Monday, March 31, 2008

One day you're the main line, the next you're a forgotten siding

"It’s a lack of care and concern on the part of Canadian National. It is convenient to blame it on the weather, but they take care of Prince Rupert and they have bad weather."-- Merv Russel, former chairman of the Port of Halifax, less than impressed with CN's attitude towards his former responsibility.

Prince Rupert's Fairview container port has certainly caught the attention of the transportation world, as CN's investment in the Northwest part of BC apparently is causing a bit of concern on the opposite side of the country.

And if it's not corporate indifference, it's a declining economic situation in the US marketplace that is starting to ring a few alarm bells in the transportation world. Two separate stories today, both in their way a window into the ebb and flow of trade and transportation in North America.
Tales to make note of locally, that the world of transportation has more than a few peaks and valleys to it, as circumstances far away can impact on the state of affairs anywhere that cargo is hauled to.

The Halifax Chronicle Herald examines the state of affairs at the east coast container terminal, while Business Week looks at the wider issue of an economic downturn in the US and how it is affecting the container transportation world across that country.

Losing traction
Port authority ex-chairman decries decline of business, criticizes CN
By TOM PETERS and AMY SMITH Staff Reporters
Halifax Chronicle Herald
March 28, 2008

The loss of Caterpillar Inc.’s business at the Port of Halifax is "a crying shame," says a former chairman of the Halifax Port Authority.

Merv Russell, who was board chairman in 2001 when Karen Oldfield became the authority’s president and CEO, took both the authority and CN to task on Thursday, charging that there is a lack of focus on building the port’s container business.

Caterpillar, which ships both imports and exports on Atlantic Container Line vessels, has been moving about 25,000 TEUs (20-foot equivalent units) a year through Halifax. That’s about 10 per cent of the total business at the Fairview Cove container terminal, operated by Cerescorp. Caterpillar has been using Halifax and CN to connect with Chicago and its world headquarters in Peoria, Ill.

Now the heavy equipment manufacturer is taking its business to the Port of Virginia because of service issues with CN.

Paul Waite, a senior CN vice-president, said earlier this week that CN had fumbled "where connections were missed because of late trains because of weather conditions."

"It was kind of a confluence of both imports and exports missing connections that caused Caterpillar to do what they did, and this is a temporary thing, in my mind. We have had discussions with both ACL and Cat on this and we will actually be meeting face to face with them over the next week or so."

CN says it has had problems across its entire Canadian network this winter.

Joe Harris, a spokesman for the Virginia Port Authority, said Thursday that Caterpillar has told the port that the move of its shipping business to Virginia is only temporary. But Mr. Harris said the Virginia authority will do whatever it can to make the deal permanent.

Caterpillar spokesman Jim Dugan said the company is not commenting.

Mr. Russell said he has been quiet about the Port of Halifax and its declining cargo figures, but "when I saw that (about Caterpillar’s withdrawal), it really bothered me because I had worked on that account directly with ACL on a number of occasions because it was so vital to them."
"It’s a lack of care and concern on the part of Canadian National. It is convenient to blame it on the weather, but they take care of Prince Rupert and they have bad weather."

CN is a partner in a new container terminal in the British Columbia port.

Mr. Russell charged that Prince Rupert’s business is flourishing while CN continues to pull back from Halifax.

"They divested their interest in Halterm (container terminal in south-end Halifax) and this goes back to the very essence of the privatization of CN," he said. "There were those of us at the time who asked that other railways be permitted to run over the line, and we also asked for guarantees that CN would remain here."

But Halifax got no guarantees from former CN president Paul Tellier, Mr. Russell said.
"He had total disdain for Halifax."

Defence Minister Peter MacKay, who has been a vocal supporter of the Atlantic Gateway concept of bringing global trade to North America through Nova Scotia, said the loss of Caterpillar is "very unfortunate, and I understand there has been a conspiracy of circumstances, if I can put it that way, that unfortunately led to the Caterpillar decision."

But Mr. MacKay also believes "there is a good possibility that we can attract that business back."
Mr. Russell was also critical of the port administration, saying "the only announcements coming out of the port authority are about real estate. You don’t hear anything about new clients, you only hear of clients leaving, and I think that’s a danger. It is disappointing where concentration is not on the port but on real estate. They have a great number of (real estate) leases but the two important leases are Ceres and Halterm, and without them you are in a lot of trouble in the port."

Mark MacDonald, chairman of the port authority board, was quick to defend the port authority and its efforts to build Halifax’s cargo business.

"There is absolutely no question that our senior management team and our board are focused on the core business of the port, which is the cargo business," he said Thursday. "There is no doubt in my mind because I see it every day. Karen Oldfield focuses on this on a daily, an hourly and nightly basis, travels constantly, acts as liaison among the stakeholders and works extremely hard at it, as does the rest of the management team and as does the board.

"Every time a container ship comes down Halifax Harbour, it has a direct employment impact of about 3½ person-years of employment, and that to me is a very telling statistic."
Premier Rodney MacDonald also defended the port authority, saying he has confidence in it and in Ms. Oldfield.

"We have a close working relationship with Ms. Oldfield and the board," the premier said Thursday after cabinet.

"They have a strong team there, and they have for many years. There are factors there that are out of their own (control) as well. The (high Canadian) dollar, for one, has had a huge impact on this port."

NDP Leader Darrell Dexter said the port has been having troubles since before Ms. Oldfield arrived in 2001.

"We have been falling on the world shipping tables since I have been in the legislature, since 1998," Mr. Dexter said.

"So those difficulties around cargo coming into the Port of Halifax did not start when she came into that position, but it is one that does raise the question, ‘How do you go about ensuring we are a competitive port when that transfer of cargo from the ships that come into Halifax Harbour is not making it expeditiously enough out of the terminal?’ "

Weak economy slows cargo, idles railcars
Associated Press

CRAIG, Mont.

BNSF Railway Co., the nation's top hauler of container rail freight, is parking miles of railcars in Montana and elsewhere because there isn't enough freight to keep them rolling.

Cars that often carry 40-foot containers of goods shipped from Asia stand like an iron fence between the Missouri River and this Montana burg known for world-class fly fishing. They stretch as far as Sandee Cardinal can see when she stands outside her home on the river's west bank between Helena and Great Falls.

"What is that but a symbol of how America is down in the dumps right now?" Cardinal asked as she gazed at the cars that haven't moved for about three months.

The cars parked are the type that haul cargo from ships on the coast to points inland, mainly imported goods -- an area that's starting to slow down due to the weak economy. Analysts say transportation usually is among the first sectors to show signs of a downturn in the economy and with Americans feeling pinched -- employers eliminated 63,000 jobs last month amid declining consumer confidence -- it could be a while before the idle cars move.

"If you take a look at transportation, both trucking and rail, you will see that things started softening last summer," said Arnold Maltz, associate professor of supply-chain management at Arizona State University. "The reason you are seeing all those cars parked is that the consumer economy translates into slower imports."

Texas-based BNSF Railway, a division of Burlington Northern Santa Fe Corp., has parked upward of 1,000 cars in Montana alone, spokesman Gus Melonas said. More are parked in other parts of the company's 32,000-mile system, which operates in 28 states and two Canadian provinces.

"There's been a downturn in international business and therefore this equipment is not necessary at this point," Melonas said.

The cars standing between Helena and Great Falls constitute 5 percent of the BNSF fleet, Melonas said. He declined to say what percentage of the fleet is parked elsewhere, citing confidentiality issues.

Seasonal car storage is common, he said, but the number of cars now idle is exceptional.
Most of the parked cars are designed for intermodal transportation, when containers filled with imported goods are taken off vessels at U.S. ports and then transported by train, truck or both to distribution centers around the country.

For the first two months of 2008, the volume of intermodal rail freight in the United States was down 3.4 percent compared to the same period last year, according to the Association of American Railroads, an industry group based in Washington, D.C. Last year, intermodal traffic was flat as railroads began to feel the effects of slowing retail orders and the dollar's decline.
While shipments of store-ready consumer goods such as clothing have dipped, movement of coal, grain and ore have risen, according to the association. The latter are less sensitive to swings in the economy and help balance out the bottom line.

Excluding intermodal traffic, rail freight rose 1.7 percent for the first two months of 2008 compared to the same period a year earlier. Coal was out in front last month with 576,012 carloads, or an increase of 5.7 percent.

"The railroads have actually performed relatively well when you look at their entire portfolio," said transportation analyst Todd Fowler of KeyBanc Capital Markets in Cleveland.

For 2007, BNSF Railway's parent company, Burlington Northern Santa Fe Corp., reported about $15.4 billion in total freight revenues, compared to about $14.6 billion the previous year. That growth was carried largely by coal and agricultural segments.

The annual revenue generated from hauling domestic freight was down about 1 percent from 2006, while international traffic was up 2 percent. Meanwhile, coal and agricultural revenue each grew about 12 percent.

Union Pacific Railroad spokesman James Barnes said the Nebraska-based company's intermodal business is "just a little down, but that's not unusual for this time of year." The company's total commodity revenue was $15.5 billion in 2007, compared to about $14.9 billion in 2006. The agricultural segment posted an 8 percent increase over 2006.

Another major rail company, CSX Corp. in Florida, said its car storage is not out of the ordinary. The company's total revenue from surface transportation was up 5 percent, from about $9.6 billion to $10 billion in 2007.

One of the nation's leading trucking companies, Schneider National in Green Bay, Wis., says it believes a freight recession began about 20 months ago, well before signs of a downturn closed in on consumers.

"We have been in a freight recession longer than people have been expressing deep concern about the economy," said Bill Matheson, Schneider's president for intermodal transportation.
Trucking companies are in a unique position. They often compete with railroads for long haul contracts, while also carrying rail freight from the nearest railhead to its final destination.
Schneider is not parking trucks, but neither is it buying new ones to the usual extent, Matheson said.

In Long Beach, Calif., home of the nation's busiest port complex with Los Angeles, the movement of goods has been somewhat stagnant. About 7.3 million containers passed through the Port of Long Beach in 2007, the same as in 2006, port spokesman John Pope said.

"That was a big decline from the growth we'd seen in the past decade or so," Pope said. "Typically, there had been double-digit growth from year to year."

In January, Long Beach posted a decrease of about 12 percent in overall volume compared to January 2007. The situation was less extreme last month, with a 2 percent drop in overall volume compared to a year earlier.

While retailers have imported less goods to be hauled by rail or truck nationwide, exports leaving Long Beach rose as the weak dollar strengthened overseas purchases of U.S. goods, Pope said. Rising export volume -- including grain and wheat shipped by rail -- helped balance falling container imports for most of last year.

"It's a barometer of the economy," Pope said. "We're going to see the ebb and flow that mirrors what happens in the rest of the nation."
On the Net:
BNSF Railway:
Association of American Railroads:

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