On the eve of a new renaissance? — commentary by Richard Kloster

By Richard Kloster

On Jan. 19, I was scratching my head as to what to write about for my next column. Then it hit me. The 19th was Inauguration Eve. The 20th was Inauguration Day. For a lot of people, it was going to be like the best Christmas ever. For others, it was going to be all coal in their stockings. But what about the rail industry?

From where I sit, there’ll be a lot more railroaders getting presents than coal — metaphorical coal, not real coal, which actually has a little brighter future than last year, but that’s a story for another column. Regardless of their political leanings, all railroaders want the same thing: a healthy, safe and prosperous industry. And not just the railroaders, but also members of the supply chain and shippers.

Let’s start with the economy. Since the election, optimism has skyrocketed in many circles. Interest rates have started to come down, which will help lower inflation. Possible tax cuts, higher wages and reduced unemployment would all result from an improved economy. This would put more money in people’s pockets, which in turn would increase spending and ultimately lead to what the rail industry needs most: more freight.

How the tariff question plays out is not clear, but I personally believe it ultimately will be a net positive for rail. Excepting intermodal, most carload traffic is bulk materials, either raw or intermediate materials, needed for manufacturing. Supply chains will adjust if these material flows change because they will have to. Rail will adjust, as well.

Two administrations ago, the Federal Railroad Administration was headed up by a deeply experienced railroad veteran who knew all the industry stakeholders and their needs. In December, President-elect Trump nominated former Pan Am Railway CEO David Fink to serve as the next FRA administrator. If Fink is approved, we again would have an experienced railroad veteran for an administrator, someone who is able to focus on the most core issues affecting the performance and safety of industry. A huge net gain over the most recent administrator.

At the Surface Transportation Board, there’s been a change in leadership — President Trump designated Patrick Fuchs to serve as chairman, and the U.S. Senate confirmed the appointment on Jan. 2 — and a full board is expected. These changes will hopefully have a dramatic and positive impact on the focus and speed at which the STB governs the industry, including how it interfaces with shippers.

As for the supply chain and the rail equipment industry, an improving and growing freight outlook would benefit both. The demand for rail cars, new and used, and rail-car services would remain strong, with more upside opportunity than downside.

Regardless of their political leanings, all railroaders, shippers and supply-chain stakeholders want the same thing: a healthy, safe and prosperous industry.

In the end, there are more benefits for stakeholders here than not, from the railroads and labor to the shippers and the supply chain.

All railroads have growth strategies. They’ve had them forever. But lately they’ve been called “Pivot to Growth” strategies to distinguish themselves away from a PSR-dominated mentality (costs) to a growth dominated strategy (revenues). Their efforts to achieve these goals will be much improved with a growing freight market brought about by an improved economy.

The rail industry faces a lot of challenges but has even more opportunities. Much of this is because of a change in administrations. And again, if there’s one thing that all railroaders want, it’s for their industry to be great, regardless of what side of the aisle they’re on.