(The following article by Tom Ramstack was posted on the Washington Times website on July 14.)
WASHINGTON — An improving economy is causing delays on the nation’s railroads, and customers are worrying their freight will get backlogged as the peak shipping season approaches in the fall.
Some coal, chemical and retail companies are reporting delays that are hurting their businesses, although July normally is slow for them.
“We’re keeping our heads above water and we can still see the shore, but it’s a rough tide we’re in,” said John B. Ficker, president of the National Industrial Transportation League, a trade organization for shippers.
He attributes the demand for freight shipping to the stronger U.S. economy, which economists estimate to have grown at a 4 percent rate in the first half of the year.
Delays from backlogged trains and trucks are likely to get worse in the fall, when grain harvests are shipped to market and consumer goods arrive for the Christmas shopping season, he said.
The economy is “really surging, and that surge pushes freight to a new level,” Mr. Ficker said. “Everybody wants to get their products moving while the opportunity is still there.”
Companies as varied as J.C. Penney Co., Dow Chemical Co. and Arch Coal Inc. have been hampered by the delays.
Dow, which makes 150,000 rail shipments annually, was forced to reduce production of herbicide at its Midland, Mich., plant because raw materials are not being delivered on time. The company says the rail deliveries are taking 12.5 percent longer than normal.
“It’s been ongoing for the last two months,” said Bill Huff, Dow’s director of rail operations.
J.C. Penney, the second-biggest U.S. department-store chain, checks rail capacity data to figure out ways to avoid delays.
“We have to monitor that on a daily basis to decide if we’re going to move things by rail or by truck,” said spokesman Tim Lyons.
Arch Coal, the second-largest U.S. coal producer, says rail delays and missed shipments reduced the company’s second-quarter profits by $8 million.
“CSX and Union Pacific [railroads] are the major problems for us,” said Kim Link, spokeswoman for the St. Louis coal company.
The Surface Transportation Board, the federal agency that regulates railroads, is demanding that railroads submit plans explaining how they will prevent these delays from turning into a crisis in the fall.
“As all who follow the freight rail industry are aware, this increase in demand is putting significant strains on the freight rail system,” the agency wrote in a June 9 letter requesting the plans.
Some of the railroads’ written plans are arriving at the agency’s Washington office this week.
The rail industry reports that average train speeds were 6.7 percent slower in the first half of 2004 compared with a year earlier.
Railroads say they are putting into high gear plans for hiring more employees and buying additional equipment. Some also are raising rates.
“We are moving an awful lot of freight, and the railroads are taking steps to manage that,” said Tom White, spokesman for the Association of American Railroads, the trade group for major railroads.
Rail freight volume was up 5.3 percent in the first six months of this year, a pace that would beat the record volume last year, he said.
CSX Transportation, the largest railroad operating along the East Coast, plans to hire 1,400 more train and engine service employees this year. It also is purchasing 120 additional locomotives.
“Our current hiring plans call for an additional 2,100 employees to be hired in 2005,” spokeswoman Misty Skipper said.
Norfolk Southern Railway, which operates in 22 states in the eastern United States, plans to hire 1,500 train and engine service employees this year.
“Current demand for freight service is the strongest that we’ve seen since the late 1990s,” spokeswoman Susan Terpay said.
West Coast states are having bigger problems as Asian imports inundate their port facilities, particularly the ports of Long Beach, Calif., and Los Angeles.
The two largest Western railroads, Union Pacific Railroad and Burlington Northern Santa Fe Railway, are using allocation systems that force shippers to take a number for rail deliveries.
Under the system, shippers must request a shipment in advance. The railroads then allocate a certain number of rail cars to each port or rail yard to make the pickup.
“The traffic doesn’t seem to be moving” fast enough to keep up with the requests for shipments, said Richard Russack, spokesman for Burlington Northern Santa Fe.
But port operators in the Los Angeles area complain that freight containers are piling up near docks because the allocation system is not taking them away fast enough.
The western railroads also are charging their customers higher fees.
Union Pacific plans to increase rates for intermodal shipments by 9.5 percent beginning Aug. 17. Intermodal refers to shipments transferred between transportation modes, such as ships and trains.
Burlington Northern Santa Fe is making similar rate increases beginning Aug. 17. Deliveries from the Pacific Northwest will cost an extra $45 per container or trailer and $95 from California.