Freight Trains: Giving American Industry the Competitive Edge

America’s freight railroads are on the move – and some of the prime beneficiaries of the gains being made are the thousands of businesses and industries that rely on them for safe, efficient and affordable freight transportation. As a result of their services, manufacturers, farmers and mining companies located in the United States are able to compete effectively world-wide. 

Evidence of the progress being made by freight railroads abounds. 

Increased volume – Before the economic recession hit in 2008, rail volume was at its highest point in history, reaching almost two billion tons per annum. As economic recovery continues, freight rail volume will soon eclipse those pre-recession levels. 

Efficiency – US freight railroads have consistently been among the US industrial leaders in productivity gains ever since 1980. Since then, traffic density per track mile has tripled, and freight volume per employee hour has increased almost five-fold.  

As productivity and volume have increased, so has investment in the rail freight network. In fact, since 1980, privately-owned freight railroads in the US have invested some $480 billion of private – not government – funds to maintain and improve track, equipment and communications systems as well as to increase capacity. Some 40 cents out of every revenue dollar goes to fund maintenance or improvements to railroad infrastructure. 

In fact, in 2011 private freight railroads plan to invest some $12 billion in capital improvements alone, the most in history.  Freight railroads invest an average of 17 percent of their revenues in capital expenditures, four to five times as much as is typical in most other U.S. industries. 

Improvements in efficiency and gains in investment have brought with them impressive advances in safety. Last year was the safest in history for US railroads, as both the train accident rate and the employee injury rate fell to record low levels. Over the past three decades, the accident rate has dropped by more than 70 per cent while the employee casualty rate declined by more than 80 per cent. Safety and efficiency truly are two sides of the same coin on US freight railroads. 

This combination of more volume, increased efficiency, record-breaking investment and greater safety has benefited freight rail shippers, the majority of whom have seen their rates drop by half on an inflation-adjusted basis over the past three decades. Studies show that the US rail freight network provides the world’s most cost effective freight service. In 2009, rail rates averaged just a little over 3 cents per ton-mile. 

One major difference that sets the US railroad system apart from those in much of Europe is that it is largely a freight-oriented network. Although Amtrak provides a nationwide network of passenger trains connecting more than 500 cities (and some cities have extensive commuter rail networks), outside of the Northeast Corridor most passenger lines see one train in each direction per day. Also, outside of the Northeast Corridor between Boston, New York and Washington, DC, and a few other locations, the rail lines are owned by freight railroads. This means that the needs of freight customers receive far more focus than is possible in a network where most of the emphasis is on passenger trains. 

The US freight rail network is vast – approximately 140,000 route miles long (or more than half the distance to the moon). Of this, about 95,000 miles are owned by the nation’s seven Class I railroads, the largest freight carriers which among them account for some 93 per cent of country’s freight rail revenue. A network of more than 550 shortline and regional railroads provide freight service along 30 per cent of the rail mileage, mostly lines that have relatively light volume. These feeder lines connect to the Class I railroads, granting their customers seamless access to the entire rail network. 

About 175,000 people work for freight railroads in the US. Eighty-five per cent of them are employed operating trains or maintaining track, facilities and communications networks. Most undergo extensive training programmes to instill a culture of safety first and to enhance efficiency. 

Railroads provide the backbone for the US freight transportation network. Based on ton-miles (tonnage multiplied by average length of haul) railroads provide more than 40 per cent of the freight transportation in the US, more than any other transportation mode. This contrasts with an average of less than 15 per cent in Europe. What is more, that percentage has increased over the past three decades and is expected to increase further in the future. 

There are several reasons for this: 

Fuel efficiency – Railroads have more than doubled their fuel efficiency over the past thirty years, and can now move a ton of freight an average of 484 miles on each gallon of diesel fuel consumed. That is three to four times as far as it can move on the highway, an advantage that has become increasingly important as diesel fuel costs have soared to well over $3 per gallon. 

Environmental – Moving a ton of freight by rail reduces greenhouse gases by two-thirds in comparison with moving it by highway.  

Reduction of highway congestion – A single intermodal train can carry the equivalent of 280 trucks over long distances.  As an added benefit, new rail capacity can be added at a fraction of the cost required to build new highways. As railroads are privately owned and privately financed, new investment can be targeted where it is most needed, not where it is politically advantageous. As a result, policy makers increasingly look to rail to meet more of the nation’s freight requirements. 

Railroad innovations also play a role in encouraging more shippers to look at rail to move their goods. Specialized freight cars meet the needs of the automotive industry, chemical companies, grain producers, the forest products industry and mining companies.  

US railroads have also been pioneers in the development of intermodal transportation. Since 1980, intermodal transportation – the movement of containers or trailers on rail equipment in cooperation with trucking companies and/or shipping lines – has more than tripled. Intermodal now vies with coal as the largest source of revenue on US railroads. 

One key to growth of intermodal was the development of double-stack trains in the 1980s. By stacking one container on top of another, a single double-stack train can remove the equivalent of 280 trucks from the highways, reducing fuel consumption, air pollution and highway congestion all at the same time. This service is so efficient and reliable that trucking companies have become among the railroad industry’s best customers. 

In the US, tracks are owned by the companies that use them. This means they are able to direct new investment where it is most needed, and railroads have been investing heavily to expand capacity so that their rail networks could handle ever-increasing volumes. BNSF Railway, for example, has almost completely doubled-tracked their main line between Los Angeles and Chicago. Union Pacific is in the process of double-tracking its line between Los Angeles and El Paso. Kansas City Southern has, in effect, created a new intermodal route between the US Midwest and the Mexican port of Lazaro Cardenas. East coast carriers Norfolk Southern and CSX Transportation are also investing heavily in projects to ease transportation to and from ports. Norfolk Southern’s Heartland Corridor has slashed hundreds of miles from double-stack routes between Norfolk, VA and the Midwest. Their Crescent Corridor and CSX’s National Gateway Corridor will also improve clearances for double-stack trains and slash transit times.  Both Canadian Pacific and Canadian National Railway have made substantial improvements to their routes from British Columbia to the East. 

In some of those projects railroads have provided all of the financing needed to increase capacity. In other cases, they have partnered with government entities in Private Public Partnerships in which railroads pay for the benefits they receive while the public pays for public benefits like reduced pollution and less highway congestion. 

One other example of a Public Private Partnership is CREATE in Chicago. Six of the largest freight railroads in the US are working with Amtrak, Metra (the local commuter rail service), the City of Chicago, the State of Illinois and the federal government to improve freight transit times through Chicago, while at the same time reducing highway congestion and air pollution and improving rail passenger service. 

This finely tuned US rail freight network is what makes it possible for a heavy equipment manufacturer in Illinois, a mine in West Virginia, an appliance manufacturer in Ohio and a grain farmer in the Dakotas to compete effectively in markets across the globe. 

Demand for transportation is certain to increase in the years ahead.  One thing that will not change is the commitment of US railroads to meet that demand.

About the Association of American Railroads

The Association of American Railroads is recognized world-wide for its efforts to improve the efficiency and safety of freight railroads.  Helping keep the industry on the cutting edge of information technology is a wholly-owned subsidiary, Railinc of Cary, N.C.  Another wholly-owned AAR subsidiary — TTCI of Pueblo, Colo. — is generally regarded as the most advanced freight rail research and testing facility in the world.  AAR members include most of the major freight railroads in the United States, Canada and Mexico, as well as Amtrak, some commuter railroads and numerous shortline freight railroads.  In addition, almost 100 railroad suppliers are associate members –

American British Trade & Investment
This article was originally published in American British Trade & Investment 2012, the annual investment guidebook produced by BritishAmerican Business, the leading transatlantic organization dedicated to helping its member companies build their business on both sides of the Atlantic.

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Sectors: Business Services
Countries: United States
Topics: Freight Forwarding and Transport & Logistics
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