Market Overview

A Tale Of Two Cities: Railroads Address Congestion In Chicago, Houston

A Tale Of Two Cities: Railroads Address Congestion In Chicago, Houston

Rail congestion in regions such as Chicago and Houston may have eased for now, but the railroads will still need to find ways to increase capacity at those busy city locations as the U.S. population grows, Class I railroad executives said at an investor conference this week.

"You're still going to need additional capacity. You're only going to wring so much out of Chicago," said Canadian Pacific (NYSE: CP) chief executive Keith Creel at an investor conference sponsored by Bank of America Merrill Lynch on May 14.

While growing capacity at Chicago might be a discussion that could span years, in the short term, precision scheduled railroading (PSR) could help improve network fluidity in the region, Creel said.

Proponents of PSR say when PSR is deployed properly, the operational model minimizes dwell time and improves network fluidity.

Meanwhile, Chicago tends to feel capacity constraints more acutely because it is a major interchange point for the freight railroads. Severe winter weather can also severely hamper rail activity in the region.

Union Pacific (NYSE: UNP) executives attributed the lack of congestion their railroad is currently seeing around Chicago to PSR. The company also recently announced plans to trim its intermodal assets in Chicago from six facilities to three as a result of its efforts to implement PSR and streamline operations.

PSR is "all about moving the cars faster. And I know the people in the other railroads–we all want to work together on how we interchange and how we do it in a more efficient manner," UNP chief operating officer Jim Vena said.

To tackle Chicago's long-standing tendency toward congestion, the Class I railroads, along with state and federal agencies, fund the CREATE program. CREATE, which stands for Chicago Region Environmental and Transportation Efficiency, has a list of projects it is seeking to pursue long-term aimed at reducing congestion through efforts such as track upgrades and the construction of overpasses and underpasses and grade crossings. The program announced in late April that it broke ground on a $32 million project for double tracking.

Meanwhile, market observers have noted that reduced rail volumes in 2019 might also be contributing to a lack of congestion around Chicago in the near term. North American rail volumes for the week ended May 11 were down 2.5 percent to 724,602 carload and intermodal units from the same week in 2018, while year-to-date volumes are down 1.3 percent from 2018 to 13.4 million carloads and intermodal units, according to the Association of American Railroads.

While Chicago is notorious for rail congestion, Houston is another area that sees a lot of rail activity because of its port and access to Kansas City Southern (NYSE: KSU), BNSF and UNP.

Because Houston can get congested, KSU has had to resort to staging trains in Laredo, Texas, or Shreveport, Louisiana, according to Sameh Fahmy, KSU executive vice president for PSR.

Congestion was so bad around Houston from around March 15 to late April, according to Fahmy, that KSU went to the dispatch center in Houston and worked with UNP to watch trains being dispatched for two days in April.

But from those days observing, KSU implemented changes and now only two trains are being held and staged away from Houston, down from 24 trains earlier this year, Fahmy said.

Image sourced from Pixabay

Posted-In: Freight Freightwaves Logistics Railroads Industry Supply ChainNews Markets General Best of Benzinga


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