Slow pace of rail recovery stirs fear of future woes
More than eight months after an extreme winter began snarling North American rail traffic, a Reuters analysis of industry data shows delays lingering, raising the risk of a second winter of chaos on the rails.
Across the continent's seven largest operators, trains ran almost 8 percent slower on average and sat idle at key terminals for nearly three hours longer in the second quarter than a year earlier, data from the main railroads, known as Class 1, show.
While Canada's rail operators have nearly recovered, many U.S. operators lag far behind.
The concerns are sharpest in the U.S. Farm Belt, with lawmakers fearful that the biggest crops on record may be slow to reach markets or could even rot.
Rail logjams contributed to the economic slowdown early in the year, rippling across corporate America and affecting everything from car makers to ethanol producers.
Many experts blame an incomplete recovery from last winter's freight backlogs, coupled with record crops and rising competition with crude oil tankers for track space amid an economic recovery.
"It's like a sinking ship - you're bailing out at one end, but it's coming in the other end just as fast, if not faster," said Citigroup Global Markets transportation analyst Christian Wetherbee.
Performance fell behind as loads grew: between April and June, U.S. rail carload volumes grew 5.4 percent and intermodal traffic, which include shipments partly by rail, rose 8 percent, Association of American Railroads (AAR) data shows.
At the same time, the industry is producing "tremendous" margins, profit and cash flow, with some companies setting records, said rail analyst Tony Hatch.
The largest operators plan to spend about 18 to 20 percent of annual revenue this year on new terminals, track, sidings and equipment to help boost capacity and efficiency, according to Thomson Reuters data. That is slightly higher than recent average annual spending.
Some shippers complain that spending hasn't been sufficient to meet demand, especially in bad weather. Still, many investment projects are multi-year improvements that can't quickly fix traffic jams.
"We're criticized ... because we haven't put infrastructure in to handle the growth. But then when you try to put infrastructure in, the not-in-my-backyard lobby kicks in and says: We don't want you here," Canadian Pacific Railway Ltd Chief Executive Hunter Harrison said on a recent earnings conference call.
Over the four decades to 2000, the nation's major track system shrank by about half, in terms of miles of rails, according to the U.S. Federal Highway Administration.
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