Railroads ready for intermodal growth

Intermodal volumes declined in 2007, but that did not deter railroads from investing large amounts of capital to prepare for future growth, the president of CSX Intermodal said.

"The railroad industry is ready for growth" this year, Jim Hertwig told a meeting of the Los Angeles Transportation Club.

The rail industry as a whole invested $9 billion last year to increase lift capacity, double-track key corridors, expand intermodal rail facilities, and expand overall network capacity. CSX, the largest eastern railroad, invested $1.6 billion of that total. CSX and the industry as a whole will make similar capital investments in 2008, Hertwig said.

Weak cargo volumes gave the railroads an operational breather after six years of steady growth, allowing the carriers to concentrate on improved service. The Class 1 railroads reported a drop in total cargo, and most railroads reported declining intermodal traffic. Union Pacific's intermodal traffic increased less than 1 percent; CSX traffic declined 3.4 percent; Norfolk Southern reported a drop of 4.2 percent; and BNSF reported a decline of 6.6 percent, Hertwig said.

But increasing freight rates resulted in strong yields and improved service offerings, he said.

The U.S. economy is projected to increase 2.3 percent this year - slightly more than the 2 percent growth a year ago. A mild recovery is anticipated in the second half of the year, which should lift rail business, including intermodal.

Railroads are showing signs of cooperation to improve service on east-west corridors. For example, last year CSX and BNSF reduced the transit time from Southern California to Atlanta by one day through a joint venture. Norfolk Southern and Kansas City Southern formed a similar joint venture with their Meridian Speedway project between Meridian, Miss., and Shreveport, La.

CSX's Northwest Ohio Interchange project will improve east-west transit times by avoiding the one- to two-day delays that occur when western and eastern railroads interline services in Chicago.

Also, CSX's National Gateway project will connect ports such as Baltimore and Portsmouth, Va., with population centers in the Midwest, similar to the Norfolk Southern Heartland Corridor linking Virginia with the Midwest.

These projects will help East Coast ports expand their intermodal reach in line with the growth of all-water shipping services from Asia.

*National Gateway Update: Since the publication of this news story, CSX has increased its financial commitment to the National Gateway to $350 million.