(Reuters circulated the following article by Fang Yan on April 25.)
SHANGHAI — Railroad operator Burlington Northern Santa Fe Corp. expects booming U.S.-China trade to keep its international container business steaming ahead at double-digit growth rates, a senior executive said on Tuesday.
China accounts for 68 percent of international intermodal business for Burlington, the second-largest U.S. railroad after Union Pacific.
Intermodal transport, the largest and fastest growing area of business for U.S. railroads, uses standardized containers that can be hauled by truck, or placed on ships or trains.
Frederick Malesa, vice president of unit BNSF Railway, told Reuters in a phone interview that nearly all Burlington’s international intermodal business comes through Asia-U.S. trade, with the segment growing at an average 13 percent since 2000.
“China would probably account for at least 70 percent of the total volume mix in the next few years,” Malesa said, citing the strength of a Chinese economy which surged 10.2 in the first quarter following 9.9 percent growth last year.
Revenue from Burlington Northern’s Asia international intermodal segment was $2.1 billion last year — more than 16 percent of the company’s total. The ratio could rise further on robust transpacific trade, Malesa said.
“You have spikes, ups and downs (in trade growth rate),” said Malesa, an industry veteran who began his carrier in 1981 at rival Union Pacific.
“But we have never spiked below double-digit in the last five years and we’d expect double-digit growth every year.”
BNSF, which vies with Union Pacific to handle goods coming in from the U.S. west coast, operates an extensive railroad network with about 32,000 route miles in North America. Its international intermodal volume totaled 5.5 million twenty-foot equivalent (TEU) units in 2005.
NO INVESTMENT PLANS
Beijing is opening its rail infrastructure sector, albeit slowly, to foreign and domestic investors as it looks for cash and expertise to overhaul an industry coping with rapidly growing freight and passenger volume.
But few foreigners have bothered to invest in the sector, which is notoriously inefficient after decades of being operated as a state monopoly.
BNSF, the only U.S. railroad with an office in China, is also staying on the sidelines as Beijing reforms the sector — a move that many say is long overdue.
Instead, the company will use its newly opened China office to better facilitate the flow of goods into and out of China for a client roster that includes Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and Home Depot Inc. (HD.N: Quote, Profile, Research), Malesa said.
“We have no direct investment in China nor do we plan any,” he said. “We will continue to invest in North America to provide the capacity that China needs to grow.
Shares in BNSF, valued at more than $32 billion, have risen more than 22 percent so far this year, just shading Union Pacific’s 21 percent gain. BNSF trades at a little below 18 times forecast 2006 earnings, a touch cheaper than Union Pacific’s 18.4 times.