Greetings from Pittsburgh as I prepare for NEARS (North East Association of Railroad Shippers - Agenda – NEARS.ORG Conference (railconference.org).
There’s some pretty good stuff – an update on Rail Pulse, the Pan Am from CSX, on GWR (always good to hear from since Brookfield), and shippers – notably Shell, whose massive new plant near the Steel City is possibly a plastics game changer that could also gyrate supply chains of that commodity. So - Just a quick note after all the drama “that strut(ted) and fret(ted) his hour upon the stage….And then was heard no more….”
“One critical factor in the persistence of high (core) inflation is labor-market tightness.”
/The Economist September 17, 2022
Meanwhile, the dust is still settling on the rail/labor strike aversion hysteria, and the still unsettled state of labor relations:
- It caught the attention of Time Magazine, which many of us thought was still covering the Apollo XI moonshot - America’s Railroads Are in Trouble–With or Without a Strike | Time
- And the Times: Railroads’ Strategy Thrilled Wall Street, but Not Customers and Workers - The New York Times (nytimes.com)
- Will the backpay cause a bump in attrition? Only time will tell. But while we addressed the nature of the experience of T&E crews (as opposed to the basic number of them) in issues such as flat switching versus hump yards, this was brought to my attention: At the time of the Penn Central bankruptcy, 61% of its Train Masters and fully 81% of its transport superintendents were on their job for less than a year….
- I forgot!! And many thought that my coverage of the strike deadline and of IANA Intermodal EXPO oddly omitted discussion of that segment’s labor negotiations with the ILWU; they were right (the hysteria in the popular press of impending rail-driven economic disaster caused me to lose my bearings. The whisper in Long Beach wasn’t positive….and that the talks, which seemed to have positive news in the summer on health & benefits, have “stalled”. The WSJ reports some observers think that the talks could drag to year-end or beyond….
- Unlike the rail situation, this contract expired (the rail contracts are perpetual, so workers had contracts as they negotiated the changes in wages & benefits over the course of the past 2 and ½ years, and got back pay). The dockworkers are working without a contract, which has implications on grievance resolution, a potential flashpoint
- One thing to be said for the ILWU, is they are pretty open (“honest” perhaps not being the right word) about their intentions – they just don’t like automation. Just cause. They said so.
- The delay in resolution will cause a similar delay in anticipated west coast port share recapture (and add to the secular case for eastern ports) – which isn’t great for the rail ecosphere
- Also missed in all of the hysteria was a flattening of LALB volumes (YOY) and….
- EMP, the container consortium run by UP and NS, replaced CP with CN – in an escalation, perhaps, of the cold war between UP and CPKC on the intermodal front, about to get hot?
- More of which we’ll learn next week at the STB hearings on the merger proposal (9/28-30 at the STB in DC and the WWW everywhere)
Grain – waiting on the harvests….Tomorrow and tomorrow and tomorrow….Everyone’s wondering what the immediate future will be after a tough crop year in the US for rails (versus comparisons) and a disastrous one for Canada. August AAR/RTI data showed the broader Ag/Food category up almost 5% in North America, and Grain itself 5.3%. That reflects two things – a narrowing of the YOY declines in Canada (A/F – 4%; Grain -7% - and that’s a good number of late) and a comparison flattering number (A/F +11%; Grain +14%) in the US. Mexican grain was off 30% (que?!?).
- Every new data point from the USDA takes the US harvest numbers down, bit by bit – but the DoA still expects a 62% improvement in Canadian wheat. Recent crop tours suggest the USDA is still too optimistic on the US side.
- The $. Good for IM, bad for grain?
- Concerns – the National Grain Car Council meeting last month brought out all 5 STB members and showed the level of concern in the grain belt about rail service – will the new crews come in on time? To be in the ever-fascinating grain business seems to make one permanently concerned – the more data, the more not less worry. If you watch the weekly “US Farm Report” they covered the impending rail strike like it was a meteor headed to earth….Farmers make day traders seem like Ben Graham….
- The Canadians say they’re ready, and the metrics support that; the worries come from the US west
- Also from the AAR’s RTI – “US grain exports running approximately half of what they were earlier in 2022”…
Some other random rail/related thoughts:
- Progressive Railroading magazine’s (my RailTrends partner, of course) annual Rail Car Fleet Data section had some numbers we have all lived through stand out in print. Since 2006 (through ’21) rail carloads are down 14%, tons down 25%, and the LOH (length of haul) up 5%. What does that mean? Well, obviously it ain’t good, but it does reflect the drop in (heavy) coal and its “replacement” by light, double-stacked intermodal….
- Well, what do we make of FedEx? A pre-announcement of earnings coming in a third below consensus, blaming macro conditions. Spooky….but analysts of FDX (not I) suggest it’s more about FDX than GDP (note that UPS shares drooped but only 1/5 of the FDX decline on the day)
- And how do we account for truck tonnage up 7.4% YOY in August (ATA)?
Finally, Karma? Saskatchewan GDP is expected to grow by 7% this year as Ukrainian-Canadians are expected to help fill the shortfall of Ukrainian wheat and the “stranded supply” of Russian potash….
Anthony B. Hatch
abh consulting
http://www.abhatchconsulting.com
anthonybhatch@gmail.com
Twitter @ABHatch18