Trends in the U.S. Rail Network Mike McClellan Vice President Industrial Products Midwest Association of Rail Shippers July 15, 2014 Lake Geneva, WI 1
The Dynamics in US Rail Freight Traffic The (Growing) Importance of Chicago and Solutions Update on NS Efforts to Improve Velocity and Capacity 2
AAR Data Total Train Speed 3 As reported publicly to the AAR
AAR Data Dwell 4 As reported publicly to the AAR
So What s Going On Here? Weather? Volume Growth? Conveyance Shifts? Commodity Shifts? Geographical Shifts? Regulation? All of the Above? 5
Volume Trends Class I Ton Miles (Trillions) Total Class I ton-miles are up 16% so far this century, less than 1% CAGR. Tonnage remains below the peak. 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 6 Data for Class I railroads. Source: AAR
Volume Trends Carloads Originated (in millions) Similarly, Class I carload originations are up less than 6% in the same period. 34 32 30 28 26 24 22 20 18 16 14 12 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 7 Data are Class I railroad originations. Source: AAR Freight Commodity Statistics
Volume Performance By Big 4 US Railroads Units (000s) 12,000 10,000 Class I Volume Since 2006 BNSF UP NS CSX 10,637 10,093 9,852 9,022 8,000 6,000 7,901 7,358 7,341 6,539 4,000 2,000-2006 2007 2008 2009 2010 2011 2012 2013 8 Data are Class I railroad originations and terminations. Source: AAR Freight Commodity Statistics
Class 1 Traffic First 2 Quarters of 2014 Eastern RRs Traffic Type 1Q 2014 vs. 1Q 2013 2Q 2014 vs. 2Q 2013 YTD 2014 vs. YTD 2013 IM 4% 9% 7% Carload (2%) 7% 2% Total 1% 8% 4% Western RRs IM 2% 7% 5% Carload 3% 6% 5% Total 3% 6% 5% 9 AAR weekly carload reports
10 Geographic and Commodity Shifts in the U.S. Rail Network
Intermodal Volume This Century Shipments originated (in Millions) 13 12 11 10 Intermodal volumes are up 45% since 2001, but only 500,000 loads since peak 9 8 7 6 5 4 3 2 1 0 Trailers Containers '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 11 Data are Class I railroad originations and terminations. Source: AAR Freight Commodity Statistics
Intermodal Volumes East vs West Units (000s) 10,000 9,000 8,977 Intermodal Volume Since 2006 IM-West IM-East 8,358 8,000 7,000 6,000 5,000 5,435 6,154 4,000 3,000 2,000 1,000-2006 2007 2008 2009 2010 2011 2012 2013 12 Data are Class I railroad originations and terminations. Source: AAR Freight Commodity Statistics
Originated Carloads of Crude Oil on US Class I Railroads 120,000 100,000 80,000 60,000 40,000 20,000 0 2009 2010 2011 2012 2013 13 Class I Railroads: Source: AAR
Crude Oil as a % of Total Originated 1.41% 0.82% 0.01% 0.02% 0.03% 0.04% 0.10% 0.22% 2006 2007 2008 2009 2010 2011 2012 2013 14 Class I Carloads - Source: AAR ASSOCIATION OF AMERICAN RAILROADS
U.S. Rail Coal Traffic 150,000 145,000 140,000 135,000 130,000 125,000 120,000 115,000 110,000 105,000 100,000 (weekly carloads originated, 52-week moving average) 2007 2008 2009 2010 2011 2012 2013 2014 Excludes U.S. operations of Canadian railroads. Source: AAR Weekly Railroad Traffic 15
Shifts in Eastern and Western Coal Traffic Carloads (000s) 6,000 Coal Volume Since 2006 Coal-West Coal-East 5,000 4,000 4,754 3,652 3,933 3,000 2,542 2,000 1,000-2006 2007 2008 2009 2010 2011 2012 2013 16 Data are Class I railroad originations and terminations. Source: AAR Freight Commodity Statistics
U.S. Rail Grain Traffic 26,000 25,000 24,000 23,000 22,000 21,000 20,000 19,000 18,000 17,000 16,000 15,000 (weekly carloads originated, 52-week moving average) 2007 2008 2009 2010 2011 2012 2013 2014 Excludes U.S. operations of Canadian railroads. Source: AAR Weekly Railroad Traffic 17
Other Commodity & Geographic Shifts Declines in Forest Product Volumes Declines in Automotive Traffic Declines in Steel and Metals Businesses Flat Chemical Volumes Increases in Shale Related Volumes 18
19 Other Dynamics in the U.S. Rail Network
Regulation Could have a meaningful service impact in the future PTC Tank Car and Hazardous Material Regulations 20
So what are the railroads doing about all of this? Pic of Track work (does not need to be this size) 21
$550 Billion Back Into the Network Since 1980 $30 $25 Railroad Spending on Infrastructure and Equipment* ($ billions, current dollars) Maintenance Expenses Capital Spending $20 $15 $10 $5 $0 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 22 *AAR: Data in chart for Class I railroads only; $550 B includes approximately $20 B spent by non-class I carriers.
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Despite fundamental shifts in the composition of rail traffic, Chicago s role continues to grow Terminal Classification of Movement Originated Terminated Interchanged Other* Total CHICAGO Loaded Freight Cars 493,274 546,983 1,475,239 395,848 2,911,344 Empty Freight Cars 105,033 61,385 1,137,423 362,060 1,665,901 Total Freight Cars 598,307 608,368 2,612,662 757,908 4,577,245 Loaded Intermodal Units 1,854,250 1,683,448 713,350 37,130 4,288,178 Empty Intermodal Units 107,387 387,139 57,197 41,039 592,762 Total Intermodal Units 1,961,637 2,070,587 770,547 78,169 4,880,940 *Includes traffic which had more than one event in Chicago 24 Source: AAR
CREATE Program Partnership $3.8 Billion to fix the Chicago rail network - $1.3 pledged so far 25
CREATE Corridors 26 $570 M for Freight Rail Projects (excluding EW2 / 75 th St CIP) Passenger 7 Projects Amtrak on NS Chicago Line Metra Southwest Service Metra/Amtrak on CN Heritage Corridor Beltway 11 Projects Metra B12 Interlocking to Thornton Jct. Blue Island Jct. to Dolton Interlocking Western Ave. 8 Projects Ogden Jct. to Blue Island Jct. Blue Island Jct. to Thornton Jct. Thornton Jct. to 80 th Street 80 th Street to 75 th Street Brighton Park to CP518 Brighton Park to Corwith Interlocking East-West 4 Projects NS Chicago Line to Beltway Corridor
So What is NS Doing About This? Crews Locomotives Strategic Investments 27
NS Chicago Line Corridor Improvements Over $400 million is being invested to increase the capacity of this critical NS Corridor Chicago 47 th Street Chicago Indiana Gateway Cleveland Englewood Flyover Bellevue 28
Chicago 47 th Street Expansion 63 rd Street IMF Metra RID 60 th Street P1 NS Chicago Line 47 th Street IMF North of Garfield South of Garfield P4 Metra SWS 29
Englewood Flyover Project P1 - Englewood Flyover Metra Rock Island District 30
Englewood Flyover Metra Rock Island District (78 Daily Commuter Trains) Metra flyover operation target November 2014 Englewood Interlocking Milepost CD-515.7 (Controlled by Metra) Crossing diamond removal for NS mains NS Chicago Line (46 Daily Freight Trains) (14 Daily Amtrak Trains) Proposed Overhead Bridge NS Park Manor Intermodal Yard CP515 control transfer to NS Dearborn Dispatcher Project completion in 2015 for second bridge Total Project Cost $140 M 31
P1 Englewood Flyover 32
P1 Englewood Flyover 33
P1 Englewood Flyover South approach including Dan Ryan Bridge Span 34
P1 Englewood Flyover Bridge span over NS Victory is in sight! 35
The Indiana Gateway Project With the State of Indiana, NS is eliminating key bottlenecks along this very busy 28 mile corridor. Investments will positively impact NS, Amtrak and other railroads along the route CSX Lake Sub ArcelorMittal CN (Kirk Yard) US Steel ArcelorMittal CSX Lake Sub CSX Garrett Sub CSS&S B 28 Miles 36
Indiana Gateway Primary focus on interlocking improvements and track extensions CP 498 Project #7 Pine CP 497/498/500/501 Final Design 37
Indiana Gateway Groundbreaking May 29, 2014 38
Bellevue Yard Expansion Bellevue Yard in Ohio is at the crossroads of NS key Northern route structure. Merchandise traffic moving between Chicago, St. Louis, KC and points east of Bellevue move through this critical yard. Bellevue Yard 39
Bellevue Yard Expansion Key benefits of the project include over-heading freight away from Elkhart, reducing the number of handlings of merchandise freight, and creating capacity for growth in NS Northern network. Bellevue Yard Elkhart Yard 40
Bellevue is Massive $162 Million Project New Track - 38.5 Miles Turnouts - 149 Buildings (3) 11,340 sq ft Service Roads 10.4 Miles Power Switches 162 Hump Control System
The Project Will Be Completed in Dec 2015 42
Work Is Progressing Well 43
Closing Thoughts The U.S. rail network is strained right now. Tactical causes include the weather and a recent surge in volumes Regulatory impacts could exacerbate service issues Structural changes in the commodity and geographic composition of rail freight are imposing additional stress on some parts of the rail network All the railroads have demonstrated their commitment to providing the tactical resources and strategic investments to address these shifts in freight. The issue is more one of timing NS is making tactical and infrastructure investments that will begin to improve service in the near term 44
Thank You! 45