Railway Age | It’s time for Carload Version 2.0

02.16.16 | Lawrence J. Gross, FTR

While trying to forecast coal loadings has been as difficult as trying to catch a falling knife, the magnitude of the problem can be seen from the simple arithmetic calculation that if North American coal loadings finally end the current plunge and stabilize at the levels experienced during the first three weeks of 2016, the deficit vs. 2015 will be 23% or 1.3 million carloads. It may be that things will be a bit better and coal will recover to a certain extent, but the damage will nonetheless likely be severe. How and whether this volume can be made up is shaping up as the greatest challenge the railroads have faced since the dawn of the deregulated era.

During recent years, the railroads have succeeded magnificently in terms of financial performance, largely due to exercising fierce discipline across a number of arenas. Costs have been held in check, both through the use of innovative new technologies such as distributed power, remote control switch locomotives and so forth as well as through economies of scale, for example: higher capacity cars, bigger trains and more density on trunk lines.

At the same time, the industry worked hard to slough off or reprice what it viewed as non-profitable business and also worked with customers to reshape how they utilized the rails by moving many out of the single-car network and into unit trains. An equal amount of discipline was applied to pricing, with the railroads assiduously avoiding costly market share battles and raising freight rates significantly faster than inflation.

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