Rail-Yard Congestion Holds Down Shipping Volumes

Date: Friday, October 22, 2021
Source: The Wall Street Journal

The chief executives at CSX Corp. CSX 1.17% and Union Pacific Corp. UNP 2.73% say a lack of truck drivers, equipment and warehouse workers are causing congestion in their yards, forcing the railroad operators to turn down some business during a time of high demand for shipping companies.

The railroads are also facing issues within their own operations, from damaged bridges to difficulty hiring conductors, that they say are hampering them from transporting more goods.

“You dream about days like this when the phone is ringing off the hook, and customers saying, ‘Pick up my stuff and move it for me,’” CSX CEO Jim Foote said in an interview Wednesday. “This is the time we want to shine.”

Union Pacific on Thursday reported flat shipping volume in the third quarter from the comparable period last year, due to declines in auto shipments stemming from chip shortages and supply-chain congestion. Earlier this year, the company said that shipping volume could rise as much as 7% in 2021; the railroad now sees that maxing out at 5%.

The Omaha, Neb.-based company is making up for some of that lost business. Union Pacific’s revenue rose 13% to $5.57 billion in the quarter, helped by gains from fuel surcharges, higher prices and shipping larger volumes of products that cost more to ship, like industrial goods. Net income rose 23%.

“We are definitely getting more price than we are experiencing in inflation,” Union Pacific Chief Executive Lance Fritz said Thursday.

Union Pacific is buying more chassis that can carry shipping containers, and opening facilities outside of Los Angeles and in Minnesota to handle the increased volume.

Mr. Foote of CSX said that while supply chains are strained globally, the railroads are handling their role of moving goods between destinations well. A bigger problem of late has been what happens after the cargo gets to its destination.

He said containers carrying finished goods often sit idle because of a lack of truck drivers, equipment to put shipping containers on trucks and warehouse workers to unload them.

When a recipient says they can’t accept the goods, “We say, ‘Get it out of here,’” Mr. Foote said. “We work real hard to keep our front door open.”

CSX is doing other things to ease some of the congestion. It opened 13 additional yards to handle overflow goods and helped the Port of Savannah in Georgia to move more containers inland to Atlanta, among other actions.

Mr. Foote said that its intermodal business, which primarily moves goods from ports on trucks then to trains, is operating well. But a shortage of workers on its rail operations has forced it to turn down some business from other customers, from grain shippers to makers of cardboard boxes. Those shippers are having to find other options, like trucks, that are often costlier.

Freight railroads are seeing a decline in intermodal traffic lately. Through the first nine months of 2021, intermodal volume is up 9.9%, due to a strong start, but has fallen the last two months, including 6.3% in September, compared with last year, according to the Association of American Railroads.

CSX posted a 3% increase in shipping volume in the third quarter, while revenue rose 24% to $3.29 billion on higher prices and fees charged to store containers. Overall profit rose 32%.

CSX has helped build up its pipeline of workers using tactics like providing referral bonuses. Training classes currently have around 40 candidates in them, up from less than 10 in some cases earlier in the year. “I’m starting to get to the point where I can see we’re actually going to start adding to the workforce,” Mr. Foote said


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