Shippers rip railway service, expect price increases in 2015

In one recent study, shippers – soon to be subject to price increases on railways – ripped rail-based intermodal freight service in the U.S. and Canada.

An RBC Capital Markets annual survey of railway users revealed the shippers’ belief that railways’ services have declined significantly in the past year, the Vancouver Sun reported. The 2014 North American Railroad Shipper Survey found that more than 75 percent of the railway customers rated service as either poor or fair. Last year 32 percent gave the same response.

One analyst blamed bad weather and congestion on shippers’ collective lack of satisfaction with railway service recently. The publication did also note that shippers indicated an expectation for volume growth in 2015 due to improvements in the Canadian economy and tighter railway service.

“We consider the decline in customer satisfaction to be a temporary sentiment shift caused by unforeseen factors that were largely out of carriers’ control,” Walter Spracklin, an analyst, wrote in the RBC report, according to the publication.

Rising demand for rail service could result in increased prices

Though service has been bad for shippers using North American railways as of late, they can expect to pay more in the near future, the Journal of Commerce explained. In RBC’s study, the Canadian investment bank surveyed 51 shippers, with the final consensus being that rail rates will rise between 4 percent and 6 percent next year. The vast majority, 85 percent, predicted increased costs. Of the others, 5 percent expect prices to remain the same, 2 percent projected a decrease in rates and 8 percent didn’t disclose their pricing expectations.

After the harsh winter, railway firms have invested extra resources into getting more locomotives and train crews on the railways in order to restore service to normal levels, the publication noted. BNSF Railway, among others, has boosted its capital project plans in order to increase capacity at freight chokepoints.

“In our view, positive pricing momentum reflects improving macro fundamentals and tightening transportation capacity,” RBC Capital Markets said, according to the Journal of Commerce. “Moreover, we are encouraged that service network disruption has not precluded carriers from obtaining higher rates in contract negotiations, and we see an incremental update in rail pricing as service recovers to historic levels.”

Canadian National Railway tops out competitors for shippers’ praise

Canadian National Railway was one railway that received praise from shippers for not allowing its service to decline over the past year. The Montreal-based railway had robust operating metrics compared with its competitors, beating them out in categories such as train speeds and dwell times, the Vancouver Sun reported. Though Canadian National Railway received more praise than other railways, its service was still described as “fair” or “poor” by 63 percent of the shippers.

However, Canadian Pacific Railway fared worse, according to the publication. Of the shippers who rated its service, 79 percent gave negative responses, compared with 48 percent last year. The railway did receive praise for shorter transit times and improved on-time performance.

The survey also showed several opinions on recent rail regulations in Canada, according to the Vancouver Sun. The federal government recently took action on Prairie grain farmers’ worries over service by implementing minimum grain volume thresholds in March in order to assist with the international distribution of a significantly productive harvest this year. Last week the requirements were extended through March 2015. Some shippers explained that the grain volume mandate put some sectors at a disadvantage, while others supported it, noting that it put service issues to task.