Warnings on intermodal rail

Warnings on intermodal rail

It's not only the capacity of marine terminals to handle the explosive growth in imports from China and the pending arrival of 8,000-TEU vessels at West Coast ports that has steamship line executives worried. Add to that the fragile state of the North American intermodal rail system, which is being tested as never before by a surge in intermodal volumes and continuing complaints by intermodal shippers - some of the largest of whom are the steamship lines themselves.

"From data we see, more than half of the eastbound trains on the U.S. West Coast today are more than 24 hours late," Ron Widdows, chief executive of APL Ltd., told the Propeller Club of Los Angeles and Long Beach this month. "We are seeing flow impact today, and it's not even the peak season."

Los Angeles-Long Beach, the largest gateway for Asian cargo, generates 35 to 40 trains per day, a figure that will need to climb substantially in order to handle anticipated volumes. West Coast ports last year handled 17 million TEUs and are projected to handle 26 million TEUs by 2010, a level that will require some 200 trains per day.

Widdows, whose company is the third-largest carrier serving the Asia-to-West Coast market with a 9.2 percent market share last year, is deeply concerned about the capacity of the intermodal rail network to handle cargo flows five and 10 years into the future. That concern exists despite a huge investment by railroads to expand intermodal capacity. The nation's Class 1 railroads are spending $5 billion a year for locomotives and railcars, to expand their intermodal rail-transfer yards and to double and triple-track heavily used routes, such as those through Southern California.

"The rail carriers are not sitting on their hands, but the question is whether the investment is going to be sufficient to meet the demand. It does not appear so!" Widdows said.

One outcome is that the rails will surrender market share to trucks. A study last year by the American Association of State Highway Transportation Officials concluded that at the current level of investment, U.S. railroads will lose market share to trucks at a time when the goal of most states is to shift more cargo from truck to rail. If the Class 1 railroads are to increase their market share, they must invest $200 billion over the next 20 years, the state transportation report stated.

Shippers in the eastern half of the country who depend on intermodal rail service from the West Coast cannot look to East Coast ports to provide significant relief, at least not in the short term. Although carriers added three all-water services from Asia to the East Coast in 2003, their ability to add more services will be compromised by capacity constraints at the Panama Canal and conditions in the ship charter market. "Right now, every ship is employed," said William Hamlin, president of the North American region for APL.

Putting future growth aside, intermodal operators are struggling to handle today's volumes. APL in early March met with Union Pacific Railroad to discuss the delays it has been experiencing on UP's system. The average speed of UP trains has decreased two mph. That ties up equipment that should be used at the ports. Widdows said a one-mph. drop in average train speed in effect creates a need for 300 more locomotives, 250 operating personnel and 250 double-stack railcars.

Delays in the system tend to compound themselves, creating delays and equipment shortages as far away as Chicago and New York. "The intermodal network is fragile. Any event can ripple through the network," Hamlin said.

APL, which pioneered the idea of intermodal rail for marine containers in the early 1980s, is hardly the only customer of the rails complaining about intermodal service. Reduced expectations for intermodal reliability have become the norm, with intermodal marketing companies building in extra time into the cargo release times they offer their customers because they don't trust the rails to adhere to their own schedules.

The western railroads said they are addressing the operational and the infrastructure requirements of their intermodal business. "The BNSF continues to make capital investments in areas that are growing, and intermodal is growing," said Suann Lundsberg, a spokeswoman for Burlington Northern Santa Fe Railway.

BNSF has increased its intermodal railcar capacity by 30 percent since 2001. It added 181 locomotives in 2003 and is scheduled to add another 344 this year. Also, BNSF will add double or triple tracks along 100 miles of its busiest corridors, primarily in California. The railroad also is increasing the capacity of its main intermodal facility in Southern California, the Hobart yard. The capacity will be increased 30 percent to 1.6 million lifts per year, Lundsberg said. BNSF last year increased its terminal capacity at the key Chicago-area hub.

Delays along UP's network have been compounded by a shortage of operating personnel. When UP, like other railroads, offered early retirement last year in line with a change in the federal law, many more conductors and other personnel retired than the railroad had anticipated. UP has been playing catch-up since last summer.

UP hired 2,400 workers last year and intends to hire and train at least another 3,000 crew members in 2004, and maybe as many as 4,000, said spokesman John Bromley. It is also adding capacity along its Sunset route, the main corridor from Southern California to the eastern half of the country, and recently expanded its Chicago-area hub.

UP is prepared to expand its intermodal infrastructure, terminals and equipment inventory further, but it requires information from shipping lines on projected growth in cargo volumes for the coming years, Bromley said. "This is a very capital-intensive industry. We're not a 'build-it-and-they-will-come' type of company," he said.

Shipping executives believe industry projections of at least a doubling of West Coast container volume by 2010 are compelling enough to warrant increased investments by the railroads, but they are not convinced the railroads' efforts will be enough in the short term or in the long term.

Widdows said, "It is likely that rail performance will worsen before it gets better, and getting to high levels of reliability could be quite some time off."