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A variety of freight carriers, third-party players and, of course, shippers were in attendance at the North American Association of Rail Shippers' (NARS) 2010 Annual Meeting, held May 26-28 in Washington, D.C. For the fifth-straight year, I presented at this event, where a variety of concerns were raised regarding the issues that matter most to the shipper-carrier set.
Increasingly, a major marketplace concern is available capacity. During the summit, there were many questions raised regarding whether railroads would have enough rail cars during the recovery phase (and why so many were still stored). Attendees also expressed concern (fear?) about trucking industry shortages (drivers and equipment), which, if warranted, would bode well for analysts' expectations of rail pricing continuing to beat inflation. Also: For the most part, shippers have been unwilling to offer the rails second-half volume predictions, thus frustrating railroads' planning efforts.
That said: Rail service has been very, very good, as even those who push "re-reg" (in the form of S. 2889) concede. That in itself bodes well for my theory on rail productivity, operating leverage (beyond the short-term obsession with train starts), marketshare gains and share outperformance through the cycle: If the rails can regain the volume lost and beyond at these levels of service and velocity, then a virtuous circle will be created for all stakeholders. Additionally, Eric Starks, president of forecasting firm FTR Associates, reported on the economy, offering a bullish talk led by what he considers to be inventory under-replenishment. But even he saw few rail marketshare gains and didn't detect a deterioration in rail service that usually comes with increased volumes.
Meanwhile, there was plenty to talk (and think) about on the legislative front. As of press time, the hope was that June (as opposed to my own expectations that May) would be the month of activity in D.C. — both with respect to the Section 45G infrastructure tax credit for short lines and S. 2889. Regarding the latter: Proponents of re-reg still believe they'll get their law. The rails could see enough compromise to support the bill; if not, I continue to believe it won't pass. Meanwhile, we still hadn't seen the much-anticipated antitrust component as of late June.
Other NARS notes:
Tony Hatch is an independent transportation industry analyst and consultant, and program consultant for Progressive Railroading's annual RailTrends conference. He can be reached via email at firstname.lastname@example.org.