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— by Tony Hatch
RailTrends® 2013, held Nov. 21-22 in New York City, provided support for the thesis of the coming second phase of the rail renaissance that we have been predicting. The event was thoroughly entertaining, as well. We had a record crowd, almost all CEO-level speakers, and an audience nearly as varied, experienced and accomplished as the speaker roster.
A few obstacles remain, presenters told us. But what emerged from the presentations and chats was the real, shared sense of confidence in the industry's continued potential, and the transferability of skills and accomplishment to new or developing markets. What follows are a few takeaways. (Click here for Hatch's complete RailTrends 2013 recap.)
2014 will feature more D.C. rail battles than we thought. Just as much of the financial community began to get complacent about the possible threat from Capitol Hill. and its near-term impact, it became clear during RT13 that a confluence of events or due dates make next year perhaps more important than anticipated. Among them:
Two CEOs, two different approaches. Fresh off Q3 results that showed him and his railroad some two full years ahead of schedule (in terms of OR targets, etc.), Canadian Pacific's Hunter Harrison explained his success as part past accomplishments and part data-driven plan — and a large measure coming from rapid decision-making. The key to his RT13 "town hall-like" talk was summed up in "The CP story is far from over."
Then there was Norfolk Southern Corp.'s Wick Moorman, who most deservedly won the annual Progressive Railroading/RailTrends 2013 "Railroad Innovator Award" (given to Harrison in 2009). In accepting the award, Moorman shifted the spotlight to NS employees and what the railroad has initiated/advanced under his tenure — from rolling out new technology to forging new PPPs and joint-venture marketing opportunities to developing a more non-confrontational safety culture. Meanwhile, NS President Jim Squires outlined the Class I's re-focused marketing and industrial development efforts — away from coal and toward emerging growth opportunities in crude by rail (CBR), and in the related industrial growth in the decade's second half.
Intermodal growth will drive the rail renaissance's second phase. As for me, I announced the creation of my white paper "Intermodal - 10 Years After." The critical thesis: that the ROI explosion that drove international intermodal in the first decade of the renaissance will be replicated by a domestic boom already under way.
Also: Kansas City Southern SVP of Intermodal and Automotive Brian Bowers, the point man on the Class I's growth drive, noted KCS' great growth in intermodal and cross-border intermodal, aided by southbound auto parts expansion supporting the big auto plant ramp up in central Mexico. And CSX CTO Cindy Sanborn cited her company's need to adjust away from a coal focus by "variablizing" coal resources and re-emphasizing service-sensitive growth areas. CSX is going forward with "clearing" (for double stack) the Virginia Avenue Tunnel in D.C., and looking for at least one more hub terminal to go with North Baltimore.
International and short-line growth, mate. RT13 also featured an under-theme of down under. Speaking were Lance Hockridge, managing director/CEO of Aussie rail giant Aurizon, which is benchmarking with world-class North American railroading; and the CEOs of two short-line holding companies with significant Aussie exposure: Genesee & Wyoming Inc.'s Jack Hellmann and Watco Cos. L.L.C.'s Rick Webb. The Indiana Rail Road, meanwhile, makes money in old-fashioned Midwestern railroading, as president/CEO Tom Hoback noted.
CBR still the move of the moment. CBR came up in every presentation. In a panel dedicated to CBR, Bill Barrett Corp.'s Stuart Nance talked about developments outside the Bakken in Colorado's Niobrara, worried about oil price swings and the cost of fracking, and felt that oil production forecasts generally were too optimistic. PLG Consulting's Graham Brisben also seemed to think that rail share was over-hyped. His position: Rail has emerged as an arbitrage tool, with inherent risks in volume and location.
In sum, RT13 proved once again that the rail industry is anything but staid and boring, or change or technology averse. Innovations in operations, power, rolling stock, marketing, and industrial and market development were the story of the day-and-a-half. And growth in share, efficiency and opportunity is the story for tomorrow.
Tony Hatch is an independent transportation analyst and consultant, and a program consultant for Progressive Railroading's RailTrends® conference. Email him at email@example.com.