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QUOTE: Originally posted by Murphy Siding QUOTE: Originally posted by futuremodal QUOTE: Originally posted by Murphy Siding Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage. Can you post the article, or at least post a few exerpts? Or a link? Alas, I am a computer dummy[D)]. The article appears in the Sioux Falls Argus Leader.
QUOTE: Originally posted by futuremodal QUOTE: Originally posted by Murphy Siding Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage. Can you post the article, or at least post a few exerpts? Or a link?
QUOTE: Originally posted by Murphy Siding Today's paper has a story that BNSF has hit a *delay* of sorts in it's plan to buy trackage owned by the stat of South Dakota. My guess is that there are some issues with letting other railroads (DM&E, and another up by Aberdeen) use portions of what will be BNSF trackage.
QUOTE: Originally posted by PNWRMNM Future, On what basis do you disagree with my contention, which is based on CURE data, that noncaptive coal from PRB is already moving at RVC ratios very little over 100%? Their data shows all noncaptive traffic at an average of 103%. Coal rates per ton are 40-50% of rates for other commodities, again CURE data. I see no data to support your conclusion. For DME what RVC other western carriers are getting for ALL coal is irrelevant. All the coal DME proposes to haul will be noncaptive, by definition. They will loose their shirt hauling noncaptive coal. Mac
QUOTE: Originally posted by Murphy Siding Why doesn't DM&E build a line into the grain country of Montana? I hear talk of a railroad up there making so much money, that they're actively trying to turn some of the business away?[:-,]
QUOTE: Originally posted by PNWRMNM For DME what RVC other western carriers are getting for ALL coal is irrelevant. All the coal DME proposes to haul will be noncaptive, by definition. They will loose their shirt hauling noncaptive coal. Mac
QUOTE: Originally posted by PNWRMNM Future, You are missing the point. According to CURE, competitive traffic of all kinds moves at a RVC ratio of 103% in the West(UP-BNSF Average).
QUOTE: DME coal will be all competitive. One would expect it to move at about the regional RVC ratio in the absence of data to the contrary. If their route is better in terms of mileage, ruling grades, and/or rise and fall, then their RVC would be higher at a given rate than the competition's. If their route is inferior their variable cost will be higher and they will hit the 100% RVC wall before their competitors. I do not know which is true. Odds are these factors will be reasonably close on some moves. I would assume them a push.
QUOTE: DME's problem is that their investment base will be in current dollars, while much of the competitors is in older dollars, some of which has been depreciated. I suspect DME's ratio of investment to revenues will be higher than their competitors. Industry average is $3 investment to generate $1 of annual revenue. If DME ratio will be higher, that will be a big burdem. I suspect it is more likely to be higher than lower. Even if DME is willing to settle for 6% ROI they need a RVC ratio of at least 118% (100% plus 3*.06). I do not think they can get that RVC, BNSF and UP will not let them. They don't let each other get 118%, so why would they let the DME?
QUOTE: The other point is that the private capital markets would not invest in this project even at 6%. They will demand more than that even of a sure investment. DME is far from sure so the market will require a risk premium. The prospect of RRIF money minimizes this problem and could get cost of capital down to 6%, but it will be a very risky business and the FRA does evaluate the borrower's business plan. I would not put my money into it.
QUOTE: Originally posted by beaulieu QUOTE: Originally posted by futuremodal QUOTE: Originally posted by beaulieu QUOTE: Originally posted by futuremodal Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment. One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago. beaulieu, the difference between Import Intermodal and Domestic Intermodal is that all import intermodal has competitive rail access at all major seaside container ports. Furthermore, overseas importers have a multitude of options regarding which combination of container lines and container ports to utilize. And finally most major US consumption markets are either located seaside, or located within a shorthaul of the major waterways (which all seem to be paralelled by at least three Class I's). Until the CN's Prince George container port comes on line, there are no captive container ports in North America. The point is, since all import intermodal has competition driving down rates, those import intermodal rates have to be at the low end of the RVC spectrum. Contrast that with domestic intermodal. There are many domestic intermodal terminals that are geographically captive to one Class I. The only other options available would require an expensive long truck haul to an alternate intermodal terminal, so the rate alternative would also be high. The monopoly Class I can charge rates from these terminals that are much higher than those rates from import intermodal terminals. And as you point out, since much domestic intermodal is time sensitive aka UPS, the rates for those shipments are on the high end of the RVC spectrum. Yeah, those time sensitive trains will use more fuel, but their crews are less likely to go dead, so the variable costs attributed to those trains cannot be that much higher. I guess if you count the delays to other trains going in the hole for the hotshots as a variable cost of the hothsot, you could make an arguement for a higher VC for the hotshots. But the rates the railroads can charge for hotshots are as high as any such rates can be, because the only alternatives are long haul trucks or airlines, so the rates can be just below those higher cost alternatives. I know BNSF has turned down more UPS business. They terminated the Swift RoadRailers. They are making business decisions that are not making sense. There is no way they can charge rate that exceeds the RVC standard of 180% on import intermodal no matter how much they try to minimize VC on those doublestacks, because there is just too much competition from other railroads and other shipping options to allow any profit mazimization. They are ordering more and more double stack wells. Those new equipment purchases cost money. They are spending an awful lot of money on increasing capacity on the LA to Chicago corridor. That is costing a pretty penny. If we attribute those expenditures as a portion of the doublestack VC, there is no way they are much above recouping 100% of RVC. And I suspect they may actually be below the 100% RVC on those double stack trains if we include the costs of capacity improvements and equipment purchases. We know they're not buying more spine cars for domestic TOFC, there seems to be plenty of those still sitting around stored on various sidings. Right Dave, CP just stopped handling TOFC traffic completely, if it isn't in a can they won't handle it. BNSF hasn't gotten there yet but they might. Don't forget that just because its a container doesn't necessarily mean its import business. CP moves lots of domestic business in containers. And if you need to move freight to the West Coast, Maersk, COSCO, Hanjin, Evergreen would love to ship it in one of their boxes even if it isn't leaving the country, saves them paying to move empty boxes. I realize Dave that all six of the Class Is are nuts and you know best.
QUOTE: Originally posted by futuremodal QUOTE: Originally posted by beaulieu QUOTE: Originally posted by futuremodal Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment. One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago. beaulieu, the difference between Import Intermodal and Domestic Intermodal is that all import intermodal has competitive rail access at all major seaside container ports. Furthermore, overseas importers have a multitude of options regarding which combination of container lines and container ports to utilize. And finally most major US consumption markets are either located seaside, or located within a shorthaul of the major waterways (which all seem to be paralelled by at least three Class I's). Until the CN's Prince George container port comes on line, there are no captive container ports in North America. The point is, since all import intermodal has competition driving down rates, those import intermodal rates have to be at the low end of the RVC spectrum. Contrast that with domestic intermodal. There are many domestic intermodal terminals that are geographically captive to one Class I. The only other options available would require an expensive long truck haul to an alternate intermodal terminal, so the rate alternative would also be high. The monopoly Class I can charge rates from these terminals that are much higher than those rates from import intermodal terminals. And as you point out, since much domestic intermodal is time sensitive aka UPS, the rates for those shipments are on the high end of the RVC spectrum. Yeah, those time sensitive trains will use more fuel, but their crews are less likely to go dead, so the variable costs attributed to those trains cannot be that much higher. I guess if you count the delays to other trains going in the hole for the hotshots as a variable cost of the hothsot, you could make an arguement for a higher VC for the hotshots. But the rates the railroads can charge for hotshots are as high as any such rates can be, because the only alternatives are long haul trucks or airlines, so the rates can be just below those higher cost alternatives. I know BNSF has turned down more UPS business. They terminated the Swift RoadRailers. They are making business decisions that are not making sense. There is no way they can charge rate that exceeds the RVC standard of 180% on import intermodal no matter how much they try to minimize VC on those doublestacks, because there is just too much competition from other railroads and other shipping options to allow any profit mazimization. They are ordering more and more double stack wells. Those new equipment purchases cost money. They are spending an awful lot of money on increasing capacity on the LA to Chicago corridor. That is costing a pretty penny. If we attribute those expenditures as a portion of the doublestack VC, there is no way they are much above recouping 100% of RVC. And I suspect they may actually be below the 100% RVC on those double stack trains if we include the costs of capacity improvements and equipment purchases. We know they're not buying more spine cars for domestic TOFC, there seems to be plenty of those still sitting around stored on various sidings.
QUOTE: Originally posted by beaulieu QUOTE: Originally posted by futuremodal Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment. One other thing Dave, don't assume that Import Intermodal is as revenue inadequate as you presume, relative to its costs it is much better than Domestic Intermodal. The speeds harmonize better with other traffic, unlike the UPS bullets where costs of failure and disruption to other traffic more than offset the potentially higher revenues, after all the containers just spent two plus weeks on a ship that may have been delayed by storms. as long as the train isn't days late the shipper isn't going to get too nervous. You must have noticed that BNSF took a pass on the UPS business when UPS wanted fast trains from LA to Chicago.
QUOTE: Originally posted by futuremodal Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.
QUOTE: Originally posted by futuremodal . I don't forsee any cutthroat rates coming down the pike with DM&E's entry to the PRB.
QUOTE: Originally posted by nanaimo73 QUOTE: Originally posted by a Forummember Until the CN's Prince George container port comes on line, there are no captive container ports in North America. Except Halifax.
QUOTE: Originally posted by a Forummember Until the CN's Prince George container port comes on line, there are no captive container ports in North America.
QUOTE: Originally posted by nanaimo73 QUOTE: Originally posted by PNWRMNM How is DME to make any money hauling coal out of the PRB? ...with a route twice as long to Kansas City (and KCS)?
QUOTE: Originally posted by PNWRMNM How is DME to make any money hauling coal out of the PRB?
QUOTE: Originally posted by beaulieu QUOTE: Originally posted by futuremodal QUOTE: Originally posted by PNWRMNM Future, I presume you would agree that DME coal will all be rail competitive. How is DME going to show any profit hauling competitive coal at 102% of variable cost, even with RRIF funding? Mac Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment. The trouble for DM&E is that there are no captive powerplants of any size on its lines, and only one on the IC&E.
QUOTE: Originally posted by futuremodal QUOTE: Originally posted by PNWRMNM Future, I presume you would agree that DME coal will all be rail competitive. How is DME going to show any profit hauling competitive coal at 102% of variable cost, even with RRIF funding? Mac Show me any railroad profits sheets where coal is being hauled at 102% of variable cost. You're confusing coal hauling with import intermodal. Import intermodal is where railroads can't come close to meeting revenue adequacy (which doesn't explain why most capacity investments are going to improve the import intermodal corridors). Most power plants are captive, even if the source of the coal is not. Therefore, DM&E will be able to charge a rate that is more than adequate to cover it's portion of the investment.
QUOTE: Originally posted by PNWRMNM Future, I presume you would agree that DME coal will all be rail competitive. How is DME going to show any profit hauling competitive coal at 102% of variable cost, even with RRIF funding? Mac
QUOTE: Originally posted by PNWRMNM Future, Go look at the CURE website where they show the carrier's discrimination against captive coal. You have given us the reference before. Look at the ratio for competitive coal. The 102% is a representative number. Mac
QUOTE: Originally posted by PNWRMNM Murphy, The marketing guys may not be disciplined enough to get above 102% but they are disciplined enough not to go under 100% of their own cost. That is why mileage and ruling grade count, they mightily influence your costs, and the other guys. Mac
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