CSX Service Delays Vex Shippers
Shippers frustrated with CSX Corp. deterring railroad service and extended delays are choosing to move some shipments to trucks to satisfy their urgent transportation needs, according to industry insiders.
Meanwhile, federal officials and some shippers have ratcheted up the pressure on the railroad’s new CEO, Hunter Harrison, to explain why service has worsened and when the delays will be resolved.
Some petrochemical, coal, fracking and agricultural shippers complained that their loads have been idle up to four weeks without a clear answer on a delivery date.
“Our members being ‘bothered’ would be an understatement. They’re very frustrated right now,” said Jennifer Hedrick, executive director of the National Industrial Transportation League, a trade association representing U.S. shippers. “In some cases, they’ve had to make wholesale changes to their operations because they’re now having to look for alternatives such as trucks to ensure that their plants don’t shut down and avoid further disruptions in the supply chain.”
“We’re getting a lot of pushback from CSX. Their customer service is really troubled right now,” said Stephen Hamilton, managing director of Chemlogix Global, a subsidiary of CLX Logistics, which specializes in chemical transportation.
He continued, “One of the major issues is that there is a complete vacuum of information. Our customers don’t have any confidence in reliable transportation or answers on how long a load will take to get to its destination. It’s an informational black hole, and I’m frustrated that I can’t give our customers any answers as to when this will end.”
Loads Go to Other Railways, Trucks
According to a survey from Cowen & Co., nearly 50% of shippers (with other options) have moved business to Norfolk Southern and 76% have switched some freight to trucking.
“I think we’ve already seen some of this in July with some companies saying the month was slightly above seasonal. We can’t infer which type of trucking is benefiting, but there is definitely a temporary shift,” Cowen & Co. analyst Jason Seidl acknowledged.
Randy Wright, executive vice president at Intermodal Cartage Co., told Transport Topics that about 25% of its railroad drayage is with CSX and about 25% of those customers have moved business to Norfolk Southern or onto trucks because the delays have included a chassis shortage at the Memphis intermodal ramp. Intermodal Cartage’s parent company, IMC Cos., ranks No. 84 on the Transport Topics Top 100 list of the largest North American for-hire carriers.
ChemLogix has also offered clients room on Norfolk Southern and trucking options as an alternative.
Bulk Fr8, which specializes in tank truck brokerage, told TT that year-over-year volumes doubled last month and are on pace to do so again this month, including nearly a dozen new CSX-beleaguered customers in the last 30 days.
“All of the companies affected by this are coming to us asking for trucks to pickup yesterday. Their moods are frantic and the price is not the concern. For many of the chemical companies they are looking to make sure they meet their [service level agreements]. For the paper mills, they are just doing anything they can to avoid shutting down,” Bulk Fr8 President Wayne Levinson said.
Hamilton added the extended delays force the chemical suppliers to shift to trucks in order to keep their customers happy.
“How long companies can continue to make the switch without changing prices to their customers is anyone’s guess, but I cannot imagine anyone is looking to trucks as a long-term solution. CSX has to get its house in order,” he said.
STB Intervenes
The Surface Transportation Board interceded in late July to find a resolution after shippers flooded the agency with complaints.
“Dealing with CSX has become impossible as person after person we work with one day are gone (with no replacement) the next,” Eddie Johnston, federal government affairs manager at The Chemours Co., said in written testimony. “This behavior is inexcusable!”
A few days later the STB sent a letter to Harrison requesting weekly service calls to “better understand the scope and magnitude of CSX’s railroad performance issues and its efforts to resolve these problems.”
CSX chief executive attributes service disruptions to employee push-back https://t.co/2kNR5PrGPa pic.twitter.com/w3Xrl4wmne — Reuters Top News (@Reuters) August 2, 2017
Harrison apologized to customers in a July 31 e-mail obtained by TT. However, he also laid much of the blame on his employees.
“The pace of change at CSX has been extremely rapid, and while most people at the company have embraced the new plan, unfortunately, a few have pushed back and continue to do so. This resistance to change has resulted in some service disruptions,” Hunter wrote.
Hedrick responded: “While some of our members appreciated the acknowledgment, I think they found his note inadequate and short on details about how ongoing issues will be addressed.”
Harrison previously brushed off the concerns in mid-July as similar in scope to those he temporarily faced when turning around Canadian Pacific Railway and Canadian National Railway.
“This is a freight line that runs through Washington, D.C., and New York. It comes with a bigger magnifying glass being located on the East Coast of the United States,” said Anthony Hatch, rail expert with ABH Consulting. “I think everyone was waiting for the first punch. I expected to see this commentary over the summer, but I didn’t think the issue would spiral as quickly as it did.”
CSX spokesman Rob Doolittle declined to comment further, but he pointed to comments on an Aug. 9 earnings call from Hallador Energy Co. on the issue.
"There was a lot of dramatic change in the second quarter for the CSX and performance was subpar," CEO Brent Bilsland said. "We’ve been delighted that in July and now in August, the performance of the CSX has been much more precise and really, really quite good. And we’ve seen in the last five weeks, our inventory levels come down significantly. So we hope that service continues to be good. We’ve had rail interruptions. In past years, we’ve always found the way to work through them, and we will continue to do so."
