Cautious optimism in North America

International Railway Journal, April, 2003 by Edward R. Hamberger

NORTH America's 500-plus freight railways are looking towards the future with cautious optimism. The optimism is based on long-term prospects, while the caution is based on the current uncertain economic climate.

The United States' economy began to slow down in the second half of 2000, and has yet to return to the strong growth that characterised the latter part of the 1990s. Since freight transport is a derived demand, economic growth is critical to the growth of freight railways.

However, even as the economy became sluggish, freight railways continued to turn in relatively strong performances. This was reflected by the fact that US railways set records for total volume of freight moved in both 2001 and 2002. Especially encouraging was the record volume of intermodal freight moved by rail in 2002-9.3 million trailers and containers in the US alone, and more than 11 million in the US and Canada combined. In fact, intermodal traffic is expected this year to replace coal as the top revenue source for US railways.

The ability to set record freight traffic levels in the face of an economic downturn speaks well for the overall strength of the freight railways.

In the longer term, there are a number of factors that bode well for the future of railfreight services in North America. One is the globalisation of the economy. Another is the growing awareness that rail can help solve environmental problems. And a third is a commitment to improve services on the part of the railways themselves.

North America's economies are tied ever more closely to the economies of other nations. The average US export travels about 2400km to reach a port This compares with a few hundred kilometres in mainland Europe and less than 160km in Japan. This plays to the strength of railways because as distances and volume increase, the advantage of rail over road transport becomes more pronounced.

Already half of our fastest growing business segment--intermodal traffic--is tied to international trade. Similarly, awareness is growing that railfreight has a critical role to play in improving the environment.

Over the next two decades, it is projected that freight transport overall in the US will double. Railways are especially well-positioned to handle that growth without adding to environmental problems. The United States Environmental Protection Agency has stated that locomotives are three times cleaner than lorries on an air emissions per-tonne-moved basis. Not surprisingly, locomotives are also three times more fuel-efficient on average than lorries.

Railways can also relieve highway congestion and reduce the need to build new or expanded road networks. A single double-stack container train can remove as many as 280 lorries from the highway. Partnerships with road haulage companies, ocean shipping lines, and logistics companies have helped to more than treble our intermodal business since 1980.

As a result, policy makers are looking more and more to ralifreight as a way of fostering economic growth while, at the same time, improving the environment.

But these trends don't by themselves assure railways of growth. Ultimately, the key to growth lies in service. That's why railways have spent more than $US 300 billion to maintain and improve their infrastructure and equipment since 1980.

In just the last few years, railways have track-doubled thousands of kilometres of lines. The industry has added almost 4000 new locomotives over the past five years alone, and the capacity of our freight wagon fleet has grown by more than 20% since the start of the 1990s.

Our greatest challenge is to build upon this foundation so that we can provide value-added service to an even broader range of customers, some of whom, in fact, are already moving from just-in-time inventory to exactly on time. US railways plan to invest an additional $US 160 billion over the next 20 years to improve the system, and then to spend more than $US 200 billion to maintain it.

The foundation for productive partnerships between railways and their customers is in place. Our massive investment over the past two decades has produced the most efficient freight railway system in the world. Enhanced services, new technology, and continued investment in safer, more efficient equipment are the building blocks that are making North America's freight railways once again a growth industry.