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December 2024
Compiled by Jeff Stagl, Managing Editor
CN President and CEO Tracy Robinson believes there are many good things happening in the rail industry.
During a Nov. 15 presentation at RailTrends® 2024 in New York City, she cited a number of positive developments occurring in rail in general and at CN in particular despite some lingering economic, political and regulatory uncertainties. For example, railroads — including CN — are trying harder to exploit sustainable traffic-growth opportunities that show promise no matter the economic cycle, while the Class I itself is doing a better with service-performance consistency, interline volume growth and talent development, Robinson said.
“This is a darn good time to be a railroader. The secret is in building growth that’s more immune to economic cycles. We’re slowly doing that at CN,” she said. “We have to tell our story, of how we power the economy. We help enable trade by connecting markets.”
The other Class I leaders concur. Rather than clouding their coming-year forecasts because of some discouraging plot twists of late — from federal government uncertainty to labor strife to fickle demand — they are encouraged that some good times lie ahead.
The Class Is have spent the past few years trying to better position their organizations and networks to exploit today’s and tomorrow’s growth opportunities. It’s all about proving you can grow and then driving scale, said Robinson.
“We need to set the record straight on what this industry is doing. It’s up to each of us to tell our story and to shape it,” she said. “We have to ensure we’re ready for what’s ahead.”
To better understand their takes on the story-shaping and organization-prepping yet to come, read the following 2025 outlook comments and insights from the six Class I CEOs: BNSF Railway Co.’s Katie Farmer; Canadian Pacific Kansas City’s Keith Creel; CN’s Robinson; CSX’s Joseph Hinrichs; Norfolk Southern Railway’s Mark George; and Union Pacific Railroad’s Jim Vena.
Creel: We have an unparalleled network that is on the path of becoming the most relevant in North America. We are enhancing what we have and we’re increasing capacity through investments in our network to support safety and the growth that our combination enables. Make no mistake, growth defines this combination. The long-term opportunities for our railway in automotive, intermodal and energy are unique and undeniable.
We deliver unique products to the market with a strong service offering to our customers, such as our Mexico Midwest Express 180 and 181 premium intermodal service that continues to grow.
In October, the STB approved a new interchange that we are establishing with CSX over the Meridian and Bigbee Railroad (MNBR) that is going to provide a new competitive rail service to rapidly growing markets, connecting Mexico and Texas to the U.S. Southeast.
The new service with CSX over the MNBR is going to bring new solutions to our customers and take trucks off the road. It is another example of this unique growth story that the CPKC franchise is delivering.
Farmer:BNSF is headed into 2025 positioned for continued growth with our customers. Intermodal is one of our largest opportunities for that growth, and we believe our years of consistent investment in our people, technologies, expansion projects, services and maintenance have led to us being the safest, fastest and most efficient intermodal rail provider in North America.
BNSF’s capital investments play a key role in our ability to operate a safe and reliable network, and to continue to grow with our customers. Since 2015, BNSF has invested approximately $38 billion into its network. Over the last five years, we have added more than 100 miles of main track, 8,000 new parking spaces and more than 8 miles of intermodal production tracks to position ourselves for growth.
In 2024, we once again had the industry’s largest capital plan, totaling $3.92 billion, which plays a key role in our ability to operate a safe and reliable network, while supporting the anticipated needs of our customers.
Also this year, with the addition of 50 miles of double track in Kansas (the Emporia sub), BNSF’s 2,200-mile Southern Transcon route is now 99.98% double, triple or quadruple tracked.
In late summer, we completed our new mainline improvement project in Becker, New Mexico, which is adjacent to our network’s largest fueling facility that’s located in Belen, New Mexico. The Becker facility will minimize the time it takes for our trains to stop and get moving again toward their destination and improves our railroad’s total train capacity through our Southern Transcon route by roughly 30%.
This investment not only positions us for tremendous growth but also improves our service consistency for current customer traffic and further reduces our carbon footprint.
Our new Logistics Park in Phoenix (LPP) was announced this year. The 4,300-acre rail-served facility is designed to offer streamlined supply chain solutions by responding to the dynamic and rapidly changing needs of our customer base. Projects like LPP and the Barstow International Gateway complex in California will help evolve the industry and deliver a product competitive with trucks but with rail’s capacity, value and emissions benefits.
This fall, we launched our new short-line program, Shortline Select, with Genesee & Wyoming’s Alabama & Gulf Coast Railway as the first short-line railroad to participate. In mid-November, we announced three additional participants in the program: Burlington Junction Railway, Texas North Western Railway (TXNW Railway) and Portland & Western Railroad.
The service allows short lines to share BNSF’s commitment to growth by improving service performance together through enhanced communication, seamless movement tracking, data transparency, faster equipment turns and reduced dwell. We look forward to welcoming additional short lines to the program in the future.
At BNSF, we believe what also sets us apart is our people and their dedication to building relationships with the people we serve. Our new renewable fuels desk opened earlier this year that gives us the opportunity to create a customized, proactive view of pipeline management for transporting renewable fuels. Our expert team keeps their eyes on customer products from origin to destination, and acts as a group of hands-on consultants, communicating and collaborating with customers daily.
We continue to seek out new opportunities to innovate with our service partners, and our new breakthrough intermodal service, Quantum with J.B. Hunt Transport Inc., is a good example of that. Quantum has been exceeding expectations since its launch a little more than a year ago.
Performance is up to 98% on-time delivery, up to a day faster than traditional intermodal service. We have a dedicated 24/7 team providing oversight of every load to consistently meet the demands of Quantum customers’ most complex freight.
George: First and foremost, Norfolk Southern is ready to flex up to meet the needs of the U.S. economy and our customers thanks to our strong, diversified franchise and the hard work our railroaders have put into enhancing network fluidity and resilience.
We’re delivering dependable service through sustainable operational discipline and greater predictability. We’re proving to our customers that they can rely on us. The numbers show it with three consecutive quarters of car velocity improvements, higher train speeds and record fuel efficiency.
Regarding specific commodities, our merchandise segment demonstrated year-over-year growth in Q3, particularly in grain markets and parts of our chemicals business. With easing interest rates and ongoing infrastructure projects, we expect this growth to continue, providing additional momentum for our franchise. Additionally, demand in our intermodal segment is expected to rise as consumer preferences continue to lean heavily toward e-commerce, a sector that increasingly relies on intermodal.
Our focus on operational improvements has been key to achieving these successes. For example, since July 2024, we’ve been able to improve our cycle times through strategic adjustments at interchanges and yards across our network. This year-over-year improvement allowed us to respond to market demands swiftly and load 16,762 more grain carloads from July through October than in the same period in 2023.
We also moved the highest number of corn, beans and wheat carloads since 2016 during that same timeframe. These gains reflect the teamwork across our company and have led to stronger processes, increased internal trust and reinforced reliability with customers.
Another area of opportunity we’re optimistic about is more electric vehicle (EV) production coming online. Many EV manufacturers are establishing factories along our 22-state network and driving demand for our rail service for the transport of raw materials, batteries and other parts, and, of course, the shipment of finished vehicles.
With our approach to enhancing network fluidity and market adaptability, and leveraging our broad, diversified franchise, NS is well-positioned to deliver for our customers, including capturing more flexible freight, even if market demand fluctuates in the coming year.
Hinrichs: We anticipate a favorable environment for growth as we continue to build on our superior service product, connecting customers with the substantial capacity we have available on our railroad.
We’re encouraged by continued acceleration of our industrial development efforts that started years ago as multiple new or expanding facilities come online and bring new, profitable volume to the network; at our Investor Day in early November, we highlighted the potential to add 150,000 to 300,000 incremental carloads from these new projects by 2027.
Positive trends in demographics and infrastructure development across many of the regions we serve continue to support our minerals franchise. Chemicals remain broadly supportive, and new facilities and share gains should be favorable for ag and food volumes.
We’re also hopeful to see momentum build for the intermodal business as truck markets continue to normalize. CSX continues to work closely with our channel partners to convert business from trucks, leveraging new service offerings such as our new interchange with CPKC connecting the Southeast with markets in Texas and Mexico.
High interest rates and mismatches of supply and demand have weighed on metals and automotive business over this past year, but we’re hopeful that these markets normalize into next year.
Domestic coal continues to be challenged by low natural gas prices and scheduled coal plant closures, though we are closely watching trends of increasing power demand in particular areas such as Virginia and the Carolinas.
Robinson: We feel very good about our pipeline of CN-specific growth opportunities that leverage our unique network and are less dependent on the economy. We are excited about growing with our customers and helping them to reach new markets.
For example, we’re moving high-quality frac sand on our network from Wisconsin to the growing markets in northeastern British Columbia, where it’s critical to energy production. From there, we’re helping our customers reach global markets by safely and efficiently transporting natural gas liquids, like propane, to the Port of Prince Rupert, connecting them to key Asian markets. It’s a great example of how CN’s network and expertise are driving value across the supply chain.
CN’s ability to offer these types of unique network opportunities and strategic partnerships are what excites us most as we head into next year. From port optionality on all coasts to our efficient bypass around Chicago, our northern route through the energy sector and high-production areas in the Canadian prairies, we have confidence in our ability to unlock growth.
These unique CN growth opportunities have been particularly important, given that the economy hasn’t recovered in the way we had anticipated. We are closely monitoring the political landscape and the new U.S. administration’s approach to trade and Canada-U.S. relations. That being said, we are diversified geographically, and from a commodity and customer perspective, and we’re providing great service to our customers.
Vena:Union Pacific’s “Safety, Service and Operational Excellence” strategy positions us for growth. Our strength is in our business mix and the markets we serve, as well as in our strong buffer of resources that allows us to respond to the natural ups and downs of railroading. That buffer served us well this year in addressing harsh weather, a surge of volume from the ports and the brief Canadian work stoppage.
While I do not have a crystal ball for 2025, I am hopeful the economy will get rolling and the industrial sector will be strong. That could take the form of more housing — new or pre-owned home sales — which would help the entire sector.
In all, I am very happy with how our company is set up to win. In 2024 alone, we invested $3.4 billion — or nearly $10 million a day — to protect and enhance our infrastructure. We are committed to investing in our future to ensure we are in top operating condition to serve our customers.
We have had a very strong 2024, and I can see a lot of things happening in 2025 that should be positive for us.
Creel: We are focused on our story and our opportunities, and I think we are in a unique place. Whatever the macro-economic environment, we continue to be an unparalleled value-creating story at CPKC, outpacing the industry’s growth, most importantly bringing it to the bottom line safely and efficiently.
We have created a premium network in our industry with new growth opportunities, and this team has and will continue to convert, creating unique value for our stakeholders. We’re going to continue to be entrepreneurial. We’re going to continue to grow our volume. We’re not going to allow our appetite for growth to exceed our capacity to handle it. We will do it in a very safe, profitable and reliable way, and we’re going to carry that momentum into 2025.
Our precision scheduled railroading operating model is well suited to adapt to any environment. We know some of our self-help initiatives and synergy opportunities are going to enable growth, and CPKC will be an industry leader again next year.
This includes some of the investments we are making now, such as new sidings and the twinning of the Laredo International Bridge that is creating the capacity for growth in 2025.
Premium services and pairing new origins and destinations, which the Mexico Midwest Express is a great example of, will take advantage of that new capacity and contribute to our differentiated growth opportunity.
Farmer: As of Nov. 6, 2024, we have ratified new agreements with five of our labor unions and have tentatively reached agreements with four additional unions. The agreements give railroaders certainty about upcoming enhancements to their pay, as well as more vacation earlier in their career and other enhancements to an already robust suite of healthcare benefits.
We believe these agreements are a crucial step in making sure our people are taken care of on and off the railroad, which leads to continued success in providing our customers with the unmatched service they’ve come to expect from us here at BNSF.
George: While we may see shifts in freight mix due to changing economic conditions or policy changes, our strategic focus and operational improvements will allow us to adapt to different market landscapes and customer needs.
You can see this acutely in our response to 2024’s unexpected disruptions. When the Port of Baltimore temporarily closed during recovery efforts, we quickly collaborated with our customers to divert much of that traffic south to the Port of Norfolk. When Hurricane Helene brought unprecedented damage to parts of the Southeast, our team cleared over 15,000 trees, repaired multiple washouts and over 50 damaged slide fences to get all core routes back open within 72 hours of landfall.
This agility and resiliency is how we help maintain critical supply chains for our customers and the communities where we operate.
All of the progress happening at NS happens because of our people, and we’re cognizant of the difficulties they have overcome in the past couple of years. So, our leadership team is focused on how we build better two-way dialogue, deepen engagement and fortify the pride our people have in the work they do to propel the American economy.
We are also ensuring we have the right talent and robust resources to help our railroaders adapt to shifting demands. We will continue our focus on operational excellence, building rigor into our systems, and empowering our people to bring forward ideas and feedback aimed at making us all better.
We’re really proud of the progress we’ve made with so many of our unions to reach early labor agreements. Railroading is a family-sustaining, and often multi-generational, career path, and these early agreements give our craft colleagues peace of mind around future enhancements to wages and benefits.
The smart, strategic investments we’re making in our workforce will enable us to deliver for the American economy and serve the communities where our team members live, work and raise their families.
Hinrichs: As for any industrial company, an unforeseen economic shock could impact end markets and overall demand. However, it’s important to note that in the multiyear targets we outlined at our recent Investor Day, we made sure to assume only very moderate economic growth. At CSX, our focus is on the initiatives and projects that we can execute to drive results through the inevitable cycles.
All that said, the biggest advantage we have at CSX is our culture and the experience of the team that we have in place. I’m very proud of our company’s ability to adapt and be nimble throughout this past year, and I’m confident that we’ll be able to demonstrate that again if we are presented with challenges moving forward.
There are some discrete, particular items that we know we’ll face into 2025. A key focus for us is the ongoing rebuild of our network following recent hurricanes. Traffic has been effectively rerouted, while we take the needed steps to restore the network to full operational capacity. We should complete this work later in 2025, and we are committed to working as safely and efficiently as possible to minimize disruptions and return to normal operations.
Another major area of focus for us is executing on recent investments that have opened new growth opportunities. These include the acquisition of the former Pan Am property in New England, investments in the MNBR to enhance connectivity with CPKC and Mexico, and accelerating the expansion of the Howard Street Tunnel, which will dramatically increase our capacity and efficiency on the I-95 corridor. It’s now up to us as a company to execute on these investments and network initiatives in order to extract the value, which I’m confident we can do.
By Chuck Baker
For short lines in 2025, the outlook and the plan is “full throttle ahead.” Short lines will continue to deliver carload growth for their customers, their Class I partners and the country.
It’s every commodity, every customer, every day for short lines. We aggressively go after every piece of business possible, particularly when we can get freight off of the highway and onto the rail system. We grow the industry one carload and one customer at a time.
Oftentimes, those single carloads are like base hits, driving momentum and belief among customers that freight-rail transportation is a reliable, safe and efficient way to be competitive. When our customers grow and win, we grow and win right along with them. String together a bunch of base hits and you’ve got yourself a big inning!
These strategies have been recognized by all six Class Is, as each has renewed their focus on short lines as interchange partners and is very focused on how short lines can help them grow. At our recent regional meetings and at a series of short-line meetings hosted at the headquarters of Class Is, top executives and dedicated short-line teams talked about the Class Is’ renewed interested in partnering with short lines to generate additional volume.
Not every proposal comes to fruition, and not every single interaction captures the joy of the holiday season, but overall the short line/Class I partnership is a remarkable win-win success story. The short line takes care of the painstaking, high touch, customized, variable and service-focused first mile and gathers up that traffic, wraps a nice Christmas bow on it, and hands it off to the Class I partner. The Class Is then move the freight incredibly efficiently over long distances, something the U.S. freight-rail industry does better than anywhere else in the world.
Blessedly, the federal government has recognized the value of what short lines do and has committed to helping us rehabilitate and maintain these oftentimes low-density lines that would otherwise be at risk of abandonment.
In particular, the Consolidated Rail Infrastructure and Safety Improvements (CRISI) Program has provided a powerful tool for short lines to make transformational events that wouldn’t otherwise be possible. In the most recent round of fiscal-year 2023-24 CRISI grants, 81 short-line projects were awarded slightly more than 50% of the $2.478 billion available.
These projects will create a wide array of benefits for the interconnected rail network, including higher capacity rail, safer grade crossings, new spurs and sidings to serve new customers, and dozens of locomotive upgrades — all to drive a better and safer experience for current and future customers, and drive volume for the entire freight-rail network.
With a new administration and Congress heading to Washington, D.C., short lines look forward to the opportunity to demonstrate the value of freight rail to a new audience and earn the continuation of the critical CRISI program.
Chuck Baker is president of the American Short Line and Regional Railroad Association
Continuing to proactively engage our key stakeholders, maintaining strong union relationships and advocacy for balanced federal regulations will be essential to managing risks and ensuring smooth operations. By addressing these challenges head-on and staying focused on execution, we believe we are well positioned to overcome any potential obstacles and capitalize on our growth opportunities in 2025.
Robinson: Our operating plan continues to prove its resilience and ability to adapt to changes in the supply chain and economy. This year has tested our team, and we are incredibly proud of how they have responded to these challenges, which included significant wildfires that impacted our operations and labor disruptions across the supply chain.
Our team’s ability to adapt and respond to these challenges has allowed us to bounce back quickly to meet customer needs and keep goods moving across our network efficiently.
We take our role of powering the economy very seriously. We are confident that our operating model is resilient and responsive, and that it provides us the necessary foundation for growth. When our customers win, we win. And that’s what we’re really excited about.
Vena: We are always going to face unexpected events, it’s the nature of what we do. Railroading means expecting and handling the unexpected while balancing the many moving parts of our strategy. I don’t waste time worrying, I spend time preparing.
Our Union Pacific team is preparing for 2025 by focusing on the fundamentals that are paving our way to growth. Our first strategic priority is always safety. While railroads are the safest and most sustainable way to move goods on land, we must never stop finding ways to be safer.
We continue making critical progress, improving our year-over-year derailment and personal injury rates. However, these numbers fall short when we remember the team members we lost. We must remain vigilant, ensuring everyone returns home to their families and the people who count on them.
Our service continues to grow stronger, with our “Operational Excellence” as its foundation. Several operational vectors — including productivity in yards, reducing touch points when handling cars, shop turn arounds and more — demonstrate our ability to make substantial productivity strides. This great work on the fundamentals is at the heart of what will differentiate Union Pacific from the marketplace and fuel growth.
While our business is measured by quarters and years, I look at where we need to be for long-term success. We have a clear plan, and as our team continues to execute it, we will continue to grow the company over the long term.
As we look at the year ahead, we are focused on pursuing what’s possible as we stay the course on our strategy. There are a lot of moving parts on a daily basis, ranging from managing price, customer relationships, business decisions and plans across our commodities. It’s critical we focus on executing what’s within our control to support network fluidity and deliver the service we promised our customers.
It’s also important we ensure our regulators know that, at the end of the day, we all share the same goals — maintaining and operating the best and safest railroad network in the world, while keeping commerce flowing in the U.S. If we continue to provide good service — and our customers agree — it makes a big difference.
Talk is cheap. Action that drives a result that positively impacts each one of our stakeholders — that’s what matters and what will make the biggest difference.
Email questions or comments to jeff.stagl@tradepress.com.
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