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9/12/2007



Rail News: Rail Industry Trends

'Rail renaissance' continues, but beware of potential roadblocks, says Hatch



North American railroads have completed a “virtuous circle” the past three years that’s helped spur the “Rail Renaissance.” Better returns, higher stock prices and improving revenue prospects have prompted railroads to invest more in their infrastructure and, in turn, expand capacity.

That was the “good news” part of Tony Hatch’s keynote address yesterday to a packed luncheon crowd of 490 at the American Railway Engineering and Maintenance-of-Way Association’s annual meeting in Chicago. But Hatch, an independent rail industry analyst and Progressive Railroading columnist, also shared some bad news at the annual chairman’s luncheon: There are eight to 10 potential threats to the renaissance.

The threats include an ongoing “cyclical vs. secular” argument about economic and business conditions; a Democratic-controlled Congress that could impact rail labor’s and shippers’ legislative agendas; brewing “re-regulation” legislation; hedge funds’ growing interest in the rail industry; questions about railroads’ liquidity; concerns about swings in railroads’ service execution; and apprehension about the execution of future mergers (i.e. the proposed Dakota, Minnesota & Eastern Railroad Corp./Canadian Pacific Railway marriage).

CN did a good job in merging with the Wisconsin Central and B.C. Rail, but “we haven’t seen good execution in many mergers,” said Hatch.

As summer turns to fall, there are many near-term issues the rail industry also will need to address, he said. The issues include economic softness, capacity constraints, declining intermodal traffic, the potential “comeback” of grain and coal traffic, rising ethanol opportunities, a growing labor shortage and the outcome of the ongoing alliances vs. mergers debate.

For more on Hatch’s renaissance views, click here.

Jeff Stagl


Contact Progressive Railroading editorial staff.

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