DECEMBER 2023
W W W. R A I LWAYA G E .C O M
AILWAY GE S E R V I N G T H E R A I LWAY I N D U S T R Y S I N C E 1 8 5 6
2024 FREIGHT RAIL OUTLOOK
BRIGHTER DAYS AHEAD TECH FOCUS – M/W Crossing Surfaces: A Grade Above
RAILCAR SUPPLY SEA CHANGE
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Higher Prices, August Elevated Rates 2017 // Railway Age 1
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AILWAY GE
February 2020 December 2023
18
FEATURES Freight Rail Outlook 10 2024 Brighter Days Ahead
18 Tech Focus – M/W
Crossing Surfaces: A Grade Above
21 Railcar Market Sea Change A Supply and Lease Rate Outlook
26 TTC Operated by ENSCO
Alternative-Power Safety Training
DEPARTMENTS 4 Industry Indicators 6 Industry Outlook
COMMENTARY
7 Market
2 From the Editor
28 People
8 Watching Washington
30 Professional Directory
9 Financial Edge
30 Classifieds
32 ASLRRA Perspective
31 Advertising Index COVER PHOTO
HiRail Corp.
CSX industrial switching. Peter Kamierczak
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December 2023 // Railway Age 1
FROM THE EDITOR
AILWAY GE
2023 Was a Very Good Year—Really!
A
tumultuous 2023 comes to a close on many positive notes, enough to say that, on balance, it was a very good year (to paraphrase Frank Sinatra). Take a look at the positives: Rail freight traffic is recovering. Service is improving. Railroad workers now have much-deserved paid sick leave, on top of paid days off that were negotiated in 2022’s national bargaining. Passenger rail overall is making a strong post-COVID ridership recovery. The Biden Administration continues pumping billions in capital dollars into all modes of passenger rail. All good. 2023 was also a landmark year. The merger of Canadian Pacific and Kansas City Southern into CPKC, North America’s first and only transnational railroad, went off with barely a hiccup and almost immediately spurred more competition—exactly what the applicants told the Surface Transportation Board, which voted 4-1 to approve. Robert Primus was the lone dissenter. With all due respect, his dire predictions that “the transaction will further concentrate control over the nation’s railroads, which have already experienced massive consolidation in recent decades”; “does not adequately guard against merger-related service disruptions, at a time when rail service in general has been historically poor”; and “will harm communities along the path of the newly combined network” were just plain wrong. We can’t look back on 2023 without at least acknowledging Norfolk Southern’s major derailment in East Palestine, Ohio. It generated a media frenzy and political circus that, for many of us, was painful to witness because of the misinformation spread by uninformed media outlets, and worse, the political
grandstanding by legislators at all levels mostly concerned with making themselves look good. I’m told, for example, that Ohio Gov. Mike DeWine privately expressed to NS management he was confident in the railroad’s ability to handle the accident and its aftermath. His public statements were something else. He said it was “absurd” the train that derailed wasn’t designated a “high hazardous material train,” urged the U.S. Congress “to change current regulations,” and asked President Biden to “issue a Major Presidential Disaster Declaration” because “the possibility remains that the voluntary support provided by NS could at some point in the future cease.” Ugh. In truth, NS responded to East Palestine by doing the right thing for the community, and not just with money—an ongoing effort. NS has also instituted a new, comprehensive, multi-year safety improvement program. I sign off with the Railway Safety Act of 2023, a useless, ill-conceived piece of legislation that served no purpose other than to portray railroads as the foundation of a National Dystopian Nightmare and waste our valuable time with endless hearings on Capitol Hill. “Take everything you don’t like about railroads, hang it on the Christmas Tree and call it the Railway Safety Act,” one veteran railroader told me. “The tree has dried out and is going to the mulch pile.” Yes, dear readers, the Railway Safety Act is dead, sent to the round file in Capitol Hill’s moldy basement (unless someone revives it in 2024). Che liberazione! Here’s to a safe and prosperous 2024. Happy Holidays!
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2 Railway Age // December 2023
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Industry Indicators RECOVERING FREIGHT TRAFFIC ’REFLECTS AN ECONOMY THAT REMAINS RESILIENT’ “Combined originated carloads and intermodal units on U.S. railroads averaged 499,331 per week in October 2023, the most for any month since June 2021—a span of 28 months,” the AAR reported last month. “Part of the increase relates to intermodal seasonality and concerns over Panama Canal capacity, but part also reflects an economy that remains resilient. Total originated carloads on U.S. railroads were down 0.3% in October 2023 from October 2022, their fourth year-over-year decline in the past five months. Total carloads averaged 230,398 per week in October 2023, down fractionally from September 2023 but otherwise the highest carload total in a year. Year-to-date carloads through October 2023 were up 0.2% (21,802 carloads) over last year and were up 0.6% (61,543 carloads) over 2021. U.S. railroads averaged 268,933 intermodal containers and trailers per week in October 2023, up 2.2% over October 2022. That’s the second straight year-over-year gain following 18 straight declines. It’s also the biggest weekly average for intermodal since May 2022. In the first 10 months of 2023, intermodal originations were down 7.2% (808,532 units) from last year and down 11.7% (1.38 million units) from 2021. Year-to-date intermodal volume through October was the lowest since 2013.”
Railroad employment, Class I linehaul carriers, October 2023 (% change from OCTOBER 2022)
TOTAL EMPLOYEES: 122,393 % CHANGE FROM OCTOBER 2022: +3.54%
Transportation (train and engine) 52,078 (+5.06%)
Executives, Officials and Staff Assistants
TRAFFIC ORIGINATED CARLOADS
FOUR WEEKS ENDING OCT. 28, 2023
MAJOR NORTH AMERICAN RAILROADS BY COMMODITY
OCT. ’23
OCT. ’22
% CHANGE
Grain Farm Products excl. Grain Grain Mill Products Food Products Chemicals Petroleum & Petroleum Products Coal Primary Forest Products Lumber & Wood Products Pulp & Paper Products Metallic Ores Coke Primary Metal Products Iron & Steel Scrap Motor Vehicles & Parts Crushed Stone, Sand & Gravel Nonmetallic Minerals Stone, Clay & Glass Products Waste & Nonferrous Scrap All Other Carloads
147,198 16,339 45,090 45,577 179,961 86,609 293,013 7,000 22,700 26,968 75,503 19,476 48,706 23,569 102,408 115,126 19,055 48,659 16,711 30,440
153,992 22,168 45,499 46,154 172,985 81,391 301,597 8,690 23,937 28,524 75,398 21,917 47,057 23,448 95,726 114,166 17,628 49,024 17,131 32,810
-4.4% -26.3% -0.9% -1.3% 4.0% 6.4% -2.8% -19.4% -5.2% -5.5% 0.1% -11.1% 3.5% 0.5% 7.0% 0.8% 8.1% -0.7% -2.5% -7.2%
TOTAL NORTH AMERICAN CARLOADS
1,370,108
1,379,242
-0.7%
8,226 (+3.42%)
Intermodal
Professional and Administrative
MAJOR NORTH AMERICAN RAILROADS
10,285 (+4.01%)
Maintenance-of-Way and Structures 28,868 (+1.50%)
Maintenance of Equipment and Stores
FOUR WEEKS ENDING OCT. 28, 2023
BY COMMODITY
OCT. ’23
Trailers Containers TOTAL UNITS
49,906 1,355,649 1,405,555
OCT. ’22
% CHANGE
64,575
-22.7% 0.1% -0.9%
1,354,309 1,418,884
Source: Rail Time Indicators, Association of American Railroads
18,003 (+2.06%)
Transportation (other than train & engine) 4,933 (+4.60%)
Source: Surface Transportation Board
4 Railway Age // December 2023
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AILWAY GE
TOTAL North American CARLOADS, OCT. 2023 VS. OCT. 2022
1,370,108 OCTOBER 2023
1,379,242 OCTOBER 2022
Short Line And Regional Traffic Index CARLOADS
BY COMMODITY Chemicals Coal Crushed Stone, Sand & Gravel Food & Kindred Products Grain Grain Mill Products Lumber & Wood Products Metallic Ores Metals & Products Motor Vehicles & Equipment Nonmetallic Minerals Petroleum Products Pulp, Paper & Allied Products Stone, Clay & Glass Products Trailers / Containers Waste & Scrap Materials All Other Carloads
ORIGINATED OCT. ’23
ORIGINATED OCT. ’22
% CHANGE
57,398 23,850 30,392 13,148 32,486 8,117 10,007 2,765 23,104 11,149 2,106 2,489 15,537 16,401 48,390 12,032 71,595
47,734 21,921 29,783 11,692 32,251 7,335 9,009 2,996 18,264 9,926 2,206 2,096 16,130 15,470 44,453 11,361 73,720
20.2% 8.8% 2.0% 12.5% 0.7% 10.7% 11.1% -7.7% 26.5% 12.3% -4.5% 18.8% -3.7% 6.0% 8.9% 5.9% -2.9%
Copyright © 2023 All rights reserved.
TOTAL U.S. Carloads and intermodal units, 2014-2023
(in millions, year-to-date through OCTOBER 2023, SIX-WEEK MOVING AVERAGE)
ARE YOU A RAILROAD OR SUPPLIER SEARCHING FOR JOB CANDIDATES?
Visit http://bit.ly/railjobs To place a job posting, contact: Jerome Marullo 732-887-5562 jmarullo@sbpub.com
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December 2023 // Railway Age 5 RA_JobBoard_1/3Vertical.indd 1
7/27/21 3:02 PM
Industry Outlook
IN A CATEGORY 5 HURRICANE FORCE STUNNING ANNOUNCEMENT, Surface Transportation Board (STB) Chairperson Martin J. Oberman announced late on Nov 16 that he will not seek renomination to a second term (his first term expires Dec. 31) and depart the agency in early 2024 during his statutory 12-month holdover period. Oberman, now 78, took office in January 2019 as the oldest rail regulator to have been sworn-in in the now more than 136-year history of the STB and its Interstate Commerce Commission predecessor. Until President Biden names a new permanent chairperson, the agency’s vice chairperson—who is determined internally—will become acting chairperson upon Oberman’s departure. Although Democrat Karen Hedlund currently serves as vice chairperson, tradition holds that the vice chair slot rotates annually among members. It is probable, but not certain, that the Board either will extend Hedlund’s term or choose Democrat Robert M. Primus. There is no clock ticking on Biden’s choosing of a new permanent chairperson. It is logical that Primus has an edge on Hedlund for the permanent chairperson slot, but Biden could also nominate a Democratic successor to Oberman, with intent to name that successor permanent chairperson upon Senate confirmation. 6 Railway Age // December 2023
Primus’ edge is owed to his almost two decades in senior House staff positions, gaining for him numerous Democratic friends in the House and Senate who likely would lobby the White House on his behalf. Not coincidentally, several very left-ofcenter public interest groups wrote Biden earlier this year urging that Oberman be demoted from chairperson to member and Primus be elevated to chairperson, the reason being Primus’ lone dissent to the Board-approved Canadian Pacific-Kansas City Southern merger. For sure, Primus, whose second term expires in December 2027, made new friends among shippers and rail labor following his sometimes-searing cross examination of rail CEOs during STB public hearings into rail safety and service lapses. Primus also has a friend in South Carolina Democratic Rep. James Clyburn, the assistant Democratic leader in the House, who was instrumental in Biden’s 2020 Democratic primary victory in South Carolina. Hedlund, whose first term expires in December 2025, has a background in infrastructure consultancy, a special interest in passenger rail issues and a demeanor less confrontational than that of Primus. She has more experience in transportation, but less in politics than Primus. At age 75, she might opt out of consideration for permanent chairperson. (Primus is 51; Republican Patrick J. Fuchs, whose first
term expires in January and who is seeking a second term, is 35; and Republican Michelle A. Schultz, whose first term expires in December 2025, is 50.) Regardless of whether Biden opts to leave an acting chairperson in charge or names a new permanent chair, a Republican victory in 2024 would allow the incoming Republican President to name a Republican permanent chairperson as early as late January 2025. That could tee-up Fuchs for permanent chairperson, but not necessarily—assuming, of course, Fuchs is renominated and reconfirmed by the Senate to a second five-year term. Fuchs, a former senior staff member on the Senate Commerce Committee, has earned the respect of railroads and achieved a reputation among shippers as “calm,” “solid” and “seriously thoughtful.” In fact, major shipper groups are backing him for a second term, having sent letters of support to the White House. If not renominated and reconfirmed, Fuchs may remain at the Board in holdover status for up to 12 months (midJanuary 2025) or until a successor is Senate-confirmed. While railroads are not expected to oppose a second term for Fuchs, they are promoting—arguably only in the event of a Republican entering the White House in late January 2025—a Republican who has been pushing rail industry policy objectives through prolific production of position papers and commentary intended to influence lawmakers and regulators. Fuchs would be seen as the more balanced, knowledgeable and broadly supported choice. Railroads may not shed tears over Oberman’s departure, given his outspoken reproval of railroad operating practices, service deficiencies, arguably excessive layoffs of train and engine crews, alleged market power abuses, and his desire to tighten the definition of the common carrier obligation. But what the public loses with either Primus or Hedlund in succession is a consensus builder with a trial attorney’s continuous probing of every facet of every dispute and someone quite opposed to authoritarian leadership based on a political majority. – Capitol Hill Contributing Editor Frank N. Wilner railwayage.com
STB
Oberman Departing Surface Transportation Board
Market Alstom: Additional TTC Flexity LRVs
Alstom last month delivered the first of 60 additional new lowfloor Flexity™ light rail vehicles to the Toronto Transit Commission (TTC) as the first step in fulfilling a contract signed in June 2021. The remaining streetcars will be delivered throughout 2023, 2024 and 2025. The new LRVs, which are jointly funded by $568 million in contributions from the federal government, Ontario government and City of Toronto, officially entered service Nov. 17 with an inaugural run on the 504 King route. The vehicles, which are being produced at Alstom’s Thunder Bay facility, will be added to a fleet of 204 Flexity LRVs built by predecessor company Bombardier Transportation. Alstom’s former Bombardier site in La Pocatière, Quebec, supports Thunder Bay’s final assembly line in providing component subassemblies such as the flat pack, which includes the underframe, side walls, roof and articulation portals and truck frames. This was made possible thanks to a Quebec government forgivable loan that allowed the site to “boost productivity through modernization and automatization of specific areas of the facility.”
NORTH AMERICA
Germany’s first fleet of new STADLER FLIRT battery EMUs (BEMUs) have entered passenger service in the northernmost state of Schleswig Holstein. Introduction into passenger service was originally planned for December 2022 but problems with approval resulted in delays. The first trains are operating in Kiel on the short nonelectrified suburban rail route between the main station and Kiel Oppendorf, which has been operated by ERRIX HOLSTEIN since Oct. 23. Operation on longer regional routes was planned for the timetable change this month from when Errix Holstein will use 26 of the trainsets on routes that include Kiel-Lübeck-Lüneburg. However, it is unclear exactly when all 26 will be in service; Errix Holstein has previously told local media that introduction could take place throughout 2024.
The INDIANA RAIL ROAD (INRD) has partnered with CATHCART RAIL for the handling of its railcar inspection and repair needs across its 500-mile footprint. Cathcart Rail, a freight rail services and transportation company based in Columbus, Ohio, provides these services, in compliance with Federal Railroad Administration (FRA) and Association of American Railroads (AAR) standards, across INRD’s major terminals in Indianapolis, Ind.; Jasonville, Ind.; Palestine, Ill.; and Terre Haute, Ind. Cathcart commenced operations in May 2023 as the sponsored repair agent for INRD with a team comprised of 15 carmen and site and regional management, with support from corporate personnel and training staff. INRD President and CEO Dewayne Swindall noted that the team has “exponentially increased railcar inspections and repairs, providing an additional layer of comfort for our customers that their goods are moved safely and efficiently. We always talk about operating rules and regulations, however rolling stock safety and regulatory requirements are equally important. Adding Cathcart provides another step in our safety process and we believe the company is well managed with the integrity to deliver a good work product for our customers and our company.”
William C. Vantuono
WORLDWIDE
railwayage.com
STANTEC signed an agreement last month to acquire ZETCON ENGINEERING, a 645-person engineering firm headquartered in Bochum, Germany. The acquisition of ZETCON, which was founded in 1973 and has “built a reputation as an industry leader in infrastructure planning, inspection, project management and construction management,” gives Stantec a strong platform focused on infrastructure, according to the company. ZETCON has a total of 13 offices covering all major German metropolitan areas. The firm has extensive industry expertise in bridge certification and assessment, project and construction management of tunnels, roads, and rail infrastructure, as well as building condition assessments, improvements, and certifications. “ZETCON’s national presence and expertise in the German market, combined with Stantec’s global knowledge and capabilities, will provide the opportunity to further diversify the business and grow in other sectors over time. Stantec’s global expertise in water and power engineering, buildings, advanced manufacturing, and environmental services offer potential for growth in the German market,” the company said. December 2023 // Railway Age 7
Watching Washington
Oberman, the Pragmatist, May be Missed
N
ews item: Surface Transportation Board (STB) Chairperson Martin J. Oberman will not seek renomination to a second term and depart in “early 2024”(p. 6). Since his January 2019 Senate confirmation, and promotion to chair by President Biden in 2021, Democrat Oberman has belligerently clanged a tocsin bemoaning lack of rail-to-rail competition and a Wall Street encouraged C-suite culture of rewarding investors to the impairment of labor, service and market share growth. Oberman’s rhetoric is that of an unrepentant regulator. Yet his record of actions doesn’t match the talk, allege captive shippers who lack effective transportation alternatives to rail. Lamented is his deafness to shipper requests he support imposing a revenue adequacy constraint on rate increases where railroads are market dominant; voting to terminate, as a remedy for rail market-power abuse, a reciprocal switching remedy (granting a second railroad access to another’s sole-served terminal); declining to support a remedy for unreasonable fuel surcharges; permitting Class Is to veto STB arbitration for rate reasonableness complaints; and not advancing a rulemaking to revoke previously granted commodity exemptions from regulation as justified by market-power abuse. “There really is no path to provide meaningful regulation to address the power differential between railroads and shippers,” former STB member and Democrat Deb Miller (2014-2018),” told Railway Age. Perhaps this explains Oberman’s embracing a pragmatic approach, attempting moral suasion where a consensus for more aggressive regulation is doubtful, or choosing easier to achieve— yet less shipper beneficial—approaches as finding service inadequate in individual complaint cases. But Oberman isn’t done. Before he departs, the STB will vote to establish operating performance metrics and whether to make reciprocal switching a remedy for yet-to-be-determined
8 Railway Age // December 2023
rail service failures. If the trigger, as the remedy now provides, is rail service near the nadir of its historic low, the relief could be meaningless. And if minimum operating performance metrics require more resources (capital and labor) for adherence, it will be a tax (rate increase) on shippers. His legacy on the line, Oberman’s rhetoric has reached a crescendo. Recently, he delivered a knife-edged impeachment— infused with oratory more suited to Sen. Bernie Sanders (I-Vt.)—of the rail industry’s chummy relationship with Wall Street, alleging that “for too many years,” railroad leaders “utterly failed to lead” by “cutting both the quality and quantity of output” to lower operating ratios and boost profit. Oberman cited Class I railroad headcount reductions and a return to investors, through dividends and share buybacks, of $253 billion over the past 14 years, while reinvesting but $40 billion to expand capacity. “For too many years, much of the corporate leadership of these railroads
utterly failed to lead,” Oberman said. “They failed to enlighten their owners [investors] that the railroads will succeed in producing a better and longer return on investment if they spend more of their profits on building infrastructure and retaining the workers needed to regain their share of the market, which they have been consistently losing to truck over the past few decades … and even more important, attract new customers and more revenue.” Railroads, he said, citing a 19th century Supreme Court decision, “primarily owe duties to the public of a higher nature even than that of earning large dividends for their shareholders.” Oberman’s critics cite the collapse of high-margin coal traffic (down 21% alone in 2023), fundamental shifts in manufacturing and the threat of driverless trucks poaching already low-margin intermodal as incentives to return cash to investors. Mainstream economists agree that if an enterprise such as railroads isn’t as attractive as other enterprises, then management should return funds to investors. Frustrating to shippers is Oberman’s pragmatic, consensus-seeking approach, thinking he missed an opportunity to use his Democratic majority to achieve more. Some shippers look to his successor to be more aggressive in that regard. The risk of a new chairperson acting in a more partisan manner is that it will lead to widespread swings in regulation, spooking further investment and imposing greater pressure on rail management to disinvest. Frank N. Wilner’s new book, Railroads & Economic Regulation, is available from Simmons-Boardman Books at www.transalert.com, 800-228-9670.
FRANK N. WILNER Capitol Hill Contributing Editor railwayage.com
Financial Edge It’s Not the Size of the Gift. It’s the Cost!
E
veryone’s Holidays are costing more in 2023. Heck, everything costs more in 2023. After three years of rising prices, it is taxing. “Financial Edge” has spilled plenty of ink regarding rising railcar costs. If some is good, perhaps more is, well, maybe not better but necessary. Unlike today, in 1986 the Congress was able to pass legislation without resorting to Queensbury Rules or without representatives threatening to walk out or retire early protesting poor behavior. Under the Reagan Presidency, Congress passed the Tax Reform Act of 1986. For users and consumers of rail equipment, it was a foundational change in the tax law. The 1986 Act implemented the current form of tax depreciation used (or able to be used) by all owners of rail (and other equipment): the Modified Accelerated Cost Recovery System (MACRS). Rail Equipment (railcars and locomotives) are depreciated using what is known as seven-year MACRS (which is really 8 years). MACRS depreciation quickly became a value driver for investors in rail equipment. Tax depreciation is used to shelter taxable income from the IRS. This is registered on a tax return. (Tax depreciation should never be confused with book depreciation, which is registered on a company’s balance sheet.) Asset owners and investors are all able to, and have benefitted from, passing the value of that income tax deduction onto end users of equipment. Best of all, every time a railcar changes hands the depreciation clock resets itself, so an asset can be depreciated under the MACRS system numerous times. Fast forward to 2001. After the horror of September 11, in early 2002 Congress passed the Job Creation and Worker Assistance Act of 2002. This began a lengthy period of what is known as “Bonus Depreciation” (BD). In addition to the MACRS depreciation already allocated to an asset, asset owners were able to depreciate a larger percentage of the equipment value in the first year of ownership (the Bonus). BD has been a part of the landscape of equipment ownership since 2001. (See the table for a history.) The challenge of BD has been, and continues to be, that asset owners are not always able to realize the value associated with the depreciation, and it goes unused or unvalued. Why the history lesson? Starting in 2024, BD is heading to a tapering kind of close. But that is only part of the issue. What has railwayage.com
happened is that the depreciation (both MACRS and BD), once a key impact factor in lowering lease costs to end users of rail equipment (railroad and shipper), is no longer being effectively monetized and passed through to the intended beneficiaries. In this era of higher interest rates and inflation, this loss is one contributing factor to the increase in lease rates that are likely to remain in place for years to come. Why has the value of MACRS and BD disappeared? Several key reasons: 1. Private equity investors (significant investors in rail equipment in recent years) are not taxpayers in the traditional sense. 2. Banking industry woes combined with rising interest rates have made many banks unable to consume the depreciation benefit. 3. Companies are no longer placing a value on tax depreciation. BD has been around for so long that it has become a yawn of a value driver. One key reason is in the Tax Cuts and Jobs Act of 2017, allowing investors to apply bonus depreciation to both new and used property.
Prior to this, bonus was for new equipment. Essentially, every time a rail asset changes hands, BD is available. By creating so much BD, the 2017 Act devalued the benefit. Fact: The value of BD or stand-alone MACRS, once it stops being passed along to the customer, will get consumed elsewhere in the financial food chain. At that consumption point, it will benefit whoever is capable and able to use it. In an inflationary world, prices generally come down slower than they go up. As BD tapers out of existence, don’t expect the value of MACRS to be passed through effectively in the future. Happy Holidays! Remember it’s not the size of the gift. It’s the cost! Got questions? Set them free at dnahass@ railfin.com.
DAVID NAHASS President Railroad Financial Corp. December 2023 // Railway Age 9
2024 FREIGHT RAIL OUTLOOK
BRIGHTER DAYS AHEAD
In more ways than one, 2023 was marked by a few dark clouds. In 2024, look for them to scatter, pushed by warmer prevailing winds.
R
esiliency is “the capacity to withstand or to recover quickly from difficulties; toughness.” Resilience, a closely related word, is “the process and outcome of successfully adapting to difficult or challenging life experiences.” Both words describe the railroad industry for the past few years, perhaps especially so for the past 12 months, given all the problems we’ve had to spend considerable time and resources solving. Some may prefer to use challenges, a softer word than problems, but I feel compelled to point out that problems are solved, while challenges are addressed. This is hard work that actually never stops, and is never easy. To paraphrase President John F. Kennedy’s 1962 address at Rice University, “We choose to be railroaders not because it is easy, but because it is hard. Our long-term goals will serve to organize and measure the best of our
10 Railway Age // December 2023
energies and skills, because our challenges are ones we are willing to accept, unwilling to postpone, and that we intend to win.” We’re not, of course, talking about a manned mission to the moon. We’re talking about operating safely. Growing market share. Competing, while cooperating to better the industry as a whole. Providing excellent customer service. Taking care of our employees. Leveraging advanced technology. Earning a decent return on investment. Improving public confidence in, and understanding of, the important things we do for the global economy. Keeping regulators and politicians off our backs. Call me an optimist, because 2024 could very well be the year in which significant strides are made in all these areas. Despite its hardships, 2023 laid the foundation and as such, on balance, was a very good year (p. 2). We’ve hopefully learned from our mistakes and emerged from some very tough circumstances
with knowledge and insight. A new resolve. “A recent Wall Street Journal article suggests three Goldilocks-like pathways for the economy,” the Association of American Railroads noted last month. “First, current economic momentum is short-lived as households and firms cut back on spending, and firms decide they have too many workers and start laying people off. This creates an economy that’s too cold, and a recession ensues. Second, growth stays strong and inflation rises again, so the Fed hikes interest rates again and raises the risk of a hard landing. This economy is too hot. Third, economic growth stays strong but inflation stays under control. The Fed leaves interest rates alone, confidence grows, everyone is happy. This economy is just right. Unfortunately, right now we don’t know what Goldilocks will find.” Following are two perspectives on what 2024 could bring. Perhaps things will turn out “just right,” at least for now. Inoltrare! railwayage.com
William Beecher
BY WILLIAM C. VANTUONO, EDITOR-IN-CHIEF, WITH JASON SEIDL AND PATTY LONG
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WINDS OF CHANGE BY WALL STREET CONTRIBUTING EDITOR JASON SEIDL Do you feel that wind blowing in your hair (or maybe just across your bare head if you are aerodynamically quaffed like me)? Those are the changes that have been taking place or are about to take place in the rail industry. For the first time in a long time, high-level executives are taking a sober look at service levels, supply chain visibility and overall customer experience. Indeed, we are hearing encouraging language from the C-Suite, and it reminds me of a time 20 years ago when Matt Rose took over at BNSF and started uttering unheard of phrases like “we must earn our cost of capital.” Specifically, Joe Hinrichs of CSX has been leading the way in pushing change, both at his railroad and the entire industry. His actions even got him named Transportation Person of the Year by the NEARS (North East Association of Rail Shippers). From the moment he took over the reins at CSX it felt like his tenure was going to be different as he stressed culture and service from day one, a focus which he has followed through on thoroughly in our assessment. A former 12 Railway Age // December 2023
railroad customer himself, Hinrichs has stated that CSX is first and foremost a service provider. He appears to recognize that the industry must improve its service, ease of doing business and supply chain visibility to begin to grow again. We are also encouraged that, in his first public communication to his rank-and-file membership, Union Pacific CEO Jim Vena stressed growth via service and operational excellence. It may seem odd to talk about growth in an industry that has not grown volumes at all over the past decade. However, growth is needed for the health of the rail industry over the longer term. Sure, we could see industry volumes grow next year, but it may just be easy year on year comparisons. Longer-term growth may not come easily as the trucking industry will not want to give up some of the gains it has made against their railroad counterparts. Growth will also likely require all the rail industry pulling in the same direction. It appears for the moment the industry is willing to do so as it is clearly saying the right things, but how much rope the investment community is willing to give them remains to be seen. The length of this rope, however, is likely longer than the one the regulators have been willing to give. The regulators have played a much larger role over the past few years in the railroad industry. Under the leadership of outgoing
Chairman Oberman, the Surface Transportation Board (STB) approved the CP/KCS merger, which will likely go down as the last of the big Class I mergers. The STB sought to protect and enhance competition/service with this merger and thus far it seems they have. The rise of new rail services out of Mexico, such as the UP/CN/GMXT Falcon Premium service and a new interchange agreement to reach the southeast with CSX and G&W, are shining examples of enhancing competition and service. The STB also announced its long-awaited proposed rulemaking on reciprocal switching. While it would be a wild stretch to call this a win for the railroad carriers, we believe it could have been far worse as many in the industry were expecting a mileage-based ruling. The future direction of the STB, however, is in question after the shocking announcement that Chairman Oberman will not seek renomination for a second term (p. 6). A new Chairperson could be named with board members Primus (who has taken the toughest stances against the rail carriers in the past) and Hedlund the likely choices as they are Democratic nominees. President Biden could also appoint a new board member to take over the role of Chairperson, but the likelihood of that option appears slim in our view given other more pressing domestic and international issues. Indeed, the STB has functioned railwayage.com
William Beecher
2024 FREIGHT RAIL OUTLOOK
many times in the past with less than a full slate of members. The length of a replacement will also depend on the outcome of the 2024 elections as a Republican victory would likely change things yet again. All of this brings us to the financial outlook of the railroad space. Railroad stocks have underperformed in 2023 with all names trailing the broader market and the group falling roughly 4% (albeit largely due to a ~15.5% drop by Norfolk Southern) vs. the SPX (Standards & Poors Index), up ~19% during the same period. Pressure on volumes and pricing have coupled with rising costs, a major derailment and tech issues to limit 2023 financial performance. The carriers have found themselves at the low point of the past two decades in their price vs. cost tradeoff for most of this year. This, however, should change as we move through 2024. First, we are starting to see some inflationary costs abate somewhat. Second, and more important, the railroads are expected to continue to attack their longer-term contracts as they roll over (recall ~50% of a railroad’s book of business rolls off every year) to account for higher costs. Finally, it appears that truck pricing has 14 Railway Age // December 2023
hit a bottom and should have nowhere to go but up. This should help a great deal on the intermodal side, but we expect it to have a larger impact on 2025 results. We believe it is this dynamic that has rekindled long-only investor interest of late. While truckload stocks may react first in the cycle, the railroads should set up really well toward the middle of 2024, in our opinion. Jason Seidl is Managing Director, Industrials – Airfreight & Surface Transportation, TD Cowen, a Division of TD Securities. RAIL FRIENDS AND FOES BY PATTY LONG As an advocate for railway suppliers, it is part of my job to understand influences impacting policies and perceptions around the movement of people and goods via rail. Our members develop products and technologies for both! Lately, I’ve noticed a troubling schism in some Congressional circles that lauds privately owned and funded freight rail for
its economic and environmental benefits while disparaging passenger rail as a wasteful use of taxpayer dollars. In doing so, I fear that our “friends” on the Hill are throwing the baby out with the bath water. The “baby” in this case, is U.S. employment directly supporting rail supply, which in 2020 was an estimated 242,000 jobs and more than 700,000 when you include indirect and induced employment. A year later, a bipartisan majority in the U.S. Congress passed the Investment in Infrastructure and Jobs Act (IIJA) to invest U.S. taxpayers’ dollars to create even more jobs while updating a system that is critical to our country’s economic and environmental health and national security. Sadly, this once-in-a-generation opportunity is struggling under the weight of extreme inflation, post-COVID ridership declines, procurement delays and in some cases, waste, and abuse that is difficult to defend. But to move forward we must condemn inefficiency and hold organizations accountable while supporting investment in American jobs. According to the USDOT, an investment of $1 billion in public transportation creates roughly 36,000 jobs. A more railwayage.com
William Beecher
2024 FREIGHT RAIL OUTLOOK
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tangible example of this is the production of new Amtrak Airo™ trains—manufactured by RSI member Siemens Mobility—that will create new engineering and manufacturing jobs with more than 3,500 parts built by nearly 100 suppliers in 31
states. This illustration and others like it must find their way into the mainstream media. But it is no secret that negative examples sell more papers and produce more clicks, particularly in years that are divisible by 4.
As we head into an election year, I caution our legislators to avoid the easy sound bites and finger pointing as it relates to funding of passenger rail. Rather, I invite them to work with us on the serious business of fixing systemic issues that can and should be addressed. Procurement reform to address implementation delays is not a sexy campaign topic, but it will yield real benefits for real people in manufacturing towns across the United States. As representatives of both freight and passenger suppliers, the Railway Supply Institute, is working to help small manufacturers navigate difficult issues related to Buy America and domestic preference laws. These complexities create barriers to entry limiting what should be a healthy and robust supply chain. This past spring, we worked with government agencies to address inflation adjustments for firmfixed price contracts that were driving small suppliers out of business or into other industries. And, through our training, best practices and standards development, we
William Beecher
2024 FREIGHT RAIL OUTLOOK
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Peter Kamioerczak
2024 FREIGHT RAIL OUTLOOK are helping to connect small businesses with large customers who need their services. We have an even greater potential for growth in uniting and aligning with other stakeholders—engineering and construction firms, state governments and labor unions—all of whom have a vested interest in system reform and the potential it provides for real job creation. At Railway Interchange, we brought all of these groups together for a candid discussion about how our organizations can and should be working together. But we need our elected official on board! This summer, the RSI and a half dozen of our members hosted an event on Capitol Hill to showcase the technological innovations that are making the rails safer, greener and more efficient. More importantly, we started a dialogue about how they—both the Congress and Executive branch—can and should support that investment. At the end of the day, we all want the same things: efficient and productive use of the taxpayers’ dollars to support our nation’s
infrastructure in a way that encourages investment and creates good jobs. Together, we can connect the dots between funding and jobs, hold organizations accountable and fix what is truly broken. Patty Long is President of the Railway
Supply Institute, which connects members to their customers and partners, advocates on behalf of freight and passenger railway suppliers in the legislative and regulatory process, and advances safety, innovation, technology and sustainability in the industry.
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TECH FOCUS — M/W
A GRADE
ABOVE
Omega Industries Inc.
Suppliers are ensuring that highway/rail grade crossing surfaces can withstand the long-term pounding of heavy rail and road traffic while providing a safe, smooth, and jolt-free ride for motor vehicles.
T
BY CAROLINA WORRELL, SENIOR EDITOR
here are numerous ways to resurface a highway/rail grade crossing: Concrete. Rubber. Composite. Timber. Users rely on tough yet resilient surfaces to perform under heavy rail and road traffic. Railway Age contacted the following suppliers to find out about their latest technologies and what their customers are looking for, as well as the state of the market: ENSCO Rail, Inc.; L.B. Foster; HiRAIL Corporation; TieTek Global LLC; American Concrete Products; Omega Industries Inc.; Omni Products Inc.; Oldcastle Infrastructure; Koppers; and Stella-Jones Corp. Following is a roundup of offerings from suppliers who responded to our inquiries. 18 Railway Age // December 2023
OMNI PRODUCTS INC. Omni Rail Products entered 2023 working diligently on a couple of new products, one of which is a scaled down version of the company’s popular VRA Railguard rail seal—aptly named “VRA2 Railguard.” This product, the company says, gives the customer the option of a dimensionally smaller—but significantly—solid virgin molded rubber with all the attributes of its bigger brother. Omni has always used/manufactured a solid virgin rubber that is molded—not extruded—for key products, such as its HDR full-depth rubber and SR steel reinforced rubber, along with its ECR and IC concrete grade crossing panels, up to and including the Tracast1 and Tracast2 tub designs. Omni’s solid molded rubber
Omni Products Inc. railwayage.com
TECH FOCUS — M/W comes with a six-year factory limited warranty against any issues of tearing or ripping. “Omni’s future is signaling a busy 2024, with a large transit project in the Northeast, and several large projects that were pushed from 2023 into 2024,” said Rob Greenside, Sales ManagerMidwest, South Central and West Coast. “Keeping a healthy inventory on the ground at all three of our manufacturing locations (Illinois, Texas and North Carolina) enables our customers the opportunity to stay ahead of tight schedules, and supplying our customers with product that is covered by the best warranty in the business—with quick deliveries—is key to both Omni’s success and the success of our customers.” HIRAIL CORPORATION HiRAIL Corporation crossing surfaces are manufactured from 100% molded rubber and incorporate recycled tires. Current market conditions remain strong in all sectors, from Class I’s, short lines and transit agencies to contractors and industry, according to Director of Sales and Marketing Jim Overfelt. “Like most businesses, we are cautiously optimistic that long-term demand will remain strong; however, there is some concern with the slowing economy and how this will affect our customers’ crossing budgets,” he tells Railway Age. The company is continuing its work developing new full-depth rubber crossing profiles to fit new concrete tie designs and new fastening systems. “The majority of the concrete ties produced domestically are not flat or rectangular-shaped like a timber tie,” Overfelt explains. “Most concrete ties have an area that slopes down from the rail seat toward the middle of the tie that meets a flat section in the middle. Over the course of many years, the concrete tie manufacturers have made these areas different lengths. As these dimensions change, we change to make our product fit the contour of the concrete tie. Our design capabilities allow the client to use the same concrete tie profile throughout their entire system and not have to transition to flat concrete ties or timber ties for their crossings. On top of the changes in shape, there have also been new fastening systems introduced that require us to add more clearance. Consequently, we end up changing our design to fit these requirements. We also seem to be getting more inquires for direct-fixation track crossings, which require a lot of the same design capabilities that we use for concrete or steel tie crossings.” OMEGA INDUSTRIES INC. “This has been a unique year for crossing sales,” said National Sales Manager Mark Mottola. “Despite material cost increases and contained supply chain lead time issues, we have had one of our busiest seasons to date. Demand remains high and we’ve been told by some of our larger customers to expect the same again next year. In addition to our main line crossing contracts, we have seen growth in light rail and transit projects requiring our product. Currently, we are supplying crossing panels on transit projects in Seattle, Portland, Los Angeles, San Diego, Dallas, Miami and New Jersey.” Omega is currently implementing a new enterprise resource planning (ERP) system to help streamline the company’s sales, accounting, shipping and inventory control systems, Mottola tells railwayage.com
December 2023 // Railway Age 19
TECH FOCUS — M/W panels for small rail sections or narrowgauge track.
HiRAIL Corporation
Railway Age. “This will help us process job orders much quicker and eliminate duplicate paperwork amongst the different departments.” Additionally, Omega is currently looking at property in the eastern U.S. to build a new manufacturing plant. “Due to
increased product demand, we are quickly outgrowing our existing North Carolina facility,” said Mottola, who added that customers are looking for quicker lead times, especially on non-standard crossing panels, including custom curved panels, panels for use on steel ties, or
T tal Solutions Partner L.B. Foster’s Anti-Trespass Panels (ATPs) are safety solutions that deter pedestrian trespassers at rail crossings, platforms and yard entrances. Made from environmentally friendly material, quick and simple to install.
AMERICAN CONCRETE PRODUCTS American Concrete Products precast crossings manufactured at plants in Nebraska, Kansas and Texas are in high demand, according to Manager of Railroad Sales and Service Dan Muessel—especially for use at intermodal facilities being built or upgraded with longer sidings, and at manufacturing facilities just beginning to ship by rail or boosting those shipments. With this growth, customers are more frequently asking for shorter lead times, as well as reduced pricing, Muessel reports. To support this, the company is “looking at material changes that may allow us to increase the length of the written warranty—now 12 years—or to change the material without affecting the life expectancy of our product,” he says. The company may consider using stronger concrete, such as polymer concrete, and less steel, as steel costs have tripled in some cases.
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FREIGHT CAR MARKET
SEA CHANGE IN RAILCAR SUPPLY
FreightCar America
T
A railcar and lease rate outlook for 2024 and beyond. BY BOB CANTWELL, CONTRIBUTING EDITOR
he North American freight rail industry is the envy of the world. We haul the most freight more efficiently and safely than any other freight rail system. But what makes our system so unique is our commodity diversification. Virtually every other freight rail system relies heavily on bulk products: coal, aggregates and agricultural products. The North American system has diversified into consumer products, automobiles, and many other non-bulk, higher-value goods. This has been accomplished under the backdrop of coal carloads declining from more than 7.5 million to 3.3 million carloads over the past 15 years. For carloads to be down only 2% to 3% from pre-pandemic levels is impressive. Pivoting to growth through better service offers a bright railwayage.com
future for the industry. But what does this have to do with railcar demand and lease rates? In December 2022, I wrote an article titled “Get Used to Higher Railcar Prices and Lease Rates” that caused some debate amid some skepticism. Ref lecting on what has transpired during the past 12 months, lease rates are up 26% to 33% and are proving sticky. Lease terms are extended as well, out as far as 60-plus months. Railcar prices are up 12% to 15%, but carbuilders continue to struggle to get to sustained double-digit margins. This has happened within the backdrop of lower carloadings. Our industry is driven by carloads, rightfully so. There are many experts that use carload-by-commodity analysis to derive railcar demand. As ref lected in my article, I looked at railcar demand
more strategically through carbuilder consolidation, capacity rationalization, supply chain constraints, disciplined production (no speculation), lessor f leet age management, and improvements in railcar designs and production methods, all of which have contributed to more stable, predictable railcar demand. This is a seismic shift from past behavior. SIMPLIFIED CARLOAD VIEW Coal: As mentioned earlier, coal carloads have fallen from more than 7.5 million to 3.3 million today. Over the past two years, coal has stabilized, but we can expect further decline in coal carloads as more coal-fired plants are retired. The key takeaway from coal: The heavy lifting is over. Yes, we may decline to 2 million carloads annually, but that is a far cry from falling from 7.5 million to 3 million. December 2023 // Railway Age 21
FREIGHT CAR MARKET
Railcars in Storage
Intermodal has plateaued for the past Seven years and is pressured today. Service quality has played a big role in intermodal’s pause, but there are far too many compelling reasons favoring intermodal (fuel costs, driver shortages, emission regulations, etc.). Motor vehicles: North American consumers buy 15 million to 16 million cars, SUVs and light trucks annually. Whenever fewer are sold, it creates future pent-up demand. We are currently seeing a rebound to historical volumes, despite higher interest rates. The shift in car preferences from sedans to SUVs and electric vehicles is creating opportunities in new autorack designs (for example, Greenbrier’s Multi-Max Plus™). Building materials: Like autos, any time fewer than 1.2 million to 1.4 million homes are built, it creates future pent-up demand. That’s what’s happening today. 22 Railway Age // December 2023
We went through a prolonged period of underbuilding throughout the 2010s, and now we’re catching up—again despite higher interest rates. Amazing. Crude oil and chemicals (tank cars): CBR (crude by rail) was a stopgap while pipelines were being built. The industry went crazy over a short-term opportunity, and we’re continuing to feel the hangover (100,000 tank cars in storage). Tank car historical build rates are 10,000 to 12,000, not the 25,000 to 35,000 that we saw in 2013-2016, mostly driven by chemicals. All other commodities: Surprisingly, the many other commodities hauled on the rails are pretty constant over time. Droughts, geopolitics and economic swings all impact “other commodities” in the short term, but over the long term they’re pretty steady. All this discussion on carloadings by
commodity highlights the diversification the North American rail system enjoys. Besides, 2023 has demonstrated that lease rates and railcar prices can increase in a f lat carload environment. Something has indeed changed. RAILCARS IN STORAGE As ref lected in the chart (above, second from top), railcars in storage have hovered around 300,000 over the past two years. Scrap rates remain elevated and the introduction of new cars into the f leet remains disciplined. Importantly, tank cars represent one-third of stored cars, or almost 100,000. Most of these will not return to service. Stored cars over the age of 35 years will likely not return to service as well. In summary, we’re in the sweet spot for railcars in storage: enough to satisfy demand swings, but not too many to depress new railcar demand. railwayage.com
FREIGHT CAR MARKET
Increases in network velocity may drive an increase in cars in storage, but elevated service levels may mitigate this impact by attracting more traffic. RAILCAR DEMAND Dr. David Humphrey of Railinc produces an excellent tool for envisioning railcar demand: aging of the railcar f leet. With a much more attractive lease rate environment, far more attention is being given to f leet demographics. Older cars are being scrapped while new cars replace them. We find ourselves in an attractive “replacement” cycle. There are no apparent spikes in a particular commodity that will drive irrational demand. Replacement demand is broad-based across a wide variety of car types. With higher interest rates, speculation will be muted as well. However, here is a cautionary word: As the rail industry pivots to carload growth through much-improved service, railcar demand will probably increase and demand will likely reach current production capacity. In contrast to many of my industry colleagues, I believe the railcar railwayage.com
replacement demand is toward the higher end of Dr. Humphrey’s chart (above, 42,000 to 45,000) for these reasons: • There are more than 250,000 cars approaching their 50-year limit. • Cars produced from 1994-2004, or more than 500,000, have been loaded to 286K but weren’t adequately designed to handle these elevated loads. This led to implementation of the S-286/M-976 standards in 2004. Put another way: Do your 286K cars that were built in the 1990s still have another 20 years of life, and what are the maintenance expenses going to be to run them that long, not to mention the wear and tear they impart on the track? To replace 750,000 cars will take 18 years at a 42,000 annual build rate. Others in the industry believe 35,000 is more realistic. Of note, however, is the potential impact of conversions on this number. All the carbuilders have the ability to convert a stored car into a car that offers utility. Conversions appear to run around 3,000 to 4,000 annually, but aren’t included in the overall industry
number. They could possibly impact new demand as an alternative to a new car. INDUSTRY CONSOLIDATION, CAPACITY RATIONALIZATION Shortly after my December 2022 article was released, the Greenbrier Companies announced the closure of its Portland, Ore., assembly facility, further reducing industry capacity. As a result, there are now 11 North American railcar assembly plants, down from 19 in 2000. As stated in my article, industry build capacity is currently estimated to be around 52,000 to 55,000 railcars annually, way down from the 80,000 built in 2015. FreightCar America has continued to ramp up capacity in its new facility in Mexico, but planned capacity is 5,000 to 6,000. Importantly, industry capacity has reduced significantly to better match replacement demand with some marginal growth capability built in. Given the current industry and carbuilder backlogs, order books are pretty full for 2024, and lessors should be planning accordingly, like GATX did with a multi-year order from TrinityRail in 2022. December 2023 // Railway Age 23
FREIGHT CAR MARKET
SUPPLY CHAIN IMPACTS In 2022, the supply chain for components was tight, driven by geopolitical
events and the tight labor market. While conditions have improved, there remain certain pockets of tightness, some of
which are driven by the wide diversity of cars in production, boxcars in particular. Recently, the biggest supply chain
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FREIGHT CAR MARKET challenge has been getting finished cars across the U.S./Mexico border. Border closures, especially at Eagle Pass in response to illegal immigration, have impacted the ability to deliver new cars. This is a f luid situation that may impact deliveries in 2024. LEASE PRICE TRENDS GATX’s LPI (Lease Price Indicator, p. 22, top) continues to trend upward. According to company sources, “we are in the early innings of the current lease price cycle.” Ironically, higher railcar prices drive higher lease rates. TrinityRail’s FLRD (Forward Lease Rate Differential) continues its upward trend as well: “Our forward-looking metrics continue to point toward consistent strength in lease rates, with a FLRD of 26.6% and lease f leet utilization of 98.1%,” Trinity reported in its third-quarter 2023 earnings statement. While lease prices trend upward, they are car-type specific. Coal, f lammable
Omni_newad.indd 1 railwayage.com
tank and frac sand car rates remain depressed, while most others are elevated and likely to remain so for the next couple years. Higher interest rates support higher lease rates and discourage speculation. The rapid rise in long-term rates over the past 18 months indicates that higher rates are here to stay. CARBUILDER PERFORMANCE The Greenbrier Companies reported deliveries of 26,000 railcars in its fiscal year that ended Oct. 31, and are projecting deliveries of 22,000 to 25,000 for its fiscal year 2024 (including 1,000 for Brazil). Importantly, Greenbrier already has the backlog to support this. The company’s gross margins on railcar sales came in at 9.3%, short of the “low doubledigit” objective, but expect further improvement going forward. Greenbrier has also committed $300 million annually to expand its lease f leet. TrinityRail’s gross margins on railcars in its most recent quarter were 5.2%, but
the company said it expects “to exit the year with a segment operating margin in rail products of 8% to 9% and the fullyear average of 5% to 6%, barring further substantial rail service issues at the border.” Like Greenbrier, TrinityRail’s backlog is strong going into 2024. Greenbrier’s and TrinityRail’s march toward double-digit margins on railcar sales continues through a combination of higher prices and lower costs. FreightCar America, in contrast, reported a 14.9% margin on sales of 503 railcars in its most recent quarter. For 2023, FreightCar America is planning to deliver 3,150 to 3,300 railcars. SUMMARY Higher railcar prices and elevated lease rates have indeed come to pass throughout 2023, despite softer carloadings. Expect more of the same going forward into 2024 and beyond. And if carloads turn the corner in 2024, things could look even better!
7/22/22 3:56 December 2023 // Railway AgePM 25
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ALTERNATIVE POWER, Figure 1. Training course in progress at the ARTC located at the TTC.
SPECIALIZED RESPONSE
Addressing the critical need for specialized hazmat training in lithium-ion battery and hydrogen railway vehicle emergencies. n the ever-evolving landscape of transportation technology, the emergence of lithium-ion batteries and hydrogen-fueled vehicles marks a significant advancement. However, this progress brings new challenges in emergency response, particularly in the railway sector. The Ambipar Response Training Center (ARTC), nestled in Pueblo, Colo., at the Transportation Technology Center (TTC) is at the forefront of addressing these challenges. RISING DEMAND FOR SPECIALIZED HAZMAT TRAINING To achieve greenhouse gas emission goals, the rail industry is currently embarking on a transformative pursuit of alternative energy sources for railway transportation. 26 Railway Age // December 2023
But the increase in lithium-ion battery and hydrogen railway vehicles underscores the need for specialized hazardous materials (HAZMAT) response training to ensure a safe and sustainable transportation future. The ARTC, located at the largest transportation testing and training facility in the world, is poised to utilize best practices from other modes of surface transportation and apply them for the railway industry through direct emergency response expertise and hands-on training to local HAZMAT responders. LESSONS FROM PAST ACCIDENTS Lithium-ion batteries have been used in commercial products for more than 25 years. They are used to power many modern devices we are all familiar with,
such as power tools, laptops, appliances and automobiles. Due to their widespread use, we have a significant amount of information about incidents. More than 25,000 incidents of fire or overheating in lithium-ion batteries have occurred over a recent five-year period, according to the U.S. Consumer Product Safety Commission. Additionally, the United States Coast Guard (USCG) issued a Marine Safety Alert in March 2022 regarding the transportation of lithium-ion batteries. Just like marine transportation, the freight railways will not only need to be capable of responding to emergencies involving railway vehicles powered by lithium-ion batteries, but also the increasing transportation of consumer goods that utilize the batteries, as well. railwayage.com
TTC Operated by ENSCO
I
BY LEE NELSON, DIRECTOR, AMBIPAR RESPONSE TRAINING CENTER (ARTC); AND MATTHEW DICK, P.E., CHIEF OF STRATEGY & DEVELOPMENT, ENSCO, INC.
TTC OPERATED BY ENSCO Recent incidents involving lithium-ion battery and hydrogen highway vehicles have highlighted the complex nature of such emergencies. For instance, lithiumion fires, characterized by high temperatures and potential for re-ignition, require specific firefighting techniques. A critical challenge is managing thermal runaway, where an increase in temperature causes a chain reaction leading to fire or explosion. This risk is amplified in the confined spaces of railway passenger vehicles or within tunnels. Methods in use to respond to lithium-ion battery highway vehicle fires include direct water spray on batteries, submerging the entire automobile in a water tank, and utilizing fire blankets to buy more response time. Unfortunately, in the case of highway vehicle battery fires, sometimes letting the fire run its course until it fully consumes the vehicle is the only option. This is obviously not a viable option for a railway vehicle. Hydrogen use in transportation is still considered to be emerging, so it does not have as many historical incidents as lithium-ion batteries. However, hydrogen vehicle incidents pose risks due to the highly flammable nature of hydrogen and the potential for explosive gas cloud formation. Hydrogen fires are almost invisible and can burn at extremely high temperatures. Detecting and controlling such fires in a railway scenario demands specific skills and equipment. Hydrogen is light and does rise and disperse easily. However, it can accumulate in enclosed areas, such as tunnels, posing a secondary risk. Additionally, the use of hydrogen in the rail industry may include utilizing it in a carrier form, such as ammonia. Ammonia can be converted to hydrogen on demand and is already transported in pressurized tank cars. Should the rail industry heavily adopt this method, ammonia response training would also need to be expanded as ammonia has its own unique emergency response characteristics. Adpting these response strategies to the railway industry involves unique challenges, given the larger scale of railway vehicles and the complexities of railway infrastructure. Ambipar utilizes and teaches the current best practices to address these events. Additionally, Ambipar and the TTC are dedicated to railwayage.com
advancing emergency response research needed for lithium-ion battery and hydrogen railway vehicles for even greater safety capabilities. AMBIPAR’S ROLE IN ELEVATING EMERGENCY RESPONSE The ARTC leverages several key training elements to equip first responders with the best capabilities for these possible events. The ARTC emphasizes hands-on training, allowing responders to experience real-world scenarios in a controlled environment. The center boasts facilities that simulate railway environments, providing realistic training grounds for handling lithium-ion battery and hydrogen incidents on trains. This includes actual tank cars, including in a hands-on mock derailment layout. A team of experts leads the training, imparting knowledge of the latest techniques and tools required to manage such emergencies effectively. Students also experience live fires and the crucial handson experience of remediating them. These approaches are crucial for understanding the behavior of lithium-ion battery and hydrogen fires in a railway context. Additionally, recognizing the varied nature of emergencies, ARTC offers customizable courses catering to the specific requirements of different railway
operators and emergency responders. Lastly, the ARTC collaborates with industry leaders and researchers to stay abreast of the latest developments in railway technology and emergency response strategies. CONCLUSION As the world shifts toward more sustainable transportation technologies, the role of the ARTC becomes increasingly vital. Training emergency responders to effectively handle incidents involving lithiumion batteries and hydrogen fuels in railways is not just a matter of enhancing safety; it’s about safeguarding the future of transportation. This comprehensive approach, combining practical training, customizable courses, and cutting-edge facilities, ensures that when it comes to handling the complexities of modern railway emergencies, the responders trained at ARTC are not just ready; they are ahead of the curve. More information about the ARTC can be found at https://ambipar.com/artc. REFERENCES: 1. https://www.cpsc.gov/s3fs-public/High_ Energy_ Density_ Batteries_ Status_ Report_2_12_18.pdf 2. https://www.dco.uscg.mil/Portals/9/ DCO%20Documents/5p/CG-5PC/INV/ Alerts/USCGSA_0122.pdf
December 2023 // Railway Age 27
People CORINA MOORE WSP Canada
HIGH PROFILE: WSP Canada last month named
Corina Moore Executive Vice President for Transportation and Infrastructure, effective Jan. 15, 2024. Moore, who will work out of the company’s downtown Toronto office, will be responsible for leading a Canadian Transportation and Infrastructure team that is “dedicated to developing sustainable, resilient, innovative and Future Ready™solutions for communities,” according to WSP in Canada.
Previously, Moore, a Province of Ontario native, spent 17 years with Ontario Northland, joining the company in 2005 as its Director of Telecommunications. She held multiple senior leadership positions, including Chief Operations Officer, eventually being named President and CEO in 2014—the first woman president of a major Canadian railway. Moore led several strategic initiatives during that time, including Moving Forward, a program designed to “improve efficiency, grow revenues and promote the value of ONR’s transportation expertise, to successfully revitalize the organization.” “Corina has been a recognized leader in the transportation industry for many years,” said WSP Canada President and CEO Marie-Claude Dumas. “Her industry experience and collaborative approach make her an ideal fit to lead our Transportation and Infrastructure sector.” In November 2017, Moore was named one of Railway Age’s inaugural Women in Rail award honorees. She was the first woman ever to appear on the cover of Railway Age (above).
S
TV has tapped three executives to lead its transportation market in the Pacific Northwest, to serve as an infrastructure program advisor and manager, and to oversee the geotechnical and tunnel practice on the West Coast, respectively. Bryan Williams was named Vice President and Pacific Northwest Area Manager within the Transportation West Group. In this role, he will manage all local staff, oversee project delivery, advance business development activities, and nurture client relationships in the region. Williams is a professional engineer and project manager with more than 20 years of experience in transportation infrastructure planning, design and construction. According to STV, he has led multimillion-dollar 28 Railway Age // December 2023
continuous improvement programs, from the initial planning stages to successful project delivery, with specialty expertise in design-build and alternative delivery. Prior to joining STV, Williams worked for a global engineering and consulting firm, where he served as a Senior Project and Design Manager, overseeing the delivery of infrastructure projects in the Puget Sound region. Matteo Montesi is STV’s new West Coast Vice President and Engineering Director in its Tunneling and Geotechnical Practice. He served previously at WSP USA, supporting highways and bridges, buildings and naval facilities, rail transit, airports, and energy projects on the West and East coasts. In Southern California, Montesi contributed to key regional projects, such as
the Mid-Coast Transit Corridor Project in San Diego, the Los Angeles County Metropolitan Transportation Authority Purple Line Extension, and the I-105 Express Lanes project in Los Angeles, according to STV. Outside of California, he has supported the New York MTA’s Second Avenue Subway and the LaGuardia Airport Central Terminal Building Redevelopment in New York City; the Port of Alaska Modernization Program Cargo Terminal 1 Replacement; and the Texas High-Speed Rail Project. Monica G. Tibbits-Nutt has been appointed Secretary of the Massachusetts Department of Transportation (MassDOT). She had been leading the department in an acting capacity since Sept. 11. Elevated from MassDOT Undersecretary for Transportation, Tibbits-Nutt succeeds Gina Fiandaca, who announced in August that she would step down from the leadership role. Fiandaca was appointed in January by Massachusetts Gov. Maura Healey to oversee the Highway, Rail and Transit, Registry of Motor Vehicles, and Aeronautics divisions. “Monica is a proven leader who has done important work at MassDOT over the past year as we’ve worked to make Massachusetts’ transportation system more reliable, safe and accessible,” Healey said. “As Acting Secretary, she hit the ground running by working with the MBTA to prepare a first-of-its kind plan to fix the tracks by the end of next year, taking important steps to integrate climate planning across MassDOT, securing federal funding to support infrastructure needs, and stepping up for communities that were devastated by extreme weather. She prioritizes community engagement and equity at every turn.” HDR named Sean Flaherty Transportation Sustainability and Resiliency Director, responsible for leading sustainability and resiliency efforts across the company’s transportation-related service offerings. He will also support services throughout the full program life cycle. Flaherty’s 16-year career has centered on advancing sustainability efforts across the Carolinas. Most recently, he was the Energy and Transportation Program Manager for the Central Pines Regional Council. railwayage.com
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Ad Index COMPANY
URL/EMAIL ADDRESS
PHONE #
PAGE #
AMERICAN CONCRETE PRODUCTS
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bhutchinson@enterprise-properties.com
24
AMSTED RAIL GROUP
312-922-45161
kskibinski@amstedrail.com
13
CIT
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James.Spencer@cit.com
11
DANELLA RENTAL SYSTEMS
561-743- 7373
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17
GREENBRIER COMPANIES THE
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15
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16
HIRAIL CORPORATION
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19
L B FOSTER COMPANY
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20
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C4
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25
RAILWAY EDUCATIONAL BUREAU
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29,C3
RELAM
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3
TRINITY RAIL
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C2
The Advertisers Index is an editorial feature maintained for the convenience of readers. It is not part of the advertiser contract and Railway Age assumes no responsibility for the correctness.
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December 2023 // Railway Age 31
ASLRRA Perspective
Short Lines Are Dependable and Get the Job Done
T
he story of “The Little Engine That Could” began as an American folktale popularized by various authors in the 1900s. An early published version of the tale appeared in 1906 under the title “Thinking One Can” in Wellspring for Young People, a national Sunday School Publication. A subsequent version was published in 1910 in the Kindergarten Review under the title “The Pony Engine.” In 1930, the story became widely known under the title “The Little Engine That Could” after a Chicago publishing house released it as an illustrated children’s book that was used in schools to teach children the value of optimism and hard work. While the story of the little engine has been told and altered many times, the underlying theme is the same: A stranded train is unable to find a large engine willing to take it over difficult terrain to its destination. Only the little engine is willing to try, and while repeating the mantra “I think I can, I think I can,” overcomes a seemingly impossible task. For many years the modern short line industry has worked hard to erase the image of short lines as the toy trains of children’s stories or a quaint name on the Monopoly board. Nevertheless, it is impossible to ignore the parallels between the children’s story and the real story. Today, short lines are critical first-mile/last-mile service providers striving to be excellent partners and connectors to shippers and the national Class I railroad network. That link is increasingly understood and appreciated by the many stakeholders in the transportation industry. At our November regional meeting in Lexington, Ky., ASLRRA hosted a panel discussion with customers shipping aluminum, plastics, coal and stone products. Their comments encapsulated the modern short line story: • “Our company has grown up together with our short line.” • “We can call our short line literally anytime because it’s a partnership.” • “Short lines are actually easy compared to trucks.” • “Our short line is dependable and gets the job done.” 32 Railway Age // December 2023
• “Our short line makes it easy; they answer the phone.” • “Price is key for us, but we use rail for more than just cost. It helps with our carbon goals. It’s important to the safety of our facilities because we have fewer trucks and drivers around.” • “We will not build a facility unless there is short line service available.” After a tumultuous six years or so, the Class I railroads are now increasing their focus on growing volume on the network and providing the service that shippers demand, and increasingly recognizing that short lines are a key partner for delivering on both of those goals. For instance, CN just revived its previously shuttered Short Line Conference and sent an unusually large (20-plus) and high-level (four SVPs) delegation to our 2023 Annual Conference in New Orleans, La. Norfolk Southern is likewise reinvigorating its Short Line Caucus and appointed former Watco EVP and former ASLRRA Chairman Stefan Loeb, as VP of First and Final Mile Markets. CSX’s Joe Hinrichs, a keynote speaker at our 2023 Annual Conference, is similarly placing new emphasis on short line connections, and has just reorganized the railroad’s strategy team to put short lines under the very qualified leadership of Farrukh Bezar, Tom Tisa and Mike Clements. Government regulators are also increasingly engaged with and supportive of short line railroads. For instance, in the Surface Transportation Board’s recent reciprocal switching proposal, short lines were largely excluded as the STB explained that it has not heard any meaningful amount of formal or informal complaints about short lines from their shippers. Likewise, the Federal Railroad Administration (FRA) has rightly given short line railroad projects an increasingly large share of CRISI grant funds. Between CRISI’s 2017 launch and 2021, 103 short lines received grants totaling more than $672 million. The recently announced FY22 awards were record breaking for our industry: Short lines garnered 47 of the 70 projects awarded for $720 million, about half of the $1.4 billion available. To paraphrase one FRA official speaking in a CRISI application debriefing:
“Short line project benefits are significant, easily measured and begin almost immediately after project completion.” The availability of short line rail service benefits local economies. The Lancaster & Chester Railroad (L&C) completed a CRISI project in 2021 in South Carolina. Former Chester County Council Member Alex Oliphant, who has been heavily involved in the county’s economic development efforts, put it this way: “During the past 11 years, Chester County has attracted more than $3 billion in new industrial development creating almost 4,000 new jobs. This massive amount of opportunity is a direct result of having short line L&C as our partner.” “The Little Engine That Could” story was revamped many times in books and later in film versions, but the little engine consistently appeared, rose to the occasion and saved the day. Today’s short lines are writing our own version of this story. While we are still saving the day for our many shippers, providing outstanding and sometimes unique services, we are more than “thinking we can.” Our value as a provider of service for our shippers, a driver of growth for the rail network and a key benefit for our communities is being recognized by our Class I and government partners. ASLRRA will host its 2024 Annual Conference and Exhibition in Kansas City, Mo., on March 24-26. We look forward to what is the largest and best opportunity of the year to bring together all the stakeholders in the short line industry and to hear from many industry and government leaders who will continue to shape and improve the first-mile/last-mile service and connections that are an increasingly important part of today’s rail industry.
CHUCK BAKER President ASLRRA
railwayage.com
We’re current, are you? FRA Regulations Mechanical Department Regulations
Now Include Part 22 s 4
A combined reprint of the Federal Regulations that apply specifically to the Mechanical Department. Spiral bound. Part Title 210 Railroad Noise Emission Compliance Regulations Updated 4-15-19. 215 Freight Car Safety Standards Updated 1-6-23. 216 Emergency Order Procedures: Railroad Track, Locomotive and Equipment Updated 1-6-23. 217 Railroad Operating Rules Updated 11-13-23. 218 Railroad Operating Practices - Blue Flag Rule Updated 11-13-23. 221 Rear End Marking Device-passenger, commuter/freight trains Updated 1-6-23. 223 Safety Glazing Standards Updated 1-6-23. 224 Reflectorization of Rail Freight Rolling Stock Updated 1-6-23. 225 Railroad Accidents/Incidents Updated 1-6-23. 229 Locomotive Safety Standards Updated 11-13-23. 231 Safety Appliance Standards Updated 1-6-23. 232 Brake System Safety Standards Updated 1-6-23.
There are no new proposals or final rules to report for this issue. Be sure to check back next month to see if there are any changes to FRA regulations.
Part 213: Track Safety Standards 49 Part 213, Subparts A-F. Classes of Track 1 through 5: Applies to track required to support passenger and freight equipment at lower speed ranges. Includes Defect Codes and Appendices A, B, and C to Part 213. Softcover. Spiral bound. Updated 1-6-23.
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