Greetings from Isolation!
Yes, rail people, after a year without, there was indeed Life on (at) MARS, the Midwest Association of Railroad Shippers annual conference in Lombard, IL, where ~600 folks gathered (about 2/3 “normal”) to attend what I consider one of the Big 4 rail events of the year. And if I didn’t make it out fully safely (or get to attend the send half in person), it was still an event rich in content and discourse.
First, from the tweets, etc:
- BNSF and Montana Rail Link announced that the 900-mile MRL would be rolled back into the BNSF family after decades as an independent. I find this fascinating but few details have been released.
- Some of the deal-making around the CPKC application is coming into focus, even though the deadline is ~February 28….
- CN came out proposing to purchase KCS’ “Springfield Line” between that city and KC (with access to East St. Louis), proposing to spend ~$250mm to make that line viable rather than shrink its relevance as CN states CPKC will do, which they deny (the game is mostly over, the woofing continues).
- NSC is seeking to “protect and serve (er, expand”) its Meridian Speedway access.
- BNSF, in another twist from Fort Worth, is seeking trackage rights in Iowa and rights in Texas, connecting its Robstown (TX) interchange point with the KCS currently directly to the Laredo gateway only if they receive a concession to serve Mexico directly – whoa!! Meanwhile, I have yet to figure out who that “other Class One railroad” that contacted KSU management – in 2020 – to inquire about a merger….but this all seems to be pretty good if circumstantial evidence.
- CSX is passing at present but reserving its rights.
- And we haven’t heard from the BIG ONE, Union Pacific….
CPKC, in the personages of their CEOs Creel and Ottensmeyer, led off at MARS and presented charts and maps that made for perhaps the most important presentation of 2022, even if only two weeks into it. Some highlights:
- They highlighted their bypass of Chicago, which still brings up some Missouri (show me0 in me, and their recent Amtrak support, and reminded us that KCS had seen real value in the Iowa (DM&E) portion of the CP under then-CEO Mike Haverty. They also stressed their renewed partnerships with short lines in the next-gen CPKC network.
- They were able to show, by commodity type, their case for the creation of “a new third single line (and closed loop) service” connecting the Midwest to Texas (and beyond). They noted that, yes, they were 300 or so miles out of route but that was a mere 12-15 hours – this will get interesting. Or more interesting….And, not cheap ($275mm – as of now – to add 30 sidings, install CTC, harden the network – mostly in CP’s KC-to Chicago sector, secondly in Texas. The reward? CPKC will serve 23 auto plants.
- Creel continues to promote the old Haverty dream of making Lazaro Cardenas a true alternative to LA/LB into the USA – tried before, not successfully, call me a Missourian twice now – but CMO John Brooks noted that there was growing customer acceptance for Texas traffic, which actually would come at the expense of Panama Canal, not Pacific business.
- More PSR Capacity dividends on the way – after opening up new auto and (Maersk) IM facilities in Vancouver recently, a new deal with Illinois Tollways will allow CP to repurpose its Bensenville IL (and unlock ~$300mm in Capex).
- Q&A overall was problematical, but there was a lot to look at for future discussions….
Norfolk Southern’s CEO-elect Alan Shaw gave what I think was his first address in his new heir-apparent role. He takes over on May 1 from Jim Squires. Alan’s speech was funny and self-deprecating but he couldn’t say much in the January quiet period, and in being the heir and not yet the King. I do hope that when he and his team can talk, they will talk if you get my drift. He did say this, and it was both the right thing to say, and at the same time startling: “We don’t have a good product right now.” Of course, he vowed, without a timeline, to fix the situation, and noted that their training rolls were finally full of applicants and trainees.
Battle Stations! The AAR’s CEO Ian Jefferies warmed up for what looks to be a long summer (plus) of battle with regulators, both commercial (STB) and safety (FRA – see last note covering the NRC conference and note that Amit Bose won Senate confirmation as FRA Administrator). Ian noted that he expected that the FRA will put out a rule mandating two-man crews, despite the – admitted – lack of safety data supporting that stance and despite the fact that crew consist is and has always been a matter of collective bargaining – going on now, by the way (again, see last note). The other big near-term issue, with March hearings, is of course “reciprocal switching” (what UP’s CEO Lance Fritz called “forced open access” at NRC a week ago, saying that it could disrupt supply chains and lead to eventual disinvestment). Ian, meanwhile, noted that the last hearings on the issue were in 2016 – before the successful rollout of PTC – and used….data from….2011.
- Ian received a question from the audience concerning the railways and the “Wall Street influence” – which I want to point out concerns not rails in a vacuum but in fact, all of the companies and modes and stakeholders in the supply chain are concerned with their own “shareholder value(s)” (if publicly-traded) and ROIC (all) ...
- Ian’s recent letters, to the new FRA Administrator Bose and to DOT Secretary Buttigieg, are worth reading as the rails prepare to assemble data and facts to counter politics and sound bites ...
- I also remind everyone having read some commentary on Ian’s speech that the STB may be under a Democratic admin, and there is a movement toward regulation and a growing sense of anti-monopoly actions against industries like “Big Meat” (2nd time I got to use that in 2022!), “Dow Chemical vs Union Pacific”- purely as an example here – is not a partisan issue. It is an important one, though ...
ESG ain’t noise pollution
ESG ain't gonna die
Now Scope 3 means carbon’s bad
ESG ain't no passing fad – we heard strong presentations from GWR (Mike Miller) and from CN’s Janet Drysdale – and really from everyone else. Janet noted that CN had a long and innovative history here, and leads the industry in fuel efficiency (15% better than the C1 average) – but noted UP last week at the NRC, that’s a short term advantage being eroded on the daily) – and that all of the rails have science-based initiative plans. Janet pointed out the overwhelming shareholder (owner) focus on this, and that with Scope Three customer focus (and market/modal share decisions) are increasingly part of the package. I wondered if Scope Three and ESG will play a role in defeating NIMBYism – after all the greater good is served by IM growth over pure highway. And I note that, at long last, CN began work last month on the long-delayed state-of-the-art IM/Logistics facility in Milton, Ontario ...
Also heard at MARS:
- GWR noted that its JD Power customer score of 8 reached the “loyalty” level (rails and truck son average pulled a 6.5 or so), yet they also apologized for service in the Midwest (didn’t say which of their 113 NA railways) over the past “4-5 weeks.”
- Illness made me miss the other important shortline presentation - Watco, where I am sure we would have been updated on their new switching-intensive model working for either shipper (Dow) or carrier (CN) -0 and I missed CCO Stefan Loeb’s much-ballyhooed Victory Dance after Watco finally got approval on the WC (from CN) sale.
- There was a lot of short-line discussion – would there be more C1 buy-backs a la CP-CMQ, CSX-Pan Am, maybe even BNSF-MRL? Would CSX accelerate their short line repatriation? They have hewn close to the original CN Mothership playbook so far in their new history under Jim Foote ...
- Trinity, represented by CCO Greg Mitchell in a follow-on to his RailTrends roll, and representing their hybrid shipper/lessor/OEM model, really made the case for rail service reform, led by technology (and quoted Oliver Wyman’s Adriene Bailey also from RT ’21 on the business being left on the table). We know that TRN is at the forefront here, with Trinsight and (especially, to me, anyway) their founding position in Rail/Pulse.
- US Steel’s GM of Logistics and Transportation Matt Nee brought down the house when he noted the great success of PSR in creating consistent rail service – consistently 60% across the board. He was otherwise more favorable in his outlook for the future and noted that USX was growing massively in Arkansas, which will soon become if it isn’t already the largest steel-producing state, which ought to make Kenny Rocker, UP’s CMO happy (I also had to isolate during Kenny’s speech).
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
abh18@mindspring.com
Twitter @ABHatch18
