Railroads are searching for ways to keep intermodal moving, and growing, on a capacity-constrained network.
Intermodal is the fastest-growing freight sector for railroad industry traffic and revenue growth. In 2013, the U.S. Class I roads originated 12.8 million units worth $16.5 billion in revenue, surpassing the record peak volumes of 2006, 12.3 million units and revenue of $8.8 billion. The Association of American Railroads recently reported that intermodal surpassed coal in revenue dollars as a percent of the whole, 23% to 20%.
“Rail intermodal growth drivers are projected to include long-haul and medium-haul domestic traffic and short-haul international traffic,” says Jason Kuehn, vice president-Surface Transportation at Oliver Wyman. “Intermodal volume growth is trending slightly higher than Gross Domestic Product, tracking in the low single-digits for the past three years (2010’s double-digit growth represented a one-off volume rebound following the most recent economic recession). For BNSF and Norfolk Southern, the two largest intermodal rail carriers, intermodal now represents nearly 50% of traffic volume. Rail intermodal has grown much faster recently in the eastern U.S. than in the western U.S. because the market is larger, less developed, and in the truck-competitive distance range.”
“To sustain current intermodal growth, the railroads need to invest $200 million to $350 million annually just in new terminal facilities,” says Kuehn. “The recent 4% growth rate suggests that carriers will likely need to construct at least two new terminals per year, based on growth of 700,000 units per year. Supporting a growth rate of double the change in GDP (an estimated 7%), would require constructing three to four new terminals per year, at a cost of $360 million to $600 million annually, based on growth of 1.2 million units per year.”
The key to success in intermodal operations is velocity, and there’s more than one way to move a box. The corridor model of Norfolk Southern, the hub-and-spoke model of CSX, the Vancouver-Toronto-Montreal model of Canadian Pacific, or the Transcon model of BNSF, for example, allow these railroads to build operating plans around scheduled arrivals and departures between specific origins and destinations. Unit trains—grain, crude oil, frac sand,
etc.—run in the time slots between the scheduled trains.
All of this is dependent upon having strategically located terminals and enough line-of-road capacity.
Union Pacific’s new Santa Teresa Intermodal and Fueling Facility on the Sunset Corridor in New Mexico is a good example. UP opened Santa Teresa, a 2,200-acre site 13 miles west of El Paso and 760 miles east of Los Angeles, in May, one year ahead of schedule. In addition to serving through intermodal trains, this $400 million “inland port” lets UP transfer some of its fueling and maintenance operations out of the crowded El Paso-Ciudad Juarez metroplex. One mile wide and 12 miles long, Santa Teresa can handle 250,000 lifts a year (currently, about 80,000 containers per year are crossing the nearby Mexican border), and sports a four-track fueling station for through trains. In short, the Santa Teresa facility gives containers a critical off-ramp someplace other than in the middle of a city and permits block-swapping among trains (meaning more O/D pairs for intermodal containers).
CSX officially opened its new Central Florida Intermodal Logistics Center (ILC) in Winter Haven on Oct. 16. The facility, which began operations earlier this year, provides a centralized hub for transportation, logistics, and distribution serving Orlando, Tampa, and other regional Florida markets. The result of a collaboration of the City of Winter Haven, numerous state and local partners, and CSX, the 318-acre intermodal terminal has capacity to process up to 300,000 containers a year and is designed for scalable expansion as freight volumes continue to grow. The terminal incorporates advanced, environmentally friendly technology, including three high-powered electric cranes, solar panels, and high-mast exterior lighting to maximize energy efficiency. ILC is surrounded by 930 acres that are being developed in phases to build up to 7.9 million square feet of warehouse distribution centers and light industrial facilities. In July, Winter Haven Industrial Investors LLC purchased more than 500 acres of the adjoining property for phase one of the industrial development program.
CSX opened its $175 million, 200-acre Northwest Ohio Terminal in February 2011, in North Baltimore, Ohio, about 40 miles south of Toledo, near the junction of the former Baltimore & Ohio and New York Central main lines, both now CSX. The facility’s hub-and-spoke design connects with core CSX routes, and its easy access to I-75 has created more than 125 new intermodal lanes representing 20% of CSX’s total volume growth. More than 30 trains a day undergo block-swapping and container classification on about 124,000 feet of track, reducing yard holdouts and improving locomotive and crew turns and equipment cycle time.
Norfolk Southern’s 250-acre Rickenbacker Intermodal Terminal in Columbus, Ohio, located at the 1,300-acre Rickenbacker Global Logistics Park, provides shippers with access to Midwest markets, as well as increased terminal capacity and enhanced service, including direct intermodal rail services to/from Norfolk and the Chicago gateway for movement to/from the West Coast. The terminal also features an Automated Gate System to expedite draymen in and out of the facility and improve the equipment inspection process; increased parking capacity and a terminal layout that improves equipment flow; and close proximity to shippers and receivers in one of the fastest growing distribution hubs in the U.S. Rickenbacker was the first new NS intermodal terminal on the Heartland Corridor.
“We know that roughly 80% of all intercity truckload freight is moving east of the Mississippi—right into the heart of the NS network,” NS Chief Marketing Officer Don Seale told Railway Age late last year. “The number of truckloads we see as being ripe for conversion to rail is large enough that we can grow at a significant pace even if we gain a small percentage of that motor carrier volume. We know customers prefer using rail networks, and that’s what is behind our decisions to go into New England, the Ohio Valley, or even Mexico. That’s why we’re adding 34 new intermodal lanes, including 18 in and out of Mexico.”
Another winter of discontent?
The severe cold and snow during the 2013-2014 winter created havoc with operating plans. Jim McClellan, the now-retired senior vice president for Planning at NS, accurately calls January-February 2014 “the winter of our discontent.”
For example, in January, CN’s system-wide average intermodal train speed dropped to 24 mph from 31 in November 2103. Dwell times at Winnipeg had reached as high as 76 hours. With temperatures well into negative double-digits, air brake propagation limitations led to shorter trains, more crews, and more locomotives to run the same number of carloads. Trains thus ran slower, leading to fewer car-miles per day, and missed yard connections. Congested yards led to trains being held out on the main lines, filling up passing sidings. Most of the CN in Western Canada is single-track, so yard holdouts take their toll on every kind of freight train, including intermodal, as well as passenger trains (such as VIA Rail’s premier long-distance train, the Canadian).
Last winter’s congestion, record grain harvests, the growth of crude oil traffic, and increased demand for intermodal services due in part to a severe truck driver shortage have combined to keep the railroads scrambling for capacity. And even though an operating plan can be crafted around scheduled intermodal and manifest trains, large numbers of oil, coal, and grain unit trains will impact even the best-laid plans.
Railroads are not naturally nimble networks, so creating and sustaining fluidity will require considerable outside-the-box thinking, especially for managing another winter
of discontent.