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FEATURE-Global trade keeps container boom humming on U.S. rails
By Nick Carey

ELWOOD, Ill., April 26 (Reuters) - The thousands of truck trailers filled with consumer goods like television sets and textiles that await distribution on a huge lot outside this Chicago suburb have one thing in common.

"Everything here is from Asia," said John Clement, senior manager at Logistics Park Chicago, an international hub operated by No. 2 U.S. railroad Burlington Northern Santa Fe Corp.

LPC is a hive of activity. Trucks arrive at the gate night and day, and crane drivers work to lift the big metal containers on or off trains within a minute as more arrive constantly.

The goods in the containers originated in factories in China and other Asian countries and traveled by ship to the U.S. West Coast. From there, they were loaded onto trains bound for Elwood. Truckers then ship them to retailers in the Midwest.

LPC is a microcosm of U.S. trade, where Asian imports outpace exports. But it also raises the question of how to move goods when they get here, whether by rail or road.

Intermodal combines both by using standard containers transferable between different modes of transport.

Driving past a 1.5-mile (2.4-kilometer) intermodal train in bright spring sunshine, Clement estimates up 80 percent of containers leaving LPC for Asia go empty. The hub has space for 6,000 of these 20- or 40-foot boxes that companies like China Shipping Container Lines Co. send to Asia when they run short.

LPC is growing fast. It handled 450,000 containers in 2005 and expects 800,000 this year - and Clement points out a fourth rail line under construction that will open in May and boost capacity to 1.4 million containers a year from 1 million as Burlington Northern expects demand will continue rising.

"We are running as fast as we can to stay ahead of the curve," Clement said.

U.S. railroads hope to cash in on rising imports by moving more containers through their intermodal services, which are cheaper and more fuel-efficient than long-haul truck routes.

But some customers complain that the railroads do not move intermodal shipments fast enough, and analysts say these services must improve for the operators to continue to grow.

"Capacity and efficiency are the main challenges the railroads need to overcome," said Ken Hoexter of Merrill Lynch.

Containers are what intermodal is all about. Easy to move between ship, train or truck, they now dominate global merchandise trade and are even moving into some areas of bulk commodities like grain or oil.

GROWTH AREA

Container use is up sharply as U.S. manufacturing moves to China and other developing nations. Since 2003, U.S. imports have posted double-digit annual growth. More imports have meant more containers.

According to the Association of American Railroads, intermodal volume rose 6.4 percent to 11.7 million units in 2005 from 11 million in the previous year.

"This has been the fastest growing rail business for 20 years, and we anticipate further growth," said association spokesman Tom White.

For manufacturer American Railcar Industries Inc. , this represents significant opportunities for years to come, Chief Executive James Unger said.

The company plans to start making intermodal railcars in 2008, following rival FreightCar America Inc.'s planned move into that business next year. Greenbrier Cos. now dominates the intermodal car market.

Flat intermodal cars are easier to make than those carrying coal or liquids. Containers are often double-stacked, so the railroads can haul more freight per train and increase their profit margins.

New intermodal rail facilities like LPC are attractive for logistics companies looking to distribute imported goods. Four of them operate next door, but they are already dwarfed by the 3.4 million square foot "import hub" U.S. retail giant Wal-Mart Stores Inc. is building a few minutes' walk from the LPC facility. Set to open in August, it will send goods to the retailer's distribution centers.

Facilities like LPC reduce costs by handling containers faster and more efficiently, boosting profit margins.

"After coal, intermodal is the highest-margin rail business," said Merrill Lynch's Hoexter.

U.S. trucking industry woes are causing shippers to turn to intermodal. Trucks are less fuel-efficient for long hauls, and drivers are in increasingly short supply.

But railroad officials also worry that their companies could suffer if shortages worsen as expected.

"It's a double-edged sword for us," said Jeffrey Heller, an assistant vice president at railroad Norfolk Southern Corp. . "While the shortage has added to our business, if it gets too bad, it could cause problems for everyone."

Handling that extra capacity also poses problems.

As rail traffic has risen, so has customers' irritation about delays.

United Parcel Service Inc. , the world's largest package delivery company and a big intermodal customer, has complained publicly.

"The railroads have greatly improved service recently, but it is still not where we need it to be," Chief Financial Officer Scott Davis said.

Jack Koraleski, executive vice president at No. 1 U.S. railroad Union Pacific Corp. , acknowledged that delays have led to inconsistent service.

"It's not always about speed, but always meeting the delivery times you promise," he said. "That's the sort of efficiency we need to focus on."
 

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^^^
Thanks for the news hkskyline!
I think this news also confirmed on the rail bottleneck issues around chicago area! :)
 

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hkskyline said:
FEATURE-Global trade keeps container boom humming on U.S. rails
By Nick Carey

ELWOOD, Ill., April 26 (Reuters) - The thousands of truck trailers filled with consumer goods like television sets and textiles that await distribution on a huge lot outside this Chicago suburb have one thing in common.

"Everything here is from Asia," said John Clement, senior manager at Logistics Park Chicago, an international hub operated by No. 2 U.S. railroad Burlington Northern Santa Fe Corp.

<snip>

LPC is growing fast. It handled 450,000 containers in 2005 and expects 800,000 this year - and Clement points out a fourth rail line under construction that will open in May and boost capacity to 1.4 million containers a year from 1 million as Burlington Northern expects demand will continue rising.

<snip>
Don't get me wrong here: I'd just like to know what this fourth rail line is.
 
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