As FreightWaves reported earlier this year, this summer brought about major contentions between agricultural shippers and CSX Transportation. In July, the Agricultural Transportation Working Group called upon the Surface Transportation Board to examine CSX’s “already-chronic service problems”.
The problems included railroad staffing issues, severe delays, and even no-shows for scheduled service. The Group complained in July that “service deteriorated markedly in the second quarter of 2017” and was only getting worse from there.
Now CSX has thrown gasoline on the fire. The railroad is continuing full steam ahead on its “precision scheduled railroading” strategy brought to the company by CEO Hunter Harrison. The rail carrier is now raising fees on shippers in a move that it claims is necessary in order to streamline operations and optimize asset utilization.
Is Harrison just doing what has to be done to make one of America’s four major railroads viable, or does the agriculture industry have a legitimate gripe about CSX’s new modus operandi (or is it a little bit of both)?
Harrison is widely regarded as the foremost executive in the railroad industry today and has even been called the best railroad operator in the last hundred years. The seasoned railroad professional used these same tactics to resuscitate the gasping CPR (Canadian Pacific Railway) and to complete a turnaround of Canadian National Railway. He was installed as CEO of CSX in a coup after activist investor group Mantle Ridge LP pressured the railroad into making him the boss.
And though the ag shippers don’t like him, the markets sure do. The day after Harrison was announced as CSX’s new head, in January of this year, the company's stock erupted in value from $36.88 to $45.51, a bump of 23.4%. And it is still riding high, currently trading at $50.43 per share as of this writing, after peaking at over $55 in the summer.
While it is hard to argue with Harrison’s record, ag shippers claim that CSX and its new strategy have wreaked havoc on the agricultural supply chain in the US over that past year. Agricultural shippers (along with some coal shippers and chemical shippers) are concerned that the situation is still getting worse, with no end in sight. Some companies have stated they will not be able to utilize the rail network anymore and will have to ship by truck, which will greatly increase their costs.
An August shipper survey performed by Cowen & Company found that 24 percent of respondents described CSX’s service as “poor.” The study also found that 37% of CSX’s shippers surveyed switched to the other major railroad in the east, Norfolk Southern, from March through July. No other railroad service provider had anywhere near this level of negative responses to the survey.
Reuters reports that among CSX's new changes are:
-Demurrage fees for cars carrying flammable materials will rise to $250 per day from $175, and to $150 a day from $105 for non-hazmat cars.
-Refrigerated cars will be charged $250 per day, up from $200.
-Charges for overloaded railcars will rise to $1,000 each from $750.
-Charges for unsafely loaded railcars will rise to $1,000 from $750.
-For railcars crossing the U.S.-Mexico border, CSX said it may charge a new fee of $200 per railcar for incomplete or erroneous customs documentation or data, and $25 per railcar for paperwork and processing.
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