Rails or Roads? Rail carriers and truck lines battle for customers

Collaboration – not competition – remains the watchword for rail freight carriers and trucking companies even though steep oil prices already have caused hundreds of truck lines to shut down this year.

Many may be wondering if the high cost of diesel fuel favors the railroad when it comes to the affordability of shipping freight, but companies on both sides of the equation agreed that demand for their respective modes of transportation is solid – for now.

Steve Forsberg, a spokesman for Fort Worth, Texas-based BNSF Railway, said the railroad, which has a significant presence in southwest Missouri, has seen an increase in certain types of freight, such as grain, coal and ethanol, but the volume of shipments related to home building and automobile industries are down.

“In the short term, it’s been kind of a wash,” Forsberg said. “They’ve fairly well offset one another in terms of volume.”

Even with skyrocketing fuel costs thinning the herd of U.S. trucking firms, industry officials are confident that their over-the-road trailers remain the best option for time-sensitive shipments. For clock-watching customers, the trucking model wins out, said Herb Schmidt, president of Joplin-based Con-way Truckload.

“I think the limiting factor … with rail is it’s a pretty static infrastructure, and you can only push so much volume through that infrastructure, whereas you can always add trucks to take care of customers’ needs,” Schmidt said. “So I think there will always be room for both.”

Shakeout expected

The U.S. Department of Transportation has projected that national rail volumes will double in 20 years, and Forsberg said the volume of freight moving across the BNSF network has increased 50 percent since 1996.

“We fully expect rail to become an increasingly important part of the U.S. transportation picture, simply because it is the most fuel-efficient means we have of moving freight long distances,” he said.

From 1990–2006, ton-miles per gallon of fuel consumed by freight trains rose to 423 from 332, according to the Federal Railroad Administration.

The FRA reports that railroad companies are making their operations more fuel-efficient by traveling longer distances between interchanges, using innovative equipment and reducing locomotive idling time.

So where does that leave trucking firms reeling from rising fuel costs?

Strangely enough, freight orders are picking up for many trucking companies with membership in the Missouri Motor Carriers Association, said MMCA spokesman Tom Crawford. But like railroad companies, certain trucking firms – mainly those with large flatbed fleets – have been hit hard by the housing slowdown. Crawford said 935 American trucking firms went out of business in the first quarter of 2008.

“I think there is going to be some shakeout between rail and trucking,” he added. “But as we kind of settle out on the trucking side of it, I think you’ll see the companies that are around have gotten leaner, meaner and more efficient in how they deliver. So I think they’ll be able to compete.”

Despite the market turmoil, Crawford said there’s still a healthy demand for trucks because of their ability to deliver freight shorter distances on a tight time schedule. Moving freight by rail lends itself to longer hauls that aren’t as time-sensitive, he added.

John Hancock, spokesman for Springfield-based truck line Prime Inc., cited American Trucking Association statistics that suggest trucks move about 70 percent – some 11 billion tons – of all freight in the U.S..

“All the projections seem to indicate that the shipping volume on the highways is going to dramatically increase over the next few years,” Hancock said.

Total domestic truck tonnage increased nearly 40 percent from 1990-–2006, according to the ATA.

The trade group also has predicted a 30 percent increase to 14 billion tons by 2018 – the same year total projected volume for freight railroads will reach about 3 billion tons.

Intermodal on the rise

Some trucking companies are actually looking to rail carriers to save on fuel by having their trailers hitch a ride on trains, also known as intermodal transport.

According to the Federal Railroad Association, intermodal is the fastest-growing segment of rail traffic, with 12.3 million trailers and containers moved by rail in 2006. That’s up from an average of 3.4 million in the early 1980s.

California to Illinois is the busiest rail corridor for intermodal traffic, according to the FRA, and it’s a route commonly used by one of Springfield’s largest manufacturers.

Bulk cheese processed locally by Kraft Foods Inc. is shipped via rail from California to Kansas City, where it’s then hauled by truck to Kraft’s Springfield plant, according to Kraft spokeswoman Cathy Pernu. Finished product is then shipped back to California for distribution, she added.

“There definitely are cost and environmental benefits to shipping intermodal, and we are interested in pursuing additional opportunities,” Pernu said.

Con-way Truckload’s Schmidt said the company isn’t entirely opposed to moving its trailers by rail, but that the cost savings appear negligible at best right now.

Schmidt said he recently looked at moving a large shipment of trailers from Dallas and Memphis to the Northeast by rail but opted to drive them to their destination after price quotes from the railroad companies were higher than he had hoped.

“I wasn’t saving a lot of money,” he said. “Any kind of hiccup, and I would have been in a wash. In that particular case, I was kind of surprised at how close the rates were. I thought there’d be more wiggle room.”

Schmidt noted that the empty trailers – a load that wouldn’t have generated any revenue to offset the rail cost – also were moving along a shipping lane that Con-way rarely uses. Most of its freight goes west and then into Mexico, he said.

“I have seen the gap between truck and rail rates reduce over the last few years as their capacity has been gobbled up,” Schmidt said. “Rail rates have gone up, comparatively speaking, to truckload rates.”

Still, BNSF’s Forsberg thinks rail freight volume could see a significant boost when home building and auto markets rebound from their current woes.

When that could occur is anyone’s guess, he said.

“That really is the magic question,” Forsberg said. “It depends on what’s going to happen with the economy. As the economy recovers and consumer spending picks up, that obviously is going to drive freight.”[[In-content Ad]]