Norfolk Southern (NS) has teamed up with leading Canadian rail operator CN for a joint interline service that offers shippers and importers shorter transit times to and from international markets, primarily in Asia. The two North American rail carriers have developed a joint interline service for carload traffic moving between western Canada and points in the eastern part of the US.

Their new service bypasses interchange points in the Chicago area, thereby avoiding the biggest bottleneck for rail traffic in the US. By one estimate, about 1 million switches occur in that area in a year, which accounts for nearly one-quarter of US rail traffic.

Rather than use interchange points in or around Chicago, NS and CN opted to switch their joint traffic at a NS rail yard in Elkhart, Indiana. They claim that this cuts transit times by 24-48 hours.

The partners interchange two eastbound and two westbound trains each daily on the routing.

“Together CN and NS have re-engineered our Chicago connections to provide shippers with a new superior-service shipping option,” said Jim Squires, chairman, president and CEO of NS in a statement. “Customers on both railways are seeing faster and more reliable service, benefiting their supply chains.”

While the concept of rail interline service is not new, CN claims that this partnership breaks new ground by going beyond traditional interline points to establish optimal routing and aims to cut down the number that cars have to be handled to a minimum.

Shippers certainly welcome shorter transit times – provided they manage to get hold of capacity in time, as rail traffic in North America has been going strong. In October, US rail traffic was up 3.1% to reach 2.2 million units of carloads and intermodal containers, which set a new record for the industry.

This continued the upward momentum of the first nine months of 2017. The Intermodal Association of North America reported growth of 6.3% in the third quarter. International intermodal volume was the chief driver, climbing 8.2% during the period, while the number of domestic containers rose 3.8%.

“This quarter’s results show a continued recovery for all three intermodal segments, marking three consecutive quarter of growth, a first in six years,” said IANA president and CEO Joni Casey.

At CN, intermodal revenues advanced 12% during the third quarter, while overall revenues went up 7% to C$3.2 billion (US$2.51 billion). Net income declined 1% to US$753 million.

South of the border, BNSF tabled 6% increases of both revenues and net income in the third quarter, continuing its growth in the first half of 2017. Operating income for the January-September period was up 9% to US$5.3 billion, while revenues rose 8%.

With the exception of CSX, which has suffered service deterioration in the wake of changes implemented by its new leadership, North American railroads have enjoyed strong growth in intermodal traffic as well as in overall business, and they are making hay while the sun is shining.

In September, intermodal rates went up 4%, marking 12 consecutive months of rising rates. Pricing in other modes is also on the rise, thanks to growing demand and capacity constraints.

The latter threaten to throw a wrench into rail firm’s pricing ambitions, though. During the late summer and early autumn CN suffered delays on its trains coming out of Canada’s western marine gateways, which were struggling under the combined impact of rising volumes and infrastructure work that crimped capacity. Delays out of Prince Rupert stretched to 10-15 days, which prompted COSCO to shift one vessel rotation to Vancouver. However, the latter has also struggled as a result of a terminal expansion project, and the problems were exacerbated by crane failures. Rail car shortages compounded the problems at both ports.

With the situation returning to normal, CN is eager to reap the benefits of its accelerated transit times to the eastern US through the alignment with NS. Rival CP Rail appears to be contemplating a move in the same direction. According to an unconfirmed report, the smaller Canadian rail carrier is looking to forge a similar agreement with CSX.

However, faced with the service problems in the wake of its revamp, CSX is not likely to put a lot of energy on such an alignment at the moment. At this point, its management is reportedly thinking of scrapping plans for an intermodal rail terminal in North Carolina. The company recently decided not to proceed with plans for a tunnel expansion that would allow double-stack train service to the port of Baltimore.

By Ian Putzger

Correspondent | Toronto