Class 1 railroads are making a big push to convert over-the-road freight to intermodal, and for CSX Intermodal, its 2-year-old Northwest Ohio hub is proving to be a force multiplier in that strategy.
CSX’s intermodal railyard near North Baltimore, Ohio, serves as a part of a hub-and- spoke network in which containers moving between low-volume cities are consolidated into full trainloads.
“Northwest Ohio enables highway to rail conversion,” said Maryclare Kenney, assistant vice president of intermodal sales at CSX.
Kenney told the Los Angeles Trade Club Tuesday that CSX is still as active as ever in serving high-volume corridors such as Chicago to New York. However, freight moving in lower-volume lanes offers an excellent opportunity for converting shipments from highway to rail.
For example, a minimum number of containers move directly from St. Louis to Buffalo. By routing Buffalo-bound cargo from a number of origins to Northwest Ohio, CSX is able to build longer trains to Buffalo, she said.
Railroads are targeting freight in trade lanes of 550 miles or longer that they believe are subject to conversion from truck because of economic and regulatory headwinds that affect the trucking industry.
Some industry experts predict the federal hours of service regulations that are scheduled to take effect next month will reduce overall truck capacity.
CSX believes more than 9 million loads that move each year in lanes of at least 550 miles can potentially be converted to intermodal.
Highway congestion, rising fuel costs, a looming driver shortage and a desire by shippers to reduce supply chain costs play into the conversion strategy of the railroads.
Building rail hubs such as the Northwest Ohio facility is an important part of the conversion strategy as those ramps help railroads to expand their hub-and-spoke operations. CSX operates out of 40 rail terminals, with plans to open additional terminals in Baltimore, Pittsburgh and Montreal in the next few years.
Additional investments in double-stack corridors, such as the National Gateway project from the Virginia ports to the Ohio Valley, likewise play into the highway-to-rail strategy.
While the railroads are investing 17 percent of their revenues, or $24 billion, into new facilities and equipment and safety and environmental initiatives, national investment in highways has been “relatively tepid,” Kenney said.
Rail investments are helping to expand international as well as domestic business. Eastern railroads this year will experience a boost in international traffic through East Coast ports as carriers such as Maersk Line and members of the G6 Alliance ship more cargo from Asia to Atlantic Coast ports via the Suez Canal route.
Kenney said CSX is already carrying containers that are transiting the Suez Canal, but the real boost in Asian cargo will come in 2015 when the second phase of its National Gateway project is completed, providing clearance for double-stack trains moving from the Virginia ports to the Ohio Valley.
[Updated per CSX to replace first quarter figures with annual figures for loads that could be converted to intermodal.]