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The resurgence of rail

Suddenly it matters that railroads can haul  three times the freight as trucks for the same amount of fuel. Truckers face doubling prices for diesel. Container ships full of imports from China clog U.S. ports. Demand’s up to transport coal to run electric power plants. It’s comeback time for rail, especially in the high-growth area linking Tampa Bay, Orlando and Jacksonville. A bonus: Florida’s nearly 2-million rail car loads keep 6-million heavy trucks off the highways each year.

It wasn’t so long ago that the railroad industry was the little engine that couldn’t: Consolidations, bankruptcies, rusty tracks, bicyclists racing down abandoned rail beds.

But look who’s smoking: After chugging distantly behind the trucking industry, the railroad industry is riding resurgent on the back of high oil prices and booming international trade.

Companies like CSX Corp., Florida’s biggest with 1,750 miles in the state, are anything but stagnant. CSX of Jacksonville is handling its highest carload volume since 1998. The $8.6-billio

n company’s stock has soared 66 percent since January 2005, 10 times the return of the Dow Jones Industrial Average.Flush with confidence, CSX is trying to revolutionize its business, stemming an industrywide slump that began with the construction of truck-friendly interstate highways in the 1950s.

Through billions of dollars of investment in tracks, terminals and computerization, CSX wants to create efficient “interstate highways of rail” that could speed freight to and from the Tampa Bay area. The plan is to combine the reliability of trucks with the low cost of rail.

Central to the plan is a huge terminal in Winter Haven that CSX proposed this year. Halfway between Tampa and Orlando, the 1,200-acre facility could become the main distribution point for consumer goods like clothing, toys, household goods and electronics in Central Florida.

In Orlando, a commuter passenger line aims to piggyback on 60 miles of CSX tracks. It will try to copy the success of the West Palm Beach-to-Miami Tri-Rail commuter line, which uses CSX freight lines. The passenger trains would divert freight onto the company’s tracks through Hillsborough and Pasco counties.

“It’s the whole railroad renaissance,” said Anthony Hatch, a New York independent railroad analyst. “Railroads never were finished, but looked stagnant at best. Now they’re growing faster than trucks in the past year and a half.”
Why should the average person, as opposed to the investor in transportation stocks, care?

According to the state Department of Transportation, the state’s nearly 2-million rail car loads keep 6-million heavy trucks off the highways each year. The growth of the suburbs north of Tampa and St. Petersburg promises more hurtling on the highways between long-haul truckers and commuters.

One of the Florida Department of Transportation’s chief missions is to reduce highway congestion. Moving freight onto rails and off the asphalt is one prong of the effort.

For all the nuisance of waiting at rail crossings, a train can haul the contents of 300 trucks. Nationally, a modest increase in rail over truck could save hundreds of millions of gallons of fuel yearly.

The rebirth of rail has had a long gestation. The federal government deregulated trucking and railroads in 1980, but in terms of growth the railroads were the tortoise to the trucking industry’s hare. Until two years ago, railroads hadn’t raised prices for more than two decades, so great was the competition from big rigs.

Two major things happened to change that. High oil prices doubled the price of diesel fuel both industries rely on. Railroads are more fuel-efficient than trucks. On average, they can haul three times the freight for the same amount of fuel.

The explosion of Asian trade over the past decade has played to trains’ strengths. Chinese imports pouring into ports — and U.S. exports such as wheat and phosphate shipping out — need trains to move them most economically across the country.

Those benefits have helped rail overcome its traditional disadvantage relative to trucks: Goods on rail move less flexibly, more slowly and less punctually.

“Truckers are feeling the pain at the pump,” CSX spokesman Gary Sease said. “We’re using 600-million gallons a year. But it’s hurting the truckers even worse.”

Another boon to railroads has been the upsurge in coal to fuel the power plants that generate Florida’s electricity. Railroads are one of the few economical ways to haul such bulk goods long distances.

Hauling containers are helping railroads to branch from low-value commodities like coal, phosphate and grain to high-value finished goods like electronics and furniture that traditionally used trucks.

Containers are rectangular steel boxes in which most consumer goods are shipped. The industry is hauling 40 percent more containers than it did five years ago, 11.1-million in 2005 versus 7.9-million in 2001. There’s no letup in sight: Trains are expected to pull 5 to 7 percent more containers in each of the next five years.

CSX isn’t as advanced as some competitors like Norfolk Southern, but in 2005 the railroad moved 2.2-million containers or their wheeled cousins, trailers. This so-called intermodal business — freight shifting among ship, rail and trucks — has grown bigger than CSX’s core coal and iron ore business.

Even truckers are willing to pump up a traditional competitor if it means saving money. Multibillion-dollar trucking companies like Schnei­der National and J.B. Hunt are doing long hauls aboard rail cars, subcontracting to carriers such as CSX. (Dollar for dollar, trucks move about 70 percent of the freight in the country versus 15 percent for railroads).

Tampa’s intermodal yard, off 62nd Street not far from the seaport, is a model of cooperation between the formerly competitive trains and trucks.

A mile-long lot is lined with hundreds of containers. The claws of giant diesel-powered side loaders grapple with the containers and hoist them to and from truck chassis and rail cars. Truckers circle the lot looking for loads to carry to warehouses and supermarkets.

Most of the 7,000 containers the yard handles each month, painted with logos of such giant international shippers as Maersk and China Shipping, came through ports in Savannah and Charleston, S.C., feeding Tampa’s hunger for such items as packaged groceries and furniture.

Terminal manager Ken Langham notes that railroads aren’t just more fuel-efficient, but more labor-efficient. Trucking firms can’t find enough drivers to ply the lonely highways. Fearful of fatigue-related accidents, the government limits the number of hours a trucker can drive.

“That’s what it’s going to have to be for the future. We’re going to have to be partners. There’s just not enough trucks to haul all this stuff,” Langham said.

CSX’s proposed Winter Haven terminal could be 10 times the size of Tampa’s operation. CSX hopes the hub will handle, according to one CSX executive, “everything you buy in your local Target.” Big retailers would warehouse products on site and use trucks for the short haul to individual stores. It could open in 2008 or 2009.

To be more trucklike, CSX wants to zip fully loaded trains directly to Winter Haven from places like Chicago, avoiding the need to decouple and combine smaller trains in Jacksonville, as the company does now.

“It ought to take a chunk out of long-haul trucking,” said Hatch, the Wall Street railroad analyst.
One model for Winter Haven is an intermodal terminal in Alliance, Texas, run by Burlington Northern Santa Fe. The railroad handles about 40,000 containers a month at Alliance. Clients include Daimler­Chrysler, JCPenney, Best Buy, Michael’s and Hyundai.

But is rail ready for the big time? With rail intermodal expected to grow at twice the rate of trucking in the next 10 years, railroads need to unknot their networks, said Tom Malloy of the Intermodal Association of North America.
Booming trade with China is drawing massive container ships into U.S. ports. The biggest port, in Long Beach, Calif., handles ships carrying up to 6,000 containers. Cargo from some ships requires 10 trains, each pulling nearly 2 miles of cars, many cars stacked double high with containers.

Faced with such logistical challenges, the railroads are seizing up, Malloy said. One well-known logjam occurred in Jacksonville around Christmas, a tie-up related to South Florida’s high demand for goods after Hurricane Wilma.

Part of CSX’s expansion plans includes laying extra rail sidings in Pasco and Hillsborough. Such sidings let trains heading in opposite directions pull aside for each other, giving a single track system the benefits of a double track.

“Think of an airport Sunday morning versus an airport Monday morning,” Malloy said of the railroads’ growth pains. “It’s like trying to get an elephant to do the hurdles.”

James Thorner can be reached at thorner@sptimes.com or (813) 226-3313.