UP-CSX weigh reversal of service cuts: sources

UP-CSX weigh reversal of service cuts: sources

With CSX unable to find enough new business to overcome steep lane cuts in 2018, the company is now querying channel partners about bringing back some routes. Photo credit: Eric Pancer/Wikicommons.

Union Pacific Railroad and CSX Transportation have been reaching out to shippers and logistics providers in recent days to discuss whether to restore intermodal service to Philadelphia, Cincinnati, and Columbus, Ohio, sources tell JOC.com.

The three markets were axed when CSX simplified its steel-wheel interchanges in Chicago last year, causing a headache for those shipping containers from California to the Midwest or Northeast. The conversations with channel partners, described to JOC.com as preliminary, might be a signal of concern about the current market. But it’s unclear whether the volumes can be regained even if rail service is restored. 

“The shippers are gone. They aren’t coming back,” one intermodal market company (IMC) executive told JOC.com. 

Another IMC said many shippers moved to J.B. Hunt Transport Service or Schneider National, which are aligned with BNSF Railway. 

The reconsideration of the service changes comes as US intermodal volumes retract on a year-over-year basis. CSX intermodal volume has fallen 8 percent year over year since January and is down 9.6 percent so far in the third quarter, according to data submitted to the Association of American Railroads (AAR). Union Pacific’s intermodal volume is down 3.5 percent year-to-date and 10 percent in the third quarter. Part of the lower volume is self-imposed, as both eliminated hundreds of lanes as part of precision scheduled railroading.

The communication with channel partners, however, may indicate the two railroads miscalculated their ability to find new shippers to replace the lost volume. 

Sources also said CSX and UP are meeting among themselves this week to discuss service to Philadelphia, Cincinnati, and Columbus. Neither company would confirm any ongoing discussions with shippers, logistics providers, or each other.

“We routinely speak to our rail partners about growth and service opportunities but won’t comment on this specific topic,” CSX spokesperson Bryan Tucker told JOC.com.

UP has told customers it needs enough volume to construct a full car in southern or northern California, which would be forwarded to CSX in Chicago in a single block, rather than half-empty flatcars. 

Two customers approached by the railroads have told JOC.com that there probably isn’t enough volume to resume daily service. Two other IMCs told JOC.com that they believe these routes will come back, possibly in an announcement in September or October.

Jim Filter, senior vice president of intermodal at Schneider, said this is the next phase of PSR.

"[CSX] fixed their service by getting smaller, now they can start to add lanes back in slowly to see how much they can add without giving up their service improvements," he told JOC.com. CSX recently added local service to the three markets from the East Coast.

For shippers exploring alternatives, J.B. Hunt’s intermodal option includes Norfolk Southern Railway service to Morrisville, Pennsylvania, and Cincinnati and Columbus, Ohio. 

Schneider uses a BNSF service connecting Los Angeles to North Baltimore, Ohio, although the small town is about two hours from Cincinnati and Columbus. For Philadelphia, CSX routes interline containers to New Jersey unless the shipper books crosstown drayage to a local CSX train in Chicago.

Other shippers might have taken advantage of the weak truckload spot market. Contract intermodal saves only about $300-400 between Los Angeles and Chicago after beginning the year even, according to the US Domestic Intermodal Savings Index and conversations with intermodal marketing companies.

Shippers should pay close attention to whether new options return for Ohio and Philadelphia and whether the rate will be competitive versus a truck, J.B. Hunt, or the Schneider options.

Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe.

Comments

Great article about situation at rail companies

Very informative, I been waiting for over a year for this, thanks.