Shippers Hit Rail Rates and Service

d Though rail intermodal traffic continued strong growth, commodities were essentially flat in Week 14. Intermodal traffic originated on Class 1 railroads increased 8.6% in Week 14 and for the second quarter-to-date. Coal, one of the railroads’ key commodities increased only 0.6% for the week and 1.6% year to date.

In its proprietary Freight Pulse Survey, equity analyst Morgan Stanley reported shipper comments that centered on pricing and service. Aggressive pricing, said many shippers, was driving them to shift freight off the rails where possible. Some shippers who considered themselves “captive” rail users suggested the railroads were pushing prices to a point that would spark regulatory action. “The Class 1 railroads are really pushing their luck,” said one shipper. “We have held off pursuing legislative efforts. However, as service deteriorates and prices continue to escalate, we will be forced to move forward with legislative efforts.”

Citizens for Rail Safety, a non-profit group that claims a goal of improving rail safety, said that railroads had shrunk their networks following deregulation in an effort to boost profits and now that they are enjoying record profits, it is time to invest in more track capacity. Noting that lack of capacity is also driving away lucrative intermodal traffic, the group called for investments in track capacity and other improvements to the infrastructure to address what it called a chronic shortage while improving safety.