Steel shipper details rail issues for STB
Steel shipper Nucor has called on the Surface Transportation Board to take “firm and decisive action” to keep the railroad industry competitive and reliable.
In an April 24 letter to the STB by Jennifer Diggins, Nucor’s director of public affairs, the company said it is not asking for a re-regulation of the industry, but a way to make sure railroad pricing is driven by the market. She explained that the majority of Nucor facilities around the country are classified as captive, meaning that they are only served by one railroad “and thus pay a premium to move their products because of the lack of rail competition.”
Diggins cited an Escalation Consultants report from March that found rail shipment premiums rose by 90 percent between 2005 and 2011. Nucor, she wrote, has experienced this price increase and has also seen a number of its facilities become under-served by railroads because carriers have been taking capacity out of routes that aren't seen as profitable.
“In the last three years, the premium on our freight shipments from one of our largest Class I railroad has increased an average of 15 percent per year, while the reliability and timeliness of the service has decreased,” she wrote.
“Unlike the railroads,” she continued, “we cannot pass the increased costs of transportation on to our customers. We have to absorb them because the U.S. steel market is still being flooded with illegally subsidized foreign products that are often sold below cost.”
High rail prices might drive shippers to seek out other modes of transportation, but Diggins wrote that in Nucor’s case, a move to trucking isn't logistically or economically possible.
Rail service has gotten so bad, Diggins wrote, that Nucor’s inventory is getting backed up because it can’t be shipped to market fast enough. Although she did acknowledge that first-quarter weather had a significant impact on railroads, she wrote that carriers didn't have adequate contingency plans.
“Just in the first quarter of this year, our managers have noted that rail cars that would normally arrive at their destinations within two weeks have been taking up to two months. These delays affected our customers and many have been forced to utilize trucks at a much higher cost,” she wrote.
“We've lost business,” she continued, “because we've been unable to deliver our products in a timely and cost-efficient manner using the rail system.”
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