A number of chemical shippers still face significant rail service disruptions despite freight railroads’ efforts to improve, according to recent statements from the American Chemistry Council (ACC).
An update to a survey that the trade group conducted in December, March and July documents what members see as ongoing rail service challenges: 46% viewed rail service and delays as getting worse, up from 39% in March; 48% viewed service as about the same, down from 53% in March; and 7% viewed service as improving, down from 8% in March.
The issues include longer transit times, missed switches, increased demurrage charges, reduced service days and higher rates, according to ACC.
Service patterns can also be seen via a separate website of the Rail Customer Coalition, of which ACC is a member. The website has two charts that compile first-mile, last-mile and on-time performance data that the Class I railroads have been submitting to the Surface Transportation Board since May.
The Class I railroads have been under fire this year from federal regulators and some customers over service delays and missed shipments. To address these issues and expand network capacity, the railroads have ramped up efforts to hire more train and engine crews and adjust their operations accordingly.
“We are closely monitoring our operating inventory level to make sure it’s climbing at a comparable rate with our carloadings,” said Kenny Rocker, Union Pacific’s (NYSE: UNP) executive vice president of marketing and sales, in a recent service update. “Most of the volume growth is within our manifest network and it is important that we avoid excess rail car inventories, especially in our terminals.” UP’s volumes have grown 2% quarter to date, and the railroad has started to add more unit train sets to support customer demand, Rocker said.
Clearing out congestion
One lingering issue is the number of customers’ rail cars on the network. The railroads say the additional cars can exacerbate congestion. Earlier this year, UP sought to reduce congestion by reducing the number of shippers’ rail cars on the network, and it is still asking customers to “avoid inserting excess cars” on UP’s network, according to last Thursday’s update. BNSF (NYSE: BRK.B) has placed a temporary embargo on certain carload shipments through early September.
But Jeff Sloan, ACC senior director of regulatory and technical affairs, says ACC members have been under pressure to add those rail cars so that they can fulfill customers’ orders.
According to July’s survey, 43% of members have had to add tank cars to their fleets, which means that these shippers are using more rail cars to ship the same volume of product, Sloan said.
“That’s a significant expense for a shipper to add cars to their fleet. That’s the last thing you want to do,” Sloan told FreightWaves. “It’s not good for the freight rails to have more cars in the system. It’s not good for the shipper to have this kind of capital expense.
“The shippers’ and railroads’ objective should be the same. It should be getting the product to your customer as efficiently as possible. That was one of the promises of precision scheduled railroading, that, with a predictable schedule and faster turnaround times, companies would actually be able to cut the number of cars in their fleet because things were so efficient. That was one of the benefits that shippers were supposed to realize from this new operating model. And we’re seeing the opposite.”
In an Aug. 5 letter that ACC submitted to the Surface Transportation Board, the trade group highlighted two areas where service issues have been a concern. BNSF’s temporary embargo is rationing rail service to California, which means that shippers have been trying for weeks to ship product to customers in California and only a handful have been able to secure permits from BNSF to move goods, Sloan told FreightWaves.
Another area is around Cincinnati, a key hub on the CSX network (NASDAQ: CSX), Sloan said. In the Aug. 5 letter, ACC said that CSX has indicated that it is “working to improve service as quickly as possible” but no timeline was given.
A third area, according to the letter, is the New Orleans interchange, which is a “problem area for delays and congestion.”
“These problems seem to come up in some areas and then get better, but then they get worse in other areas,” Sloan said. “It’s kind of like squeezing a balloon. There’s just not enough capacity overall on the system … . When we sent that letter, those stood out as particular problem areas but it’s certainly not unique to those regions.”
In response to ACC’s comments and to criticism of the temporary embargo to the West Coast, BNSF said managing active car inventory is an “impactful action in the short term to improve network fluidity and restore service consistency.”
“The temporary limited embargo of certain shipments destined for California was one of several actions we made to improve network fluidity,” BNSF told FreightWaves in a statement, characterizing the provisional permit system as one that controls traffic but exempts essential commodities, such as chemicals used for municipal water treatments. BNSF also said it worked with customers to prioritize volumes based upon other considerations, such as medical usage, critical manufacturing production and commodities needed to maintain proper levels of food production.
“As a result of the temporary embargo, we have seen a significant reduction in backlogs, which has allowed us to drive greater efficiencies for trains moving both towards and in California, as well as throughout our network,” the railroad continued, adding that since issuing the embargo in early July, the number of trains holding has decreased by around 50% while overall network velocity increased and terminal dwell decreased.