Shippers are sounding the alarm over steep declines in rail service, prompting regulators at an emergency hearing on Tuesday to intervene as lengthy delays and labor constraints threaten to shut down some operations.
Service issues in the rail industry have escalated in recent months, threatening to exacerbate supply chain headaches that have already increased costs and created major shipment delays for producers. It could also lead to further supply shocks down the line – the agricultural industry, for example, enters the planting season, and a delay in products such as fertilizers could impact crop yields at autumn.
“When railroads charge unreasonable fares and provide poor service, farmers struggle to make ends meet. Consumers pay higher prices at groceries. And the United States becomes less competitive in the marketplace. world,” Assistant Agriculture Secretary Jewel Bronaugh said.
The growing complaints have caught the attention of the White House in recent days. White House press secretary Jen Psaki noted Monday that the administration has offered a simpler route to request service relief, as “businesses face frequent … rail delays and poor service. “.
Earlier this month, the Surface Transportation Board announced it would hold a two-day emergency hearing to hear from the companies and pressure railroad leaders on their short- and long-term plans to restore the service.
Most Class I railroads are due to testify on Wednesday about their plans to speed up the flow of freight. Here’s a look at highlights from the first day of the hearing, including what shippers say are the biggest issues facing rail right now.
Deteriorating service adds to supply chain chaos
Chemical companies, agricultural producers and others who rely on rail to move their goods said unfilled orders, missed switches and other delays have saddled them with more fees and higher costs.
In agriculture, unfilled grain orders are the highest on record, creating cascading effects throughout the supply chain, according to Bronaugh. Ethanol and biodiesel facilities have had to slow down or, in some cases, stop production. Some livestock operations – unable to get the grain they need – have had to consider whether to depopulate their herds.
Other companies have noted that rail service issues have led to production disruptions. Cargill’s sweeteners business, for example, halted production 25 times last year “due to a lack of adequate service provided by carriers”, according to North American railroad manager Brock Lautenschlager. The company is seeing an 18% increase in transit times for its private fleet, and the delays have created railcar supply issues.
Molson Coors also noted that a delay in transit times has resulted in volatility in car availability. David Burchett, director of procurement for Molson Coors’ indirect supply chain purchasing team, said the company is concerned that “we don’t have enough cars to supply our brewery with malt during the important summer months when we see the highest consumption of our products”.
Burchett also said the delays have resulted in higher demurrage charges, which the railways charge when cargo exceeds a certain point. Fees increased two to three times on average for the company’s factories despite no change in shipping behavior. A location is expected to receive $2 million in demurrage charges this year, compared to an average of $850,000.
“Railway service has been deteriorating for several years. We, the customers, are shouldering that burden, whether it’s with additional resources to manage these issues, increased inventory to cushion delays, and increased costs of rental or purchase of additional equipment,” Burchett said.
Push for solutions
The railways noted that crew availability remains one of the biggest constraints on the network. But railway union members noted at the hearing that delays sometimes occur because the railways have set up the network to move longer, slower trains.
Carriers generally opt for longer and heavier trains to cut costs, although union members note that some trains are so long they are difficult to move and slow down the handling of other trains in a yard. .
“Our active members are also now tasked with operating trains of such excessive length that it is impossible for more than one train to travel because the territory has no sidings or alternate tracks” , said Jeremy Ferguson, president of SMART Transportation. Division, which represents employees of each Class I railroad. “The solution: stop all other trains until the very long train has crossed from point A to point B. The congestion this causes is taking its toll on our ability to serve customers.”
Delays in moving longer trains have also necessitated the use of more crew members, as some workers reach or exceed the maximum hours of service before the train is moved. Ferguson pushed the council to limit train lengths and prevent railroads from idling trains once they reach certain speeds, which is done to save fuel costs.
Shippers also had their own list of solutions for the board. Among other things, they asked for service assurance plans, more data around the first and last mile, and for the council to adopt reciprocal switching rules, which shippers say will provide more service options. in the face of higher congestion. The companies have pushed the council to financially penalize rail carriers for poor service.
“Using the same demurrage concepts that railroads use to incentivize customers would help prevent rail service problems in the future,” said Michael Seyfert, president and CEO of National Grain and Feed. Association. “Adding demurrage charges would increase the railways’ resolve to ensure they move trains faster.”
The suggestions come as the council has already unveiled plans to accelerate the service’s path to relief. STB Chairman Marty Oberman said the railroads will have to do more to restore service.
“We have to do better,” he said following testimony from CSX. “And if all you can do is squeeze in a few more deliveries…we’re a lot further along.”