Not All Rail Cars Are Created Equal

by on

In part one of Chris Blumberg‘s response piece to our Railroaded series, he examined the relative tax bases for highway and rail spending. In this section he looks at the real increases in commodity shipping that are causing rail car backlogs.

In 2008, the Great Recession affected Class 1 railroads just like it did other companies. Carloads dropped about 20%, layoffs happened and the businesses trying to take advantage of scrap prices reduced the total rail fleet by about 10% from 1.57 million. The fleet has yet to recover to this pre-recession level of total cars with the current fleet only reaching 1.42 million.

This, however, paints a slightly misleading picture as not all cars are equal. Roughly 50% of the fleet was below gross load weight of 286,000 lbs. with the majority being 263,000 or even lower. A hopper of GRL 286 can carry 11 more tons of grain over a GRL 263, and even more of lower cars. The latest cars have overwhelmingly been GRL 286, which is at least a 10% improvement in carrying capacity.

Don’t miss this free download of our Monthly MMI® Report, covering price trends in 10 metals markets.

The problem is that not all rail lines can support GRL 286 cars, while the Class 1 rails have upgraded all of their main tracks to GRL 286, there are large connecting sections that are GRL 263 or lower. Class 2 and Class 3 railroads have only upgraded small amounts of their lines, less than 50% of their total miles. The problem becomes even worse when involving Mexico with many businesses relocating production from overseas to Mexico due to the high gas prices.

Now, Mexico has new factories being built and expanded, but the only GRL 286 lines are the lines headed into New Mexico and Texas. This is creating massive congestion and traffic issues with only 3 main lines able to serve Mexico and a 4th line to California being under GRL 286.

This further adds to the congestion on the US rail network, as oil trains are trying to head south to Texas, Asian products are being delivered in LA and sent east, and manufactured equipment is being sent from Mexico. Thus just like highway rush hour there is simply not enough room for all those trains all heading to the central US.

On top of all these problems we now add a huge new problem of a record 2013 bumper crop for the US and Canada. In total these bumper crops were 20 million metric tons larger in Canada then 2012 and 80 million metric tons larger in the US. To make matters worse, in 2014 the total crop production in Canada dropped back down by 17 million metric tons, but the US increased yet again by an estimated 15 million metric tons for yet another record harvest with a difference of nearly 100 million metric tons of grains from the 2012 harvest of 354 million metric tons.

Due to the problems described above with reduction in fleet sizes and new cars not able to go on all tracks there just simply aren’t enough cars available when they need to be to haul 440 million metric tons of grains per year for 2 years.

Leave a Comment

Your email address will not be published. Required fields are marked *