New and expanding refrigerated rail services are delivering new options for smaller food shippers who soon could be left out in the cold by western railroads as thousands of 50-year-old mechanical boxcars are retired in the coming years.
“Over the next decade or so, there is a real wall coming up in boxcar availability and capacity with the railroads,” said Herman Haksteen, CEO of Cryo-Trans, the largest reefer boxcar-leasing company in the U.S.
Smaller shippers that use one or two cars a week are starting to feel the pinch. “The railroads are trying to push the little guy into intermodal,” Haksteen said. Because of car capacity, efficiencies and rate differential, using boxcars over intermodal saves about 15 percent, so those lower-volume shippers “are going to start feeling the pain,” he said, noting that the ConAgras of the world probably won’t feel the difference, at least for a few years.
Although the low-volume shippers now using traditional boxcar manifest service may pay more, they have a number of new intermodal rail and boxcar services to choose from.
Railex, which started the new generation of reefer services in 2006 with boxcar unit train service between Wallula, Wash., and Rotterdam, N.Y., is set to expand again in June, adding regular unit train service between Wallula and Jacksonville, Fla., and Delano, Calif., and Jacksonville.
ColdTrain, which introduced domestic reefer containers for intermodal use in 2010 from Quincy, Wash., to Chicago, last fall added service between Portland, Ore., and Chicago and to 17 intermodal points in the Northeast, mid-Atlantic and Southeast.
Tiger Cool Express this month began reefer intermodal service between the Los Angeles basin and the Northeast. Unlike Railex and ColdTrain, Tiger Cool won’t operate between fixed points, but will “chase” harvests and peak import and export demand with flexible routing and capacity, according to CEO Thomas L. Finkbiner. “We’re using the entire expedited network and have contracts with all the carriers operating expedited intermodal networks,” he said.
Using expedited holds keeps the cars and routing flexible while holding them to a schedule and set delivery times to maintain timeliness of service for perishables,
Another unit train boxcar reefer service is scheduled to begin service in May, when McKay TransCold will offer one train weekly in each direction between Selma, Calif., and Wilmington, Ill., using service and cars from BNSF Railway.
Another group, Green Express, plans to begin operations by the end of the year with a refrigerated and dry expedited service between Tampa and Kingsbury, Ind.
That service is expected to offer reefer intermodal and reefer boxcar on expedited trains operated by CSX Transportation. That service still has a few operating hurdles to overcome, including building an intermodal facility in Kingsbury, signing an operating agreement with CSX and signing an agreement with the Port of Tampa. The boxcars involved in that service would be leased from Iowa Pacific Holdings.
Finkbiner and his partner, Ted Prince, originally were looking for investors in Tiger Cool to fund a refrigerated service that used boxcars rather than intermodal containers. During the three-year development process, they decided to start with the intermodal service.
Finkbiner said some commodities would be more efficient in boxcars, but it came down to the cost. “Boxcars cost $270,000 each and you need at least 100 cars so you can have two dedicated trains — one going in each direction,” he said. “And you need refrigerated facilities with cross-docks at origin and destination at $15 million to $20 million each in addition to everything else to start up. That would require an investment of $100 million.”
The same volume of business in containers required a $40 million investment, he said. “So it (using boxcars) is about 2 1/2 times more expensive and restricted to just two service points,” Finkbiner said. “We like the intermodal model because it allows us to be flexible and nimble enough to chase the peak-season traffic.”
Tiger Cool eventually wants to add boxcars to the operating plan — not with dedicated terminals but using them in expedited train service, he said.
Haksteen said some of the companies that will lose railroad boxcar capacity would end up leasing boxcars for their own use. “Shippers don’t have to be huge companies to lease a railcar fleet. We have several customers with fleets of five or six cars.”
The coming retirement of much of the nation’s boxcar fleet caught the attention of a number of shippers, and Cryo-Trans is getting more inquiries now, Haksteen said, but not all are from current railroad customers. “Some of our calls are from completely new companies that have never used rail before,” he said. “Our business model has been to work with customers that do all their shipping by truck now and convert them to rail.”
Intermodal isn’t a replacement for reefer boxcar service, Haksteen said. “The best comparison is to long-haul trucking. The trucking industry is having trouble holding on to long-haul drivers. Intermodal is the answer to that,” he said.
One logistics company that studied entering the reefer rail arena has decided not to — at least for now. “There were too many players for it to be viable for us right now,” said Terry Brown, president of Diversified Port Holdings. “There appears to be a fair amount of competition. We’ve decided to watch and wait. It’s not our core competency. There are opportunities there in the sector, but we haven’t been able to put all the pieces together.”
Demand in the sector will continue to rise, and from all quarters, according to Finkbiner. “What both UP and BNSF say is that if shippers want to use boxcars, they should lease them,” he said. “Smaller companies that use a few boxcars now won’t be able to get them. They will move into intermodal reefer.”
And, he sees continued conversion from shippers now using long-haul reefer trucking. “The capacity of the for-hire refrigerated trucking industry is shrinking, and shippers now using trucks are going to look to intermodal,” Finkbiner said. “Demand for intermodal reefer has an amazing potential for growth.”
|Name||Equipment Type||Routing||Origin||Destination||Frequency||Service Start|
|Railex||Boxcar||Fixed||Wallula, WA||Rotterdam, NY||2/week in
|Fixed||Delano, CA||Rotterdam, NY||2/week in
|Fixed||Wallula, WA||Jacksonville, FL||2/week in
|Fixed||Delano, CA||Jacksonville, FL||2/week in
|ColdTrain**||Container||Fixed||Port of Quincy, WA||Chicago, IL||6/week eastbound,
|Fixed||Portland, OR||Chicago, IL||6/week eastbound,
|Tiger Cool Express||Container||Open, using expedited network||-||-||Open||Feb. 2, 2014|
|McKay TransCold||Boxcar||Fixed||Selma, CA||Wilmington, IL||1/week in
|Green Express||Intermodal/Boxcar||Fixed||Tampa, FL||Kingsbury, IN||2/week in
|End of 2014*|
|*Company estimates for service startup. **17 destinations offered beyond Chicago.|
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