COSTMINE with the downward trend more pronounced from 2015 to 2023. The thin red dotted curve is a best-fit trend of rail loadings from 2007-23 to show loadings have decreased by 24.6% from an average of 1.3 million carloads per month in 2008 to an average in 2023 of 995,000 carloads per month, with the January 2024 count at 1.0 million carloads. Business volume has clearly decreased. A nearly
identical but subdued downward trend in railcar loadings is also underway in Canada with a decrease in volume of 12.5% from 2015 to 2022. An explanation for the initial question of the sudden upward cost trajectory now favors rate or price increases as the cause for sharp increases in cost, as loading data show shipper volumes are eliminated as a cause.
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Other factors in rising rail costs
Is there more to the saga of high and increasing costs in railroading? The largest railroad companies earn revenue margins of 15%, and returns on capital invested are in the order of 12% to 14%. Data was not available on earnings of railroad employees, although employment in the industry (Fig. 4) has fallen from about 190,000 before 2016 to about 145,000 today. Class 1 railroad employment (not including warehousing) was 122,343 in December 2023. Freightwaves. com says the cost to build railcars has risen from US$50,000 in the past to US$150,000 today with about 100,000 more rail cars in service today at 1.6 million compared to 1.5 million in 2009. About 17% or 339,000 railcars remained in storage (not used or idled) of the total of nearly 2.0 million railcars (AAR Oct 2021). Perhaps the most significant factor is that railroads now must operate under the rule of precision scheduled railroading (PSR) to protect against high speed and to reduce accidents and increase profits or operating ratios. Costs of implementing PSR are borne by each railroad. Operating ratios have been sub-60% during the years-long period to implement PSR. Railroads continue to report that PSR provokes disruption at the six major U.S. and two major Canadian railroads and negatively affects service. To reach sub-25% ORs, chair Martin J. Oberman of the Surface Transportation Board says railroads must cut employment. This seems to be underway (Fig. 4), but the result translates to higher costs borne by rail shipping customers. The reason for the upward trend to explain higher cost is complex and no one reason can be identified as a single cause, so the cause involves multiple factors. It is clear that increases in cost or rates best explain and translates to the much higher costs charged by railroads today. More information to address the question of or to explain high cost is available for the 2023-24 period entitled 2023-2024 Update – Rail Industry and Freight Rates is provided in Appendix B-Transportation (TR) a chapter in Mining Cost Service of CostMine.com. CMJ Dave Boleneus is a seasoned analyst with over 45 years of professional experience in major mining companies, oil corporations, and esteemed consulting organizations globally.
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