Biggest rail companies are cashing in on supply chain crisis, watchdog says

WASHINGTON — Several of the largest railroads in the United States have profited from the supply chain crisis by raising fees and cutting costs, according to a liberal-leaning watchdog in a new analysis.

Accountable.US, a nonprofit group that reviews businesses and special interests, said the seven major railroads, which dominate an industry that moves about 40% of US freight, collected a record $1. $18 billion in fees for freight stuck in supply chain bottlenecks. in the first nine months of 2021.

With the impact of the Covid-19 pandemic, supply chain issues have worsened over the past year. Railways suspended and limited service, levying more demurrage charges – which take effect when cargo stays beyond a specified time in a terminal and are an essential tool for keeping cargo moving.

Companies have also cut costs through the use of “precision programmed railroading”, which involves streamlining schedules, reducing staff as well as locomotive and car fleets. Before rail industry fees set a record during the pandemic, they had already grown at a rate ten times higher than spending since 2002, the report said.

The Association of American Railroads, an industry trade group, said in the first half of 2021 the railroads handled the highest volume of intermodal traffic ever moved during that period.

The group, however, argued that “the idea that the railways are using demurrage charges to ‘profit from the supply chain crisis’ is wrong”, saying such charges serve “to incentivize other actors in the supply chain to operate more efficiently and in ways that improve the supply chain.

In the third quarter of 2021, BNSF, a subsidiary of Warren Buffet’s Berkshire Hathaway and North America’s largest railroad, charged freight rates 5% higher than the same period a year earlier. , and reduced the time before it began to impose demurrage charges, according to the analysis.

During the fourth quarter of 2021, CSX, the fourth-largest railroad, credited higher charges to profits and improved its operating ratio, the analysis found, adding that it spent more than $2.3 million. lobbying on user fees, rail regulations, mergers and other issues that year.

According to the analysis, Union Pacific, Canadian National, Norfolk Southern and Canadian Railway also increased costs, which boosted net income.

CSX and Canadian National referred NBC News to the Association of American Railroads. The other companies did not immediately respond to requests for comment.

Surface Transportation Board Chairman Martin Oberman, a key federal rail regulator who was appointed by President Joe Biden, has criticized the railroads for abusing their market power.

Last September, Oberman denounced the industry’s “pursuit of almighty OR,” referring to railroad efforts to improve their operating ratios by cutting costs.

Oberman estimated that since 2010, the industry has spent $46 million more on stock buybacks and dividends than on maintenance and equipment investments, “which would have increased the resilience of the rail system in the face of the type of supply chain shocks that are currently weighing on consumers’ wallets and access. daily necessities,” according to the analysis.

“I count on RRs and shippers to keep their big picture and to actively participate in efforts to ameliorate these issues not only for the immediate crisis, but in the long term to close the holes in the international supply chain that the pandemic revealed,” Oberman said during a speech.