CSX Transportation CEO Michael Ward said he would prefer West Coast port growth to East Coast port expansion, because shipments from the West would less likely be diverted to trucks.
The railroad chairman and president said the West Coast ports will continue to be the biggest players, while East Coast ports will see a “higher growth rate from a lower basis” through the expansion of the Panama Canal. Ward said his estimation of business gained through CSX’s $850 million initiative to better connect East Coast ports with Midwest markets, known as the National Gateway, is unchanged.
His comment regarding the impact of the Panama Canal expansion at the annual North American Rail Shippers Association conference in Chicago comes as the maritime industry debates how much freight shippers will shift from the West Coast to the East Coast when the larger locks open.
Ward reiterated his optimism that the U.S. economy was improving, pointing to strong manufacturing output, recovering home construction and healthy railroad volume. Excluding the steep drop in domestic coal shipments, U.S. railroad volume is up roughly 3.5 percent year-over-year.
He said nine of of the 10 CSX markets are stable or growing, with domestic coal the sole exception. Ward said he expects export coal shipments to be more than the 40 million metric tons shipped last year, as the size of the global market offsets short-term volatility.
“China opens a new coal-firing plant every week. India is going to double its use of coal,” Ward said.
He scoffed at environmental pushback of exports of coal to Asia from the West Coast ports. Ward said U.S. mining is safer for workers and the environment than extraction done abroad.
"China is going to burn coal no matter where it comes from. Wouldn’t you rather have it coming from the U.S.?” Ward said.
Despite the economic slowdown, the rail industry spent $12 billion in 2012 on new projects, up $2 billion from the prior year.
“This year we are taking it up again,” Ward said. The industry is on track to spend about $13 billion on new projects and another $12 billion on maintenance.
To continue to maintain and expand the rail network for expected volume growth, Ward said the federal government needs to continue fostering an atmosphere where railroads can remain profitable.
He praised Congress for striking language in the surface transportation bill that would have allowed wider and heavier trucks on the road. Allowing trucks to carry heavier loads would make the railroads less competitive with their trucking industry, he said.
“Clearly, there are maintenance concerns. The trucks don’t pay for the damage they do to the highway system,” said Ward, a claim the trucking industry has denied.
He criticized the federal mandate for costly crash-avoidance technology, saying the costs outweighs the benefits by a 22-to-1 ratio. CSX won’t meet the deadline for implementation of the the positive-train control deadline at the end of 2014. There is a proposal in the House to extend the deadline by five years, and the Senate is considering a one-year extension that could be extended for another two years on an annual basis.