Print This Article
Railex offers third weekly run from West Coast to New York
May 5, 2009By Stephanie Nall
The commercial viability of shipping refrigerated cargoes by rail is getting a big boost from private investment.
Railex, a company that sends refrigerated trains of 55 railcars between enclosed refrigerated rail terminals on the West Coast and upstate New York, added a third weekly service this week.
Railex began operating between Wallula, Wash., and Rotterdam, N.Y., in 2006. Last fall, the company opened a $30 million terminal in California’s central valley.
The facility, in Delano, like the terminals in Washington and New York, is big enough for a train to pull into and unload and load cargoes in a temperature-controlled environment. Storage rooms keep goods at different chilled and frozen temperatures. The service between Delano and Rotterdam proved so successful that Railex offered a second weekly service between the two points.
Railex provides the 64-foot cars, the terminals and the marketing. Union Pacific and CSX Transportation engines pull the trains between the terminal points in five days.
“The second weekly service is starting just as a lot of fresh California produce is starting to be harvested,” said John Philp, assistant vice president for food products at UP. “It may be that the second weekly service will end up being seasonal.”
Out of the Washington area, nearly all the farm goods moved by Railex are storage crops — potatoes, apples, pears and onions that are harvested, put in storage and sold throughout the year. “It’s a very steady demand there,” Philp said. “The fresh produce in California may not sustain two weekly services all year long.”
In addition to providing transportation services for Railex, UP offers its own refrigerated services — both carload and intermodal.
Five years ago, UP invested in thousands of new reefer boxcars. It has the rail industry’s largest fleet of refrigerated equipment. With the decline in rail cargo over the past year, Philp said reefer business has been a bright spot. In fact, during a conference call with Wall Street analysts, the sector got a special mention.
“Food and refrigerated products were the bright spots with our produce rail express leading the way with a 50 percent volume increase resulting from our new California unit train start,” said Jack Koraleski, UP’s executive vice president for sales and marketing.
“Reefer traffic is holding up really well,” he said. “And we’re one of the few groups to meet our mark.”
“Our refrigerated revenue is up in first-quarter 2009 vs. the same period of 2008 by over 10 percent, but volume is actually down,” Philp said. “The volume is down primarily due to a 20 percent decrease in meat and poultry exports.”
Last spring, volume records were set because of the weak dollar, and “we actually had to embargo for a short period because the port infrastructure could not handle all the reloads into containers,” he said.
“Our (reefer) exports now are at healthy volumes (more than 1,000 cars per month), but just not versus last year,” Philp said. “Average revenue per car is up due to price increases and a mix toward more fresh fruits and vegetables and less frozen, which is typically moving at lower rates.”
Philp said the railroad is getting better utilization of its cars, with quicker turns and more shipments annually with each car. In terms of capital, UP is spending $14 million this year to replace more than 700 cars with new refrigeration units, to increase their reliability and to assure compliance with new California emission requirements. Philp said the carrier is looking at the possibility of buying more reefer cars in 2010.
While UP hauls reefer cargo intermodally, the carrier owns none of that equipment and has no hard numbers on the number of moves made annually.
“There are a limited amounts of international containers that move past the ports,” Philp said. “We run a train out of Omaha for “K” Line that is a regular meat shipment.”
The vast majority of refrigerated intermodal equipment is 53-foot trailers, he said, and most still move by highway.
“It’s all dependent on the economics,” Philp said. “One of the biggest owners is the Alliance group. They have between 1,200 and 1,500 refrigerated trailers that move solely intermodal — mostly California to the East Coast.”
Rail Logistics is a Kansas City-based equipment owner. It has a fleet of refrigerated boxcars that it leases to users, including the Washington state Department of Agriculture. The company is interested in increasing the size of its fleet, possibly by purchasing boxcars from railroads and refurbishing them. But Chief Financial Officer Chris Mnichowski said the company also wants to assemble a fleet of 53-foot domestic intermodal containers.
“There will always be the need to ship food, and rail is the best way to do it,” he said. “This sector doesn’t always get a lot of attention, but right now farm goods and food are outperforming other industries.”
Mnichowski said he believes there is a short window of time to attract the attention of investors. “When the overall economy really starts up again, farm products might get ignored again.”
Tags: Railex, refrigerated cargo, refrigerated trains, upstate New York, West Coast
Related posts
