other investment in those companies, eliminte asset "looting" takeovers, and clamping down on the Hedge fund giants. The trick is to have a government that can do it without it over regulating/moving left to the point the economic progress slows down to a trickle or goes negative.
Europe is not an example the US wants to copy when it comes to RR's. Their nationalization of rail service resulted in the passenger side totaly dominating and freight rail reduced to a distant afterthought. So of course rail freight traffice fell off to practically nothing. It has rebounded some, often due to freight service being spun-off in some countries to independent operators. The US is different in that Passenger rail service in the US only meaningly impacts some very populated areas and corridors between them. Goverment supported High Speed Rail won't happen in the US as the US federal government is now $25 Trillion in debt, soon to be $28 Trillion or more. And that's just the Federal existing debt. The estimated future "real debt" the US faces (includes known but unfunded future entitlements under existing laws) is over $50 Trillion--and more if you factor in projected state and local entitlement deficits.
In regards to the comment that truck sizes and weight will definitely increase along with volume, all I can say is that would result in most of the current highway infrastructure being pounded to pieces far beyond what it is today. It would cost about $5 Trillion to get it right today and up to $10 Trillion to handle what the trucking industry is proposing for the future. The only way that expense could be meaningfully reduced would be to eliminate the rules requiring union labor or "prevailing wage" laws when working on government funded contracts. Since none of that appears it will happen, eventually the deteriorating roads and bridges would require weight limits that would be no more than today, maybe even further reduced.
ttrraaffiicc This post was inspired by Bill Stephens' blog post about the likely outcome for rail traffic in the face of this pandemic so I will link to that in case you haven't seen it: http://cs.trains.com/trn/b/observation-tower/archive/2020/05/19/history-suggests-rail-traffic-won-t-fully-rebound-after-recession.aspx There is a lot of pessimism in the rail industry these days. It seems less and less is being shipped by rail as time goes by. Branch lines and rail spurs close. Trucks begin moving cargo that once moved by rail. Intermodal fails to take adequate market share to make a difference in road traffic. Even as trucking volumes surge ahead to record highs, rail is stagnating and even shrinking. A lot of people blame this on PSR, but PSR was the symptom, not the cause. It was the trend that finally allowed people to see what was really going on. For a long time, longer than people realize, there has been a widespread modal shift from rail to road. We aren't talking about a span of years, but decades. This has been going on for over half a century. As time goes on and at an accelerating pace, shippers increasingly choose road over rail. In the modern world, rail service is too slow and cumbersome to be useful for most shippers. There really isn't anything to remedy this, it is fundamental to the modal competition dynamic. This trend show itseld throught the decline in carloads from the peak before the last recession. As has been asked many times before, how is it that in a growing economy, one mode of transport shrinks? People often bring up intermodal as a counterpoint. It did have a high rate of growth for a period, but recent events have shown its weaknesses. The first is that a large portion of intermodal growth just cannibalized carload volumes instead of actually diverting freight from the highways. Even in the strongest intermodal lanes, market share against trucking is rather poor. The second is low profit margin. Intermodal is well known to not give railroads a good profit margin. The third is value to the shipper. Generally a shipper will save only about 15% compared to trucking with intermodal. In exchange, they have to deal with slow transit times and poor service. Is it really worth it to use intermodal then? As we have seen over the past year with large amounts of rail intermodal jumping to highways, that answer is a resounding no. In general, the whole concept of intermodal is on the brink of obsolescence. As trucks electrify, costs associated with fuel and maintenance will drop, bringing costs down at least 15%, completely eliminating rail's advantage. The same goes for automation. With this, intermodal will likely die off quite soon. Another thing working against the railroads is highway size and weight limits. There has been a great deal of talk about increasing highway size and weight limits recently. As the size of trucks increase, their efficiency does as well. This reduces the cost of trucking greatly and severely hurts rail's value proposition. People complain about this and not without good reason, but the reality is that there isn't any way to stop this. Truck size and weight limits will increase eventually and this is certain. As freight shifts from rail to road, many worry if the infrastructure would be able to handle it, but this isn't as much of an issue as many think. Currently railroads move less than 10% of all tons of freight in the USA. People will quickly jump to ask about ton-miles, but when measuring market share, it isn't a good statistic. It isn't much use to move freight far if you aren't moving much freight in the first place. Of course, rail's share of tonnage is projected to continue to decline in coming decades. But even if freight rail ceased to exist, the increase to highway tonnage would only be modest. If you want to see a similar situation, look at Europe. Rail freight is essentially non-existent there and things are fine. Sure, the highways have more trucks on them, but their infrastructure handles it fine. There isn't any reason to think things would be different here. The reality is that during this pandemic, huge amounts of freight will shift from rail to road and never come back. That isn't necessarily a new thing, but just as the pandemic is excellerating other existing trends, so too will the trend of the freight modal shift to road. When it comes to railroads, the only accurate market outlook is pessimism.
I think you overemphasized the magnitude and speed of the shift but you make some valuable points. The rail crowd overlooks those. However, Ken Greyhounds, who had a lot of experience on the sales and marketing side of the railroad industry, would be right there pointing out their complacency in seeking new traffic sources to replace the shrinking bulk trainload staples like coal.
Rail ton miles are up 500% over the last 50 years..with fewer people and less track..I would hardly call that a dying industry. Sure.. longhaul trucking was far less important 100 years ago.. largely because there were no hlghways and trucks around then. Lots of positive developments on the rail side if one cares to look, and most have moved past their obsession with PSR and the OR. I remain bullish on the rail industry..lots of good things happening that keep me optimistic.
None of the existing modes of freight transportation are going away, now or in the future. They each have the strong points and their weak points. Shippers are always looking for maximum tonnage and minimum costs consistent with their needs for speed and/or reliability. There is no one size fits all. Each existing mode will continue to 'reinvent' themselves as they have done since forever.
The reality of human existence portends that there may be additional modes of freight transportation created and put into the overall mix of transportation options available to those that need to move something from one place to another.
zugmannI wonder if this is Ed Benton's son?
Russell
Truck sizes aren't going up.
BaltACD,
You got it right!
Carload traffic is dying off. What'll be left is boutique products moving in specific equipment for very specific commodities in very specific lanes. Examples would be plastic pelets, sheet steel, chicken feed, chemicals. The king of bulk, coal, is dying and just going to be another carload, niche market.
So, what's left? Intermodal. The railroads, as they are right now, have what they are going to get, plus or minus a bit. It'll grow with the economy. Diruption from autonomous trucks? No. Diruption from networked highways systems? Sure, but that's a long ways off.
So, if RRs are going to stick around, they have to figure out how to improve what they do to stay competitive. Status quo won't hunt. They need a 20 year capital plan, not just a 5 year one.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
The problem at the moment is that, unlike trucking, railroads have enormous investments tied up in physical assets. Capital investment groups find these "get rich NOW" targets. Railroad managers now have to generate an unsustainable annual return of 40% (39% won't cut it) on operations to service the return on the invested capital; failing that, they will be replaced by those will cash out those assets and pass the proceeds onward.
Just as in the 60's and 70's, railroads are down to pricing for cash - if they destroy the customer base and dispose of assets beyond the bare-bones minimum to handle this week's traffic, so be it. Frankly, i expect half of the current railroad mileage to be gone in 25 years - there will be a few, skeletal main lines to tow containers moving at least 1000 miles, plus a few bulk commodities over which rails have absolute pricing control. Granted, the remaining mileage will look like the Chicago Loop in terms of frequency.
1. Sell the track and ROWs cheaply to the government and use the recovered cash to do the profitable thing - operate revenue-generating train.
2. Beef up marketing and sales with people who know what that means. Find new niches.
Some of you need to do some research on the trucking industry. They have just as many problems as the railroad industry. They include being squeezed for savings by the big shippers like Walmart and Amazon. Driving a truck used to be a middle class career. Not anymore. It's working class. Companies are advertising for drivers and offering such "benefits" as 1-3 days home after 2-3 weeks on the road. Driver pay is only 35-40cpm in many companies. I know there are some small companies with good customers like STCO post here. I'm talking about the 800# gorillas of the industry like Swift, Prime, CR England, etc. They don't get layover or breakdown pay or much of anything else.
alphas Europe is not an example the US wants to copy when it comes to RR's. Their nationalization of rail service resulted in the passenger side totaly dominating and freight rail reduced to a distant afterthought. So of course rail freight traffice fell off to practically nothing. It has rebounded some, often due to freight service being spun-off in some countries to independent operators.
Europe is not an example the US wants to copy when it comes to RR's. Their nationalization of rail service resulted in the passenger side totaly dominating and freight rail reduced to a distant afterthought. So of course rail freight traffice fell off to practically nothing. It has rebounded some, often due to freight service being spun-off in some countries to independent operators.
The reasons for rail traffic being pretty much an afterthought is likely the same reasons that the local freight dropping off a boxcar here and there on North American railroads, under private ownership, has also mostly disappeared. The railroads are not interested in single car movements over a relatively short distance. That has virtually all gone to trucks. Perhaps fortunately in Europe government support of passenger rail has kept the network in place so that it is still available for freight where it makes economic sense.
oltmannd What'll be left is boutique products moving in specific equipment for very specific commodities in very specific lanes. Examples would be plastic pelets, sheet steel, chicken feed, chemicals.
I am at my summer location in central Texas. There is not much to do because of the Covid-19 constraints, so I have been going up to Temple most days to watch trains.
I have seen some very long BNSF grain trains, or at least I think they are grain cars, nearly every day. They are headed to or from Galveston, I believe. It is hard to imagine trucks carrying grain competitively from the upper midwestern grain belt to places like Galveston for shipment overseas.
I am aware that a significant amount of grain goes by barrage, but how does that work if the grain and the shipping port are not along a major waterway?
charlie hebdo 1. Sell the track and ROWs cheaply to the government and use the recovered cash to do the profitable thing - operate revenue-generating train. 2. Beef up marketing and sales with people who know what that means. Find new niches.
charlie hebdo 1. Sell the track and ROWs cheaply to the government and use the recovered cash to do the profitable thing - operate revenue-generating train.
Futuremodal, is that you?
charlie hebdo2. Beef up marketing and sales with people who know what that means. Find new niches.
Based on our discussions here over time, I suspect the only ones who don't think that's the appropriate thing to do is the railroads.
alphas Europe is not an example the US wants to copy when it comes to RR's. Their nationalization of rail service resulted in the passenger side totaly dominating and freight rail reduced to a distant afterthought. So of course rail freight traffice fell off to practically nothing. It has rebounded some, often due to freight service being spun-off in some countries to independent operators. The US is different in that Passenger rail service in the US only meaningly impacts some very populated areas and corridors between them. Goverment supported High Speed Rail won't happen in the US as the US federal government is now $25 Trillion in debt, soon to be $28 Trillion or more. And that's just the Federal existing debt. The estimated future "real debt" the US faces (includes known but unfunded future entitlements under existing laws) is over $50 Trillion--and more if you factor in projected state and local entitlement deficits. In regards to the comment that truck sizes and weight will definitely increase along with volume, all I can say is that would result in most of the current highway infrastructure being pounded to pieces far beyond what it is today. It would cost about $5 Trillion to get it right today and up to $10 Trillion to handle what the trucking industry is proposing for the future. The only way that expense could be meaningfully reduced would be to eliminate the rules requiring union labor or "prevailing wage" laws when working on government funded contracts. Since none of that appears it will happen, eventually the deteriorating roads and bridges would require weight limits that would be no more than today, maybe even further reduced.
True indeed.. It's known that Euro Railfreight operators would love to have a much larger loading gauge, with the ability to run longer trains, double stacks, along with heavier axle loads. This would lower cost for rail freight in Europe along with a unified freight reservation system to allocate path transition between nations. Until then dreams persist.
Oil record lows now, will go back up and rrs will get some truck tonnage back
SD60MAC9500 It's known that Euro Railfreight operators would love to have a much larger loading gauge, with the ability to run longer trains, double stacks, along with heavier axle loads. This would lower cost for rail freight in Europe along with a unified freight reservation system to allocate path transition between nations. Until then dreams persist.
Do you have a source for that?
Maybe they do not need the kind of extreme heavy haul system that we have. Maybe their system is more light and nimble than ours and thus matches the demands of their transportation market. Indeed, it seems that our market is changing to require a system that is more like that of Europe.
Murphy Siding charlie hebdo 1. Sell the track and ROWs cheaply to the government and use the recovered cash to do the profitable thing - operate revenue-generating train. 2. Beef up marketing and sales with people who know what that means. Find new niches. I doubt they could sell the track and ROWs *cheaply* to anybody considering the amount of capital the railroads have invested in them.
I doubt they could sell the track and ROWs *cheaply* to anybody considering the amount of capital the railroads have invested in them.
It's unavailable capital that isn't productive. That's the problem and it costs a lot to maintain.
I know nothing about futuremidal, but he seems to have had some ideas that challenge this same ol' same ol'thinking. So do Oltmann and Greyhounds.
charlie hebdoI know nothing about futuremidal,...
His schtick was chiefly open access.
charlie hebdo It's unavailable capital that isn't productive. That's the problem and it costs a lot to maintain.
Nothing gets sold cheaply! Unless corporated raiders want to turn EVERYTHING to cash NOW! Their intent is turn the property to cash - damned to any business that may be ongoing.
charlie hebdo1. Sell the track and ROWs cheaply to the government and use the recovered cash to do the profitable thing - operate revenue-generating train.
A problem with this approach is that in today's railroad financial climate, what would happen after "Sell the track" would be to move the money in total to the bottom line to be harvested by the investors.
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