Archive for Uncategorized

Washington state’s short lines need $600 million in upgrades as of 2015 study

Deferred rail infrastructure project costs have been assessed for the state of Washington Short Lines. More than half of short-line rail lines in the state of Washington aren’t up to modern standards… … is the conclusion in a study by the Washington State Department of Transportation (WSDOT) and Washington State University.

The Washington State Short Line Rail Inventory and Needs Assessment was performed by the WSDOT and the university’s Freight Policy Transportation Institute.

29 short lines operate there . More than 55% with 740 miles of the track miles within the state are still unable to handle 286,000-pound rail cars used in modern frail reight over the past thirty or so years.

To bring the lines up to modern standards could cost more than $600 million

For more, log onto: URL: >–45306?

South Africa electric utility dispute with major coal supplier

The dysfunctional issues surrounding the government managed electric utility threatens the so called National Development Plan.

Here is the latest business news from multiple sources. News reports suggest that South Africa’s ailing mining sector has already shed more than 35,000 jobs over the past two years.

Mining company’s complain of the rising costs, particularly for electricity and wages.

Tonight, mining giant Glencore announced that it is placing its Optimum coal operation under “business rescue” due to Eskom’s unreasonable supply contracts. Optimum previously contracted to supply 5.5 million metric tonnes of coal per year to Eskom. ”

Glencore claims that “This has resulted in it supplying the coal at a price significantly below the cost of production for a number of years”.

Meanwhile, South African coal prices for exported coal have reportedly dropped 23 per cent over the past year due to a global glut of the fuel. Eskom is therefore looking to renegotiate the rate it pays for domestic coal.

All of the coal is mostly moved by rail.

Is the 2015 expanded Suez actually needed? // Or a build it and they will come project?

Is the just completed Suez improvement project a prayer as in the expectation: “build it and they will come”?

The Grand Opening this week in Egypt….

The upgraded Suez canal is actually a new 35-kilometer channel and 37 kilometers of widening and deepening of the original channel. The improvements allow two-way traffic and reduces transit time to 11 hours from 18, according to the canal operator. The expansion does not allow larger vessels to use the route. It has been improved despite the fact that Suez has yet to fully recover since the global financial crisis caused shipping to plummet in 2009.

Although total tonnage has increased, the number of vessels using the canal remains 20 percent below its 2008 level — according to data compiled by Bloomberg. These statistics reflect slower global trade growth, which the International Monetary Fund expects to average 3.4 percent in the period 2007-2016.

In an earlier period 1997 to 2006, global trade had grown at about 7 percent a year. As an illustration of the slower growth, the Baltic Dry Index, which measures rates for shipping iron ore, coal and grain is about 90 percent below its all-time high of 11,793 reached in 2008.

Will the Government obtain a Fair Return on the Suez upgrade investments?

The government hasn’t made public viability studies to show how it will gain a return on its 64 billion Egyptian pound ($8.2 billion) investment. The claim is that this expansion will meet future demand, with ship traffic expected to double to 97 vessels a day by 2023. That according to Mohab Mameesh, head of the Suez Canal Authority.

They hope to increase the toll revenues from the $5.5 billion collected in 2014 to as much as $13 billion by year 2023. “By creating a second lane of the canal we are able to reduce waiting times, which reduces fuel expenditures and costs, with no increase in our toll fees,” he said in a response to Bloomberg.

Is that likely? Global trade volume would need to rise by around 9 percent a year for Suez to reach its traffic goal, Capital Economics says in a report.. It describes that as “unlikely to say the least.”

For very large ships, the Suez Canal can save about 42% of the sailing distance between Rotterdam and the Persian Gulf versus the longer around Africa route.

Railway Renaissance! Maybe not as challenges come from re-sourcing thermal coal

As a Middle Ages historian in college, I can tell you that the Renaissance period had its ups and downs.

The modern North American so called Renaissance Rail Freight Period has challenges also. Loss of potential thermal coal traffic market share is one such challenge.

Next time you are at a rail conference, look for a due diligence balance in the railway future discussion.

Renaissance Challenge #1 is to rail thermal coal markets and routes… The Bloomberg news has an excellent report on the changes coming in the U.S. Coal by rail market. Here are a few highlights:

“Coal Left Fighting Over America’s Last Plants as Rules Mount” — a report by Tim Loh and Mario Parker – Aug 2, 2015

One theory is that various states will fight to Steal Markets from one another & therefore rail coal train corridors could significantly change. We saw such massive rail routes changes in the 1970’s to 1990’s period as the Powder River traffic literally exploded as a new rail market.

Now comes a new cycle fight. One example is the fight for resourcing origin markets between the Illinois Basin producers and the Wyoming Powder River area. Illinois miners may try to “take 60 million tons of Powder River Basin’s market” says one source, Robert Moore, CEO Foresight Energy LP in St. Louis.

This geographic resourcing is particularly interesting since the rail regulators at the STB in ashington typically ignore source competition as an economic variable.

Amidst this, the pending Clean Power Plan rules will seek to cut coal-fired electricity by 90 gigawatts. The Energy Information Administration reported earlier that this cut would come out of about 292 gigawatts of coal-fired generation capacity that was in line during in 2014.

New replacement thermal coal power station in the next decade or two? Unlikely.

The railroads will therefore fight for a diminishing share of the coal energy market over possibly much shorter average lengths of haul as states fight for resourcing.

No one knows how this will play out even if there is a Rail Renaissance under way.

What is the calculated financial risk impact on the big 6 North American rail companies from such new sourcing + route shifting + power station energy changes?

To read the entire Bloomberg article and its authors’ story focus, go to

US revised 2015 Climate Rules will hit railroads hard as soon as 7 years…by 2022

An important Coal background report from Bloomberg, Aug 1, 2015

The Obama administration has reduce the differences among state goals in a landmark climate change rule, addressing complaints from states such as Arizona and Florida… Selectively, this add further pressure to the long term profitability issues senior railroad managers face.

Rail freight commodity mix is going to change significantly as a result.

This is a good topic for upcoming U.S. Railroad forums and possible marketing lessons for students seeking to enter the rail industry.

A few Highlights:

According to Bloomberg sources, the new rules from the Environmental Protection Agency will force cuts in greenhouse gases from power plants. It is to be the centerpiece of President Barack Obama’s plan to address global warming.

US power plants burning coal produce almost 40 percent of the United States electricity, and release the most carbon dioxide for every kilowatt generated.

Each state will have to submit plans to the agency by 2018 on how it will achieve the EPA-mandated goal, which begin to bite in 2022 and phase in through 2030.

Coal-Heavy States

The EPA’s initial proposal would have forced states like Arizona, which have a lot of natural-gas plants and scope for renewable power growth, to make cuts in emissions of more than 50 percent by 2030. …the coal-heavy states such as Kentucky, West Virginia, Wyoming and Montana faced cuts of 21 percent or less.

Under the scheduled new rules, EPA is tweaking its forecasts for the amount of natural gas and renewable energy growth it estimates can be accomplished in those states…

The White House claims that… …the final plan will be stronger than what was proposed in 2014.

How this will hurt individual coal hauling railroads financially is not yet predicted.

To read the entire article, go to

Three Years Ago This Coal Mine Was Worth $624 Million. // Now just $1 dollar

From Bloomberg, Jul 31, 2015

The destructive force of a collapse in world coal prices has been underscored by the sale of a mine valued at A$860 million ($631 million) three years ago for just a dollar. Brazilian miner Vale SA and Japan’s Sumitomo Corp. sold the Isaac Plains coking-coal mine in Australia to Stanmore Coal Ltd., the Brisbane-based company said Thursday in a statement. Sumitomo bought a half stake for A$430 million in 2012.

A slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers.

Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008.

To read the entire article, go to

Blue Skies in Beijing! All because Steel Mills Face Curbs as city prepares for a Parade

From Bloomberg, Jul 30, 2015


A Chinese paramilitary policeman stands guard at Tiananmen Square under crimson clouds at sunset in Beijing, China. Photographer: Feng Li/Getty Images

Beijing airport under clear skies

Steel output in China will be disrupted next month and September as mills around Beijing are ordered to curb production to ensure clean air and blue skies for a parade to mark World War II and sports event, hurting iron ore demand.

Look for more falling ore and met coal and scrap prices to follow as a result.

Steel output in China will be disrupted next month and September as mills around Beijing are ordered to curb production to ensure clean air and blue skies. Why? All for a parade to mark World War II and sports event. Impact Example As much as 6 million metric tons may be cut, more than was lost last year when similar curbs were used for a global summit…  says Xu Xiangchun, chief analyst at Mysteel Research. He was citing talks with policy makers and mills. The government plans measures to ensure the air quality, according to an official at the Beijing Municipal Environmental Protection Bureau.


Over a longer period, the capital’s air pollution may drive the government more quickly towards far less polluting steel manufacturing processes.  Look for a shift towards more scrap charged oxygen plants and mini mills to substitute fro fully integrated ore and met coal steel plants.  This shift will affect railway traffic volumes both in China and in far away raw materials nations like Mongolia and South Africa.

To read the entire news report, go to

CSX, Georgia Ports Authority MOU to open new inland port


Is such a short haul intermodal Port of Savannah inland corridor possible? Or just a boutique market?

355 miles? Really?

Being promoted as a MOU. That’s not a legal contract. So how real is this? And can it be profitable given the short distance? Or will it need to be subsidized? Too little info at this time to tell.

New Release highlights:

CSX Transportation and the Georgia Ports Authority (GPA) signed a MOU agreement yesterday to establish an inland port in northwest Georgia.


The Georgia Governor and officials from the ports authority, CSX and Murray County signed the memorandum of agreement.  It sets up the Appalachian Regional Port in Chatsworth, Ga. From there, It might use trucks or rail to service a hinterland market of Alabama, Tennessee and parts of Kentucky.

It is to be operated by the GPA. This new inland terminal/transfer/storage port facility will be located on 42 acres in Murray County. The site is next to U.S. Highway 411 and provides access to Interstate 75.

But the facility may not become operational until 2018.

Port officials estimate the CSX route will reduce Atlanta’s truck traffic by 40,000 moves annually. That is about 150 containers a day. The calculated highway mileage is about 355 truck miles.

Normal economics see rail intermodal profitable competition ranges versus trucking at longer 600 plus mile distances. In theory this might work with by using on near dockside lower drayage cost within the Savannah port.

What do you think? A good investment? Or too risky for my pension funds?–45233


Selected observations from others

The port of Charleston inland terminal at Greer SC is quite different than this Savannah opinion. For one thing it is between Greenville and Spartanburg and down the road from the BMW plant which is a very big deal up there so the terminal was a natural for truck drays from the port and vice versa. The rail angle is to connect the port drays to the Crescent Corridor including base load traffic into and out of the region.

One person recently observed that with reasonable wait times the dray men are making 2 turns per day, very good economics for them.

Some of these short inland operations can work.

Trouble in Steel Town as World’s Mills Face Glut, Sinking Prices

From Bloomberg, Jul 29, 2015

There’s trouble in steel town. Global finished steel prices are in retreat as China’s mills put more products on the boat for export.

The average U.S. price of hot-rolled coil, used in everything from buildings to automobiles, dropped by 33% to $456 a ton in the second quarter, according to The Steel Index.

In China, steel rebar sank to the lowest level since 2003 this month.

Scrap prices are also falling.

To read the entire article, go to

A few data points:

“Chinese steel is flowing into the North Asian markets,” Naoto Umehara, executive vice president of Kobe Steel Ltd., told reporters in Tokyo. “That’s pushing down hot-rolled coil, a typical example of general commercial steel products, and that’s also pushing down the overall market prices. In that sense, the damage is big.”

South Korea’s Posco, the world’s fifth-largest producer, reported a slump in profit earlier this month and announced plans to cut staff and refocus on its main business. Its stock traded this week at the lowest in a decade.

U.S. Steel said that the net loss widened to $1.79 a share in the second quarter compared with 12 cents a year earlier. Its steel SALES fell to $2.9 billion from $4.4 billion. Stock in U.S. Steel is 36% lower over the past 12 months.


Steel exports from China surged 28 percent to 52.4 million tons in the first half, according to customs data. Overseas sales from China have risen to extraordinary levels, according to Credit Suisse Group AG.

All of this are more signs of a reduction in the value of scrap steel and proposed new mine and rail projects around the world.

What happens when asset sales slow down? As buyers are few.

From Bloomberg, Jul 28, 2015

Big oil companies are trying to spin off assets to generate cash and rebalance their Balance Sheets.

South Africa’s government wants to sell off assets to generate funding for its troubled monopoly power company

What happens when buyers are in no rush to do a deal?

More about this can be found on Bloomberg as oil giant BP Plc’s second-quarter profit were reported this morning and it missed analyst estimates. Part of its strategy is to sell off assets. Finding buyers at the right price seems to be difficult! That could mess up a lot of strategic plans.

To read the entire article, go to