Chemicals shippers relay rail service woes to regulators

The American Chemistry Council (ACC) wants regulators to look into why chemicals shippers are experiencing “rail service challenges” throughout the U.S. and particularly within the Gulf Coast and Southeast.

ACC President and CEO Chris Jahn sent a letter dated Tuesday to the Surface Transportation Board (STB) asking whether widespread and persistent rail service issues have been brought about by the railroads’ efforts to cut costs and modify network operations.

The letter didn’t name precision scheduled railroading (PSR) specifically as a potential cause, although efforts in recent years to implement PSR through means such as sharply increasing demurrage and accessorial charges have stirred shippers’ ire.

“Current rail service challenges are harming ACC member companies, disrupting supply chains, restricting manufacturing, increasing costs and preventing companies from meeting customer expectations,” Jahn said.

According to a member survey conducted by ACC, 93% of respondents said they have experienced rail service challenges within the past six months, with 86% saying they have had problems with CSX (NASDAQ: CSX), 57% saying they have had problems with Kansas City Southern’s (NYSE: KSU) operations in the U.S. and Mexico, and 43% saying they have problems with Norfolk Southern (NYSE: NSC).

Although the service issues are widespread and have occurred on many Class I railroads, the major issues are concentrated in the Gulf Coast and Southeast, with issues at Atlanta; Mobile, Alabama; Jacksonville, Florida; and the New Orleans interchange with western carriers, according to Jahn. There have also been dwell times as high as eight to 10 days in Laredo, Texas, with Kansas City Southern.

The issues include a lack of communication about network impacts, interchange delays, congestion, bunching, dwell times of over seven days and local service failures. The problems have affected cross-border shipments between the U.S. and Mexico and delayed product delivery to customers in Asia, Europe and South America.

ACC asked STB to conduct enhanced oversight of CSX, saying the railroad hasn’t been adequately prepared to meet customer demand or uphold past commitments.

“The Board should utilize its oversight authority to identify the root cause of CSX’s service disruptions and assess the long-term impacts of operational changes on capacity and network resiliency,” Jahn said.

ACC also recommended four other steps for STB to take, including:

Adopting an expedited process to provide alternate service options to groups of impacted shippers when a carrier is experiencing regional or systemwide service problems.
Holding rail carriers responsible for service failures by allowing customers to recover damages for the additional cost of alternative service and compensation for lost production and/or sales.
Encouraging or requiring carriers to suspend minimum volume commitments when a railroad is failing to provide reasonable service.
Promoting greater rail-to-rail competition by moving forward with the board’s long-standing exploration of reciprocal switching.

In a response to FreightWaves, CSX said it is addressing the service issues that ACC raised.

“Along with safety, providing exceptional service is a priority for CSX. Due to the significant increase in Covid-19 cases and major weather impacts this winter, CSX experienced some service disruptions in isolated areas early in the year,” CSX said. “We have since seen improvements in our service and performance metrics and will soon be sharing more detailed information with the Surface Transportation Board. We have been engaging with our customers directly and continue to work with them to resolve any remaining concerns.”

U.S. railroads in 2020 transported 2.3 million carloads of chemicals and plastics, and that number could grow annually by nearly 200,000 carloads by 2030 amid the industry’s investments to grow production capacity, according to Jahn.

ACC sent another letter to the board in late May to express concerns about how potential mergers between Class I railroads might affect rail service.

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