North American Intermodal Experience - World Banksiteresources.worldbank.org/INTSARREGTOPTRANSPORT/6034746... · The double-stack route network ... 2008 Total Rail Intermodal Revenue:

North American Intermodal ExperienceNew DelhiMarch 25, 2009

Joint Workshop Planning Commission / Indian Railways / World Bank

1

Inland transport: key driver of global supply chain competitiveness

Example: New Delhi, India to Dayton, OH

Source: APL

North American Intermodal in Context

Double-Stack Revo/Evolution

Key Players & Relationships

Infrastructure Funding

Outlook

ContentsIntermodal in Context

3

Revenue - $64 Billion

Carloads – 38 Million

Ton-Miles – 2+ Trillion

Market Share (ton-miles) – 41%

Railroads – 559 railroads, 7 Class I

Route Miles – 169,000

Employees – 226,000

Locomotives – 23,000

Freight Cars – 1.6 Million, 49% railroad-owned

Capital Expenditures – $9 Billion

Snapshot: North American Rail Freight – 2006

Key Players

Traffic

Infrastructure

Operating Ratios: Mid-High 70s

4

All of the Class I railroads are regionals – connected & competing

Norfolk SouthernBNSF

CSXUnion Pacific

Canadian PacificCanadian National

Kansas City Sthn.

Source: Skedz

Key Players

5

North American rail infrastructure investment

Intermodal in Context

Freight is king

Railroads compete AND cooperate

Investment driven by private sector

Diverse supplier ecosystem

Ambiguous national transportation policy

Freight is king

Railroads compete AND cooperate

Investment driven by private sector

Diverse supplier ecosystem

Ambiguous national transportation policy

Characteristics Results

Effectively dedicated freight corridors

Rapid response by private sector– Large scale– Very efficient– Meeting customer needs

BUT . . . untapped opportunities to address national goals

– Weak interline markets– Weak intercity passenger rail– More rail freight desirable to meet

energy & environment goals

Effectively dedicated freight corridors

Rapid response by private sector– Large scale– Very efficient– Meeting customer needs

BUT . . . untapped opportunities to address national goals

– Weak interline markets– Weak intercity passenger rail– More rail freight desirable to meet

energy & environment goals

Future North American Trend: Increased public investment in rail

6

North American freight: large scale, and highly productive

Major World Railways – Scale and Productivity, 2006

Source: World Bank


7

U.S. railroads have blossomed since deregulation in 1980, when Staggers Act led to substantial restructuring


Source: AAR

8

Rail has over 40% share of all freight ton-miles, and intermodal represents about 20% of rail revenue

Truck28%

Rail41%

Inland Waterway

13%Total Rail Revenue = $58B

U.S. Freight Modal ShareTon-Miles, 2006

U.S. Class I Railroad Revenue by Commodity, 2007

Coal

Intermodal19%

Chemicals

Farm Prod.

Wood & Paper

Food

Auto

Ore & Mineral

Metals

Waste

Sources: BTS, AAR

Pipeline19%


9

Intermodal volume has grown at a 5.8% annual rate since 1980, much faster than total rail volume, and truck

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1980

1985

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

North American Rail Intermodal VolumeContainers/Trailers (000)

1980-2008 CAGR: 5.8%

Source: IANA

Supercharged growth from 2002-2006

Recent domestic growth 2-3% per year

International rail volume fell in 2007, partially due to increased “all water”Asia – U.S. East Coast vessel services

2008 fall off from global recession

2002-2006

CAGR 8.4%


Approx. 25 MM TEUs

10

Domestic rail-truck intermodal is competitive over 1,000 miles, but as TL costs are increasing, the breakeven point is declining

Cost ($/Ton)

Truckload ($2.00 Diesel)

IntermodalRail Carload

Rail Unit Train

Distance in Miles

Break-even Zone

Truckload ($4.50 Diesel)

ConceptualConceptual


11

Rail-truck intermodal has the greatest market share at longer lengths of haul, where rail economics are most compelling

U.S. Mode Share by Mileage Block

Largest highway volume is in shorter haul lanes

Intermodal has highest share in long haul lanes

Lots of upside, but limited by service requirements and longer drays

Largest highway volume is in shorter haul lanes

Intermodal has highest share in long haul lanes

Lots of upside, but limited by service requirements and longer drays M

illion

s of

Tra

ilers

or C

onta

iner

s

Rail Intermodal Share

2% 7% 7% 12% 24% 32%

Miles

Source: 2006 Transearch; Norbridge Analysis

U.S. Mode Share by Mileage Block

0

10

20

30

40

50

60

70

80

301-600

601-900

901-1200

1201-1500

1501-180

1801+

IntermodalLTL TruckPvt TruckTL Truck

16% intermodal share in markets over 600 miles


16% intermodal share in markets over 600 miles

12

Most intermodal moves in long distance West-East lanes on efficient double-stack container trains

Source: U.S. Department of Transportation, Federal Highway Administration (April, 2002)

U.S. Intermodal Rail Density Map


13

Contents

U.S. Intermodal in Context




Outlook

14

Railcar technology has evolved, driven by global containerization

Single Stack

Double Stack

Domestic Containerization

DST Evolution

Bimodal Technologies

DST: 1/3/5-well articulated cars (40’ & 53’ wells), 9000’ trains, 560 TEU/train

15

020406080

100120140160180200220240260

SingleStack

Double-Stack

SingleStack

Double-Stack

LinehaulEquipmentDray, terminal, other

Door-to-Door Cost StructureIllustrative

12%Savings

23%Savings

Double-stack savings are substantial for long hauls, but diminish for shorter hauls on an all-in basis

Source: Norbridge analysis

DST Evolution

500 Miles 2000 Miles

Double-stack advantage: lower tare weight and more boxes per train

Result: 35% lower linehaul costs

But endpoint costs dilute linehaul savings, therefore no panacea for short hauls

Double-stack advantage: lower tare weight and more boxes per train

Result: 35% lower linehaul costs

But endpoint costs dilute linehaul savings, therefore no panacea for short hauls

16

DST route structure evolved rapidly, overcoming significant infrastructure barriers – clearances, terminals and equipment

The double-stack route network expanded rapidly from 1984 to 1993 . . .

. . . Driven by terminal rationalization & mechanization

DST Evolution

0

200

400

600

800

1000

1200

1400

1978 1986 2008

Non-Mechanized

Mechanized

361255

11% 48% 95%

1176

Number of Intermodal Terminals

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DST clearance envelope followed auto multilevels

Initial DST lanes used routes cleared for multi-level auto rack cars; new clearance projects proceeded case-by-case based on ROI. Most were funded by the railroads; some state funding (e.g., PA).

DST Evolution

Conventional Multilevel

High “Q-Car”Multilevel

Two 8.5’ISO Boxes

Two 9.5’Domestic Boxes

19’7” 20’8” 18’9” 20’9”

Auto DST

18

Domestic containers have shifted rapidly from 48’ to 53’, matching standard for over-the-road domestic trailers

Total fleet of 48’/53’ domestic containers = 150,000; now mostly 53’s

Supplied by some railroads and half a dozen intermediaries

Domestic containers can go in the large wells, and also on top of 40s, -- corner castings are at 40-foot and 53-foot locations.

DST Evolution

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Intermodal railcar technology alternatives

RoadRailer – “bimodal”– Trailer-based– Bogie and purpose-built trailer– Triple Crown dedicated network

RailRunner – “bimodal”– Container-based– Bogie and purpose-built chassis– Port or double-stack hub feeder

Iron Highway – “modern circus”– Any trailer or container on chassis – Continuous platform - “circus” load from center– Canadian Pacific: Montreal-Toronto-Detroit

DST Evolution

Iron Highway

RoadRailer

RailRunner

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Bimodal Alternatives: RoadRailer

RoadRailer is a specialized trailer + bogie combination – no cranes required.

NS Triple Crown Services runs a dedicated train network with 6500 units

NS’ Triple Crown Services Subsidiary

Source: RoadRailer, TCS

DST Evolution

RoadRailer Trailers

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Bimodal Alternatives: RailRunner

RailRunner is specialized chassis + bogie combination – no cranes required

Complements container system – port and double-stack feeder

Smooth ride - Air cushion and steerable trucks

Cost advantages- Small gaps = good aerodynamics and

more containers per per train- Low tare weight = less power/fuel- Radial steering = less track/wheel wear- Complements double-stack network

No catenary interference in terminal- Neither locomotive switch nor

electric wire-free area requiredHigh security

- Doors can’t be opened“Terminal Anywhere”

- No lift equipment, small footprint- “$1M - $2M vs. $25M - $50MM

RailRunner Benefits

Source: RailRunner FULL DISCLOSURE: DEAN WISE IS INVESTOR AND ON BOD OF RAILRUNNER

DST Evolution

RailRunner container train

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Contents





Outlook

23

Key players drive the intermodal sector

Railroads – 7 Class Is

Ports – 10 Majors

Local Trucking (Drayage) – Hundreds, fragmented

Container Lines – Top 10

Stack Train Operators – Pacer and CSX Intermodal

Intermodal Retailers – Motor Carriers, UPS, IMCs, RRs

Railcar Pool – TTX

Key Players

24

In addition to the basic transportation linkages, many differentplayers sell and supply the intermodal value chain

ShippersShippers ReceiversReceivers

Retailers – IMC, Motor Carriers, Ocean CarriersRetailers – IMC, Motor Carriers, Ocean Carriers

Stack Train OperatorsStack Train Operators

Key:Day-to-day

operational relationship

Commercial relationship

Key:Day-to-day

operational relationship

Commercial relationship

Origin Drayage

Companies

Origin Drayage

Companies

Destination Drayage

Companies

Destination Drayage

Companies

Rail Equipment Suppliers

Rail Equipment Suppliers

Highway Equipment Suppliers

Highway Equipment Suppliers

Terminal Equipment Suppliers

Terminal Equipment Suppliers

Sales and Customer Service

Transportation

Equipment

Railroads

Key Players

25

Intermodal is an important segment for all of the major Class Is

Note: Carrier websites. CN and CP in Canadian dollars

North American Freight Railroads2008 Revenue

West East Canada

Primary Operating Region:

BNSF37%

Union Pacific20%

CSX10%

Norfolk Southern

14%

Canadian National

10%

Canadian Pacific

9%

Railroad Intermodal Market Share, 2008

Total Rail IntermodalRevenue: $13.9B

Key Players

$0$2$4$6$8

$10$12$14$16$18$20

BNSF UP CSX NS CN* CP* KCS

Non-Intermodal

Intermodal

26

The western railroads’ networks reflect the Asia-US pipeline

Key Players

BNSF and UP Intermodal Density

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Prince Rupert.02M

Vancouver2.5M

Seattle + Tacoma3.6M

LA/Long Beach14.3M

Oakland2.2M

Manzanillo1.4M

Houston1.8M

Savannah2.6M

Charleston1.6M

Hampton Roads2.1M

NY/NJ5.4M

Montreal1.5M

Lazaro0.3M

Halifax0.4M

Baltimore0.6M

Jacksonville0.7M

Miami+Port Everglades

1.8M

Los Angeles/Long Beach accounts for a third of container traffic; Prince Rupert is the “new kid on the block”

Source: Port websites, Norbridge estimates.

2008 ocean container volumes

declined, especially on West Coast

Major North American Ports, 2008Million TEUs

Key Players

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Domestic intermodal has three sales channels: intermodal marketing companies (IMC), truckload carriers, and railroads

Domestic Rail-Truck Sales Channels

Channel Example Players Advantages Disadvantages

Must rely on others for assets and movement

Low margins, high overhead

Inefficient

Outlook

Intermodal Marketing Companies (IMCs)

Hub Group, Exel, Pacer Global, Alliance, C.H.

Robinson

Customer relationships

Door-to-door operational expertise

Nationwide coverage

Truckload Motor Carriers

J.B. Hunt, Schneider,

Swift

Lower overhead

In-house drayage

Customer relationships

Minimal operating synergy with trucking operations

Requires new management focusMinimal experience selling or operating,

Lack of nationwide coverage

RailroadRetail

NS Triple Crown, Union Pacific Distribution

Services

Control customer relationship

Control integrated operation/margins

Key Players

Non-asset based

Asset based

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$0$200$400$600$800

$1,000$1,200$1,400$1,600$1,800$2,000

19901995

20002001

20022003

20042005

20062007

2008

J.B. Hunt Intermodal Revenue1990-2008 ($MM)

Favorable long-term contract with BNSF provides excellent service and pricing flexibility

14.4% 2008 Intermodal operating margin best in business

Intermodal now the biggest J.B. Hunt revenue segment, from 32% of revenue in 2001 to 61% of revenue in 2008.

34,000 domestic containers, 26,000 trailers (also used for TL business)

J.B. Hunt has grown its rail-truck intermodal revenue at double-digit rates, gaining share from other retailers

Favorable long-term contract with BNSF provides excellent service and pricing flexibility

14.4% 2008 Intermodal operating margin best in business

Intermodal now the biggest J.B. Hunt revenue segment, from 32% of revenue in 2001 to 61% of revenue in 2008.

34,000 domestic containers, 26,000 trailers (also used for TL business)

Source: Company financial reports

J.B. Hunt Revenue By Segment, 2008

Key Players

1995-2008 CAGR:11.4% 2006-2008

CAGR 16.8%

6%

18%

25%51%

Intermodal

Dedicated

Truckload

ICS

Approaching $2B . .

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Pacer is unique – wholesaling its stack train network, retailing through its IMC, and providing trucking and warehousing

Source: Company financial reports

Pacer Stack Train Network

Key Players

2008 revenue: $2.1B

Pioneered double-stack with predecessor APL in 1984, now 1000 trains/week, 80 terminals

Sells space on scheduled train network to other IMCs

Developed new door-to-door wholesale product

Equipment position– 1800 stack cars– 29,000 domestic containers

Primary rail partners: Union Pacific and CSX; recently BNSF

Major challenge: Long-term contract with Union Pacific expires in 2011 – future unclear

2008 revenue: $2.1B

Pioneered double-stack with predecessor APL in 1984, now 1000 trains/week, 80 terminals

Sells space on scheduled train network to other IMCs

Developed new door-to-door wholesale product

Equipment position– 1800 stack cars– 29,000 domestic containers

Primary rail partners: Union Pacific and CSX; recently BNSF

Major challenge: Long-term contract with Union Pacific expires in 2011 – future unclear

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Contents





Outlook

32

Infrastructure funding background

Historically almost all funding from private sector– Track – railroads– Terminals – railroads, ports– Railcar equipment – TTX and railroads– Trailers/containers – railroads and pools (declining), motor carriers,

intermodal marketing companies, ocean carriers

Federal transportation funding for rail freight slowly increased– 1990s – ISTEA, TEA-21– 2000s – SAFETEA-LU - projects of national significance

Railroads have varying degrees of interest – “slippery slope” concern– NS most active, CSX becoming more active, UP reluctant

Advocacy groups have made a strong case – AASHTO, AAR, Surface Transportation Policy and Revenue Study

Commission– $135B infrastructure expansion requirement by 2035, $39B shortfall– Obama Stimulus: $27B for formula grants to state/local govts., but expect

minimal use for rail projects; $8B for high speed passenger rail


33

Recent rail infrastructure funding examples

NS Heartland

CSX National Gateway

Logistics Parks

CA Alameda Corridor

KCS Speedway

Inland PortsTerminals

Significant Connectors

Multi-State Corridors

Chicago CREATE

Equipment “Clean Trucks” Drayage

Rail Equipment Pools

Examples of Multi-Party Infrastructure Investment


34

Case Study: Alameda Corridor, Southern California

$2.4 B, 20-mile-long link between ports of Los Angeles / Long Beach and the U.S. rail network.

Eliminated a major intermodal bottleneck.

Includes bridges, underpasses, overpasses a 10-mile trench to separate freight trains from vehicles and passenger trains.

Completed April 2002.

Financed through a public-private partnership:

$0 $500 $1,000 $1,500

Other

Ports of LA/LB

MTA (Local)

Federal Gov't

Bonds

Funding (MM)

Sources: OnTrac, Alameda Corridor Transportation Authority, Union Pacific


35

Los Angeles / Long Beach On-Dock Rail Facilities

Alameda Corridor connects 10 LA/LB rail terminals with BNSF and UP’s network, reducing street truck traffic to near-dock and off-dock rail terminals.

Sources: Trains Magazine (Sep. 2006)

Port of LA / Long Beach On-Dock Rail Map


36

Case Study: Chicago CREATE

25% of U.S. rail traffic moves from, to or through Chicago.

$1.5B project seeks to improve rail transportation in Chicago, the primary rail hub in the U.S.

A public-private partnership between the U.S. Department of Transportation, the State of Illinois, the City of Chicago, and 8 freight and passenger railroads.

CREATE will invest in new over/underpasses, viaducts, and track and signal upgrades.

41% of CREATE projects are already underway (as of 2009).

Sources: CREATE website

Chicago CREATE Corridors


37

Case Study: NS Heartland Corridor

$151M effort to increase tunnel clearances between East Coast and Chicago, to be completed in 2010.

Will shorten distance traveled by double-stack trains between East Coast and Midwest by 200 miles.

Financed through a public-private partnership: NS ($45M), Federal government ($95M) two states ($11M).

Part of $311M in NS and public intermodal investments along the line.

NS Heartland CorridorShown as Black Line

Sources: Norfolk Southern, VA Commonwealth Transportation Board, Trains Magazine (Apr. 2009)


38

Case Study: NS / KCS Meridian Speedway

$300M upgrade to 320-mile “Meridian Speedway” in U.S. Southeast.

Speedway provides a faster route for intermodal shipments between West Coast, Texas, and the Southeast.

Line was originally owned by Kansas City Southern, but Norfolk Southern took a 30% stake in 2006, and funded the improvements.

By 2010, upgrades will increase train speeds to 60 mph (97 kph) on 80% of the line.

The line is also used by Union Pacific for shipments from the West Coast.

Meridian Speedway

Sources: Wall Street Journal (Feb. 2008), Logistics Management (May 2006), Norfolk Southern (June 2006 8k)


39

Case Study: CSX National Gateway

$724M plan to provide clearances and terminals for double-stack intermodal service in Eastern U.S. by 2015.

Public-private partnership between CSX Transportation ($362M est.), six states ($181M est.) and the Federal government ($181M est.).

Project would ease the flow of intermodal shipments from East Coast ports into U.S. Midwest.

Public funding – particularly for clearances – is sill being sought.

Recent fiscal stimulus may provide additional federal funds.

CSX National Gateway

Sources: Cleveland Plain Dealer, National Gateway homepage.


40

Case Study: Logistics Park Chicago, BNSF

Sources: BNSF, JADA, Google Maps

700-acre intermodal facility located in a 2,200-acre industrial park outside of Chicago, on former U.S. Army property.

Intermodal and finished vehicles

Handles international containers from West Coast ports, including daily service from LA, Long Beach, and Seattle.

LPC has allowed BNSF to win business from steamship lines moving containers into Midwestern U.S. markets.

Centerpoint and Prologis developing 12 MM sq. ft. warehousing with major retailers (Wal-Mart, others)

Total projected investment: $1B total (private and public)

Logistics Park Chicago


41

Case Study: TTX

TTX is a joint venture owned by the major North American railroads, providing pooled rail equipment at market rates.

Today, TTX owns 67% of U.S. intermodal platforms.

Over the last 10 years, 61% of TTX’s $3.9B in new equipment consisted of intermodal cars.

Pooling the purchase and management of intermodal cars

– Standardized equipment specs– Increases equipment availability and

limits empty miles– Reduces the railroads’ capex (TTX is

funded from daily rentals)

TTX DST

TTXNon-DST

Other Non-DST

Other DST

U.S. Intermodal Fleet Intermodal Platforms by Owner and Type

Total:316K Platforms

Source: TTX


42

Contents





Outlook

43

Looking ahead, intermodal will outpace other modes, providing opportunities for the strongest players

Intermodal Growth DriversGlobal trade growth

Trucking cost pressures –drivers, fuel, congestion, environmental

Healthy rail sector

Green appeal – carbon offsets

Intermodal Growth DriversGlobal trade growth

Trucking cost pressures –drivers, fuel, congestion, environmental

Healthy rail sector

Green appeal – carbon offsets

Intermodal ChallengesPanama Canal expansion – 2014

Meeting customer needs for service and capacity

Passenger train network

Measured pace of investment

Intermodal ChallengesPanama Canal expansion – 2014

Meeting customer needs for service and capacity

Passenger train network

Measured pace of investment

Outlook

44

Post recession, intermodal growth prospects are strong

Outlook

U.S. Freight ForecastCAGR 2009-2020

2.5% 2.1% 2.3% 1.7%

4.7% 5.0% 5.1%4.2%

8.0%

0%1%2%3%4%5%6%7%8%9%

10%

US GDPTotal

Truck

Rail Carlo

ad

Intermodal

TotalTruck

Rail Carlo

ad

Intermodal

Tons Revenue

65% volume growth

Double revenue to $20B

Source: ATA, HIS Global Insight, March 2009

45

Strong international container growth is expected to continue, particularly at big load center ports that can handle larger vessels

Outlook

46

Passenger network expansion will compete for resources, but can ultimately complement freight infrastructure

Outlook

47

Nimble commercial strategies, innovative operations, and steady investment in growth will ensure continued health of NA intermodal

Outlook

Keep the pressure on the “indifference line”– Productivity gains– Service excellence

Drive further share in current hub lanes

Fill in the “white space” – secondary markets

Move into shorter hauls – carbon offset financing?

Selective use of bimodal for port-rail feeder, double-stack feeder, and closed loop unit trains

Niche opportunities in bulk (reefer, tank, waste) and auto

Attract the next wave of channel partners

Keep the pressure on the “indifference line”– Productivity gains– Service excellence

Drive further share in current hub lanes

Fill in the “white space” – secondary markets

Move into shorter hauls – carbon offset financing?

Selective use of bimodal for port-rail feeder, double-stack feeder, and closed loop unit trains

Niche opportunities in bulk (reefer, tank, waste) and auto

Attract the next wave of channel partners

Growing North American Intermodal to 2020

Documents

North American Intermodal Experience - World Banksiteresources.worldbank.org/INTSARREGTOPTRANSPORT/6034746... · The double-stack route network ... 2008 Total Rail Intermodal Revenue: