(Reuters circulated the following article on August 31.)
SAN FRANCISCO — Freight railroads on Wednesday began restoring limited service to areas hit by Hurricane Katrina and rerouting traffic hundreds of miles to the north, but continued to lose business as track from Florida to Louisiana remained flooded, damaged or covered with debris.
Analysts warned that railroad profits would be hurt by the storm, but said the companies would likely see a surge in demand for the transportation of materials and chemicals to be used in the recovery effort, which is expected to be massive.
Striking the Gulf Coast with 140 mph (225 kph) winds and 30-foot storm surges, Hurricane Katrina wreaked havoc on railroad tracks that carry chemicals, paper, pulp and other materials to destinations around the country.
New Orleans, which was devastated by the storm, is a major gateway for freight traffic running from Texas refineries and chemical plants into the Northeast, but remained off limits to railroads.
CSX Corp. (CSX.N: Quote, Profile, Research), a Southern railroad seen as one of the hardest hit, said on Wednesday it has restored service between Montgomery, Alabama, and Pensacola, Florida, but declared a “force majeure” limiting its liability from loss or damage due to “the uncontrolled rising waters in several states.”
A CSX route in Alabama was closed within 14 miles of Mobile, as storm debris covered some parts of the track, while the line between Mobile and New Orleans continued to be inspected for damage. Shares of CSX fell 2 percent on the New York Stock Exchange on Wednesday.
Union Pacific, the largest U.S. railroad, said it has restored some local service on tracks approaching New Orleans, but has had to reroute to Memphis or St. Louis the long-haul traffic normally passing through the city.
Neither CSX nor Union Pacific would disclose the financial impact of the storm, saying the focus remained on restoring service and rerouting traffic. A Union Pacific spokeswoman, Kathryn Blackwell, said the company seemed to have been spared any serious damage to infrastructure. “We’re in decent shape,” she said.
Donald Broughton, an analyst with A.G. Edwards, said Katrina would take a toll on profits at all the major railroads, though he said it was too early to make accurate assessments of damage.
Union Pacific Corp. (UNP.N: Quote, Profile, Research), he said, normally runs about 25 trains per day into and out of the New Orleans area.
“We believe that UNP’s tracks might have (been) spared the brunt of Katrina,” Broughton wrote in a note to clients. “That said, we believe that UNP has notably more volume at risk because of damage by the storm.”
Norfolk Southern Corp. (NSC.N: Quote, Profile, Research) reported disruption into Louisiana, Mississippi and Alabama but said it had rerouted traffic wherever it could. In a statement on Wednesday, the railroad said all operations except in the immediate New Orleans area were returning to normal.
Railroads will be racing to restore service as recovery efforts begin. The rails are the primary means of carrying chemicals like chlorine needed to purify water, and for materials like brick, iron, and lumber that will be used to rebuild homes, roads and bridges.
“Those railroads which can prove to be better operators should capture the majority of this business,” Broughton said, “and do a better job of converting that incremental revenue into shareholder wealth increases.”