(Reuters circulated the following article by Nick Carey on April 6.)
CHICAGO — Rising demand for rail freight in the United States and China will drive growth at the rail services unit of Harsco Corp., with double-digit growth likely for some products, the unit’s top executive said on Thursday.
“Increasing demand in the United States and China is good news for us,” said Robert Newman, president of Harsco Track Technologies, which specializes in constructing and repairing railroads.
The Columbia, South Carolina-based unit accounted for around 10 percent of Harrisburg, Pennsylvania-based Harsco’s $2.7 billion revenue in 2005. The unit was singled out when Harsco reported fourth-quarter earnings in January as one of its leading growth areas.
Rising U.S. imports — with annual double-digit growth since 2003 — from developing countries like China, plus strong demand for coal from utilities, have strained U.S. railroad capacity.
Caught by surprise, the railroads are laying new track after two decades of network reductions that followed U.S. railroad deregulation in 1980.
In the western United States in particular “we are seeing a race by” the largest U.S. railroad, Union Pacific Corp.
Between them Union Pacific and Burlington Northern will spend more than $5 billion in 2006 on repairing and extending their networks.
“The irony is in many places the railroads are laying track where they removed it over the past two decades,” Newman said.
Harsco Track Technologies’ main growth business is rail grinding, which has seen average annual growth of 10 percent over the past five years. Heavy rail traffic warps rails to the point where they split and can derail trains. Harsco builds and contracts out special grinding trains that reshape the rails.
The company has four grinding machines operating under contract at Union Pacific and one on that serves all railroads as needed.
Harsco is building three new grinding machines for between $10 million and $15 million, two that will run on contract for U.S. railroad CSX Corp
The company has also built 11 grinding machines for China, where the rails are likewise under strain.
Newman said that Harsco Track Technologies is benefiting from U.S. manufacturing capacity shifting abroad to markets like China, plus China’s need for raw materials.
“We have raw materials coming out of North America by rail that go to China, providing business for Harsco in both markets,” Newman said. “Then goods come back by rail in containers, wearing the rails and providing more business.”