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Erasers (or the electronic equivalent) might be in short supply among the prognosticators of crosstie purchases at the Railway Tie Association (RTA).

With growing freight-rail traffic leading to more wear-and-tear on the rails, as well as more maintenance-of-way spending by railroads, the RTA continues to revise wood crosstie purchase forecasts upward. Following an 8 percent to 10 percent increase this year, another 5 percent to 7 percent

increase is expected next year. Concrete, steel and composite tie suppliers also are expecting escalating demand.

“With railroad traffic up and revenue growth up, that means more trains. And more trains mean more maintenance and more tie work,” says RTA Executive Director Jim Gauntt. “It’s a real renaissance in the railroad industry.”

Not that there aren’t any supply-side concerns. High wood-tie demand has contributed to the shortage of creosote supplies, particularly on the domestic side, leading to more imports from an unpredictable overseas market, observers say.

Meanwhile, more Class Is want tie producers to use sodium borates — chemical compounds that have been shown to be particularly effective as an insecticide in many tie applications — to treat wood ties, suppliers say. There also are lingering environmental and health concerns about creosote, a “probable carcinogen” according to the U.S. Environmental Protection Agency.

But as long as traffic continues to boom on North American railroads, whether they be Class Is, short lines or transits, business appears to be good for crosstie and switchtie producers for the rest of this year — and into 2007.

Wood crosstie sales soared to record levels in the first six months of 2006, with railroads purchasing 11.6 million ties, a 19 percent increase compared with the same 2005 period, according to RTA statistics. The 6.7 million ties purchased in the second quarter was the highest quarterly total since the RTA began collecting such data in 1987.


Although there isn’t similar data for the purchase of concrete, steel and composite ties — which make up less than 10 percent of the North American tie market, according to RTA — reports from producers in those tie segments suggest sales are stronger than they were in 2005.

“The fundamental demand doesn’t seem to be slowing down,” Gauntt says.

The fuel factor
The demand for ties is directly linked to the increase in freight-rail traffic and Class Is’ push for more capacity.

Through 2006’s first 36 weeks, Association of American Railroads statistics showed a 6.3 percent increase in intermodal units and a 1 percent increase in total carload volume compared with similar 2005 data.

A primary volume driver? Higher fuel prices, which have pushed some shipper traffic away from long-haul trucking.

“As fuel costs have gone up, there’s been a big drive to put more things on intermodal,” Gauntt says.

Also driving RTA’s revised forecasts is the continuing effect of the federal tax credit for short-line and regional railroad infrastructure improvements. This year, short-line and regional railroad tie purchasers likely will buy 500,000 to 750,000 ties more ties than prognosticators originally projected, Gauntt says.

“The short line and regional business for us is strong,” says Jeff Broadfoot, national account sales manager for Thompson Industries Inc., which produces pressure-treated wood crossties, switchties, crossing timbers, and bridge ties and timbers. “They’re being pushed by the Class Is to increase their capacity.”

Although the Class I capacity drive might have caught many wood-tie suppliers a little flat-footed a year ago, that hasn’t been the case this year. Through the first half of 2006, suppliers produced 11.7 million wood ties, a 34 percent jump compared with first-half 2005, according to RTA data. June 2006 marked the 12th-straight month that monthly production totals topped the corresponding totals from a year earlier.

Wood-tie producers have been ramping up production accordingly. In 2003, Thompson Industries purchased a large treating vessel from Kerr McGee Corp., which had exited the tie business. Since 2004, Thompson has more than doubled the number of ties it has sold — from 600,000 to 1.35 million for fiscal 2006, which ended Sept. 30.

To primarily meet the demands of Canadian National Railway Co., particularly in the southern United States, Burke-Parsons-Bowlby Corp. began construction this summer on a new wood treating plant in Fulton, Ky. When the plant opens next spring, it will have the capacity to treat 1 million ties annually, says Marketing Director Floyd Bowlby.

“The Class Is’ maintenance budgets are pretty strong,” he says. “We’re looking at a 10 to 15 percent increase in overall tie demand this year and more of the same next year.”

Tangent Rail Corp. subsidiary Tangent Rail Products expects to close the book on its first year of operation on a similarly strong note. Established in October 2005 following a management-led buyout of four RailWorks Corp. subsidiaries, Tangent Rail Products provides treated wood, creosote and coal tar products.

“There’s good raw material flow and demand is very high,” says President and CEO Bill Donley, a 26-year industry veteran. “It’s probably the best year I’ve seen.”

During 2006, the majority of Tangent Rail Products’ tie business shifted from the transit and regional/short-line railroad sectors to Class I-related orders.


Large-road orders also are pouring in at Koppers Inc., which is registering more sales from Class Is, IIs and IIIs.

“Demand from the regional/short line market has also increased, driven by the need to upgrade their lines due to heavier axle loads,” says Tom Niederberger, vice president of marketing and sales for Koppers’ railroad products and services division. “The recent tax credit legislation has also helped spur on this higher level of demand.”

A diversified customer base also has helped Gross & Janes Co. expand its reach. The supplier is serving more short lines, regionals and industrial contractors while meeting increased demand from its Class I customers, says Matt Clarke, chairman, president and CEO.

“We have seen a ramp-up since 2004, culminating in what has been a robust 2006 to date,” Clarke says. “All sectors of the industry — Class I, short line, regional, industrial, contractors — have seemingly turned the corner on their rates of return and are putting their investments heaviest to infrastructure to keep the trains running.”

It’s been a steady year for a wood-tie supplier to transit systems, Appalachian Timber Services, which counts MTA New York City Transit among its customers. Although sales and production are expected to nudge slightly higher this year, the company probably benefited more from the boom in freight railroad ties, says Rick Gibson, vice president of sales.

"The Class Is really do influence the tie market,” Gibson adds. “It puts me in a position of not having to compete with more wood tie suppliers, because if they don’t sell to the Class Is, they’ve got to sell the ties to somebody.”

Concrete examples
The freight-rail traffic boom also is benefiting concrete-tie suppliers.

“Business is so good, [railroads] are not only upgrading track, they’re also doing heavy maintenance more often,” says Al Smith, manager of sales for Rocla Concrete Tie Inc., a producer of prestressed concrete ties. “The concrete tie industry is out of its infancy and into its adolescence. It’s evolving.”

In recent years, BNSF Railway Co.’s heavy-haul routes — which feature concrete ties — have gone from handling 70 trains a day to upwards of 100, Smith says. That’s prompted Rocla to project 10 percent year-over-year increases in sales and production this year and next, Smith says.

Production ramp-ups have been a priority at CXT Inc., too. A new production facility in Tucson, Ariz., and an upgraded plant in Grand Island, Neb., have helped make 2006 a strong year, says Dave Millard, vice president of the rail division at CXT, a wholly owned L.B. Foster Co. subsidiary.

The ramp-ups were a response to Union Pacific Railroad’s plan to increase capacity along it Salt Lake City to Chicago, and Los Angeles to El Paso, Texas, heavy-haul corridors.

“The Grand Island plant has been very busy producing ties for Union Pacific,” Millard says. “The Tucson plant started operations [in August], and will be at full capacity by year end.”

Rail-transit systems, too, have served as a healthy order source for concrete-tie suppliers. For example, CXT produced concrete ties and concrete turnout ties for Calgary Transit, Edmonton Light Rail Transit, Sound Transit, Utah Transit Authority, the Tri-County Metropolitan Transportation District of Oregon, Caltrain and Metra, Millard says.

At KSA Concrete, which produces prestressed concrete crossties, switchties, switchtie turnouts and rehabilitated wood ties, the year’s two biggest orders have been 40,000 ties for Charlotte Area Transit Authority (which is building a light-rail line) and 50,000 ties for CSX Transportation, says General Manager Scott Craig.

As railroads continue to emphasize heavier axle loads, they also may turn more frequently to steel-tie suppliers, who say steel ties can be installed faster than wood ties because ties of the steel variety require no gauging, or driving of spikes or plates.

Steel & Composite Sketches
At North American Railway Steel Tie Corp. (NARSTCO), orders have increased during the past year, says John Fox, vice president of marketing and sales.

In 2004, NARSTCO relocated its manufacturing plant from British Columbia to Midlothian, Texas. The company counts Class Is, short lines and contractors among its customers.

Although 70 percent of the steel ties Tie and Track Systems Inc. produces are provided to European railroads, the time might be right for the company to set its sights on U.S. roads.

“We should revisit our friends at the Class I railroads and go over our achievements in the last six to eight years,” says Tie and Track President Alan Briggs. “I’m optimistic. We’ll look around at opportunities and go after them.”

Neal Kaufman also is optimistic. The President and CEO of North American Technologies Group Inc. — parent company of composite-tie producer TieTek — believes TieTek is on the right track, a year after it was delisted by the NASDAQ stock market because the stock was selling for less than a dollar a share. During first-half 2006, TieTek generated revenue of $6.4 million, more than what it earned all of last year.

“We’ve raised $5.5 million to help launch a third production line, improve raw materials processing and help in our drive to profitability,” says Kaufman, who took over the company in January. “We also restructured our debt so that we have significant breathing room to focus on growing our business.”

The company is using the proceeds to upgrade its Marshall, Texas, production facility, boosting capacity to 220,000 ties a year. TieTek also plans to fulfill a contract with UP to provide 1 million ties over six years — including an agreement that permits TieTek to adjust prices based on raw material costs.

Lingering market challenges
Rosy near-term outlooks notwithstanding, tie producers of every ilk remain concerned about raw-material prices. It’s a particular concern among wood-tie producers, many of which are experiencing creosote shortages. RTA’s Gauntt expects supplies to remain tight into third-quarter 2007.

Tie producers are also continuing to make production changes to accommodate railroads, such as the capability to treat more wood ties with sodium borate. BNSF, CSXT and Norfolk Southern Corp. all are looking for more such ties, particularly in the South, where weather and insect damage take a harder toll on wood, Gauntt says. The use of sodium borate usually means less creosote consumption.

“We have a plant getting ready now to treat with borates,” Tangent Rail’s Donley says. “We’re seeing more and more railroads testing it out.”

Meanwhile, Durable Wood Products Inc. offers tropical hardwoods that require no treatment, says Carlos Calixto Orta, one of the firm’s owners.

Although such ties initially cost more than conventional wood ties, “we think the [return on investment] is much better compared to a creosote tie,” he says. “We think we can change some people’s minds.”

Both Burke-Parsons-Bowlby and Thompson Industries note an increase in sales of Parallam®, a high-strength engineered lumber product produced by Weyerhaeuser that requires less creosote and offers shorter wait times for the treated product.

Unfortunately, there’s also going to be a short wait time for something suppliers aren’t looking forward to. When a market heats up the way the cyclical tie market has the past two years, it really has no place to go but down. It’s just a question of when.

“There is some growing concern in the West that the supply of ties may be exceeding the current demand,” Koppers’ Niederberger says. “After several years of steady increases, we may be starting to see some leveling of overall demand.”

But no matter what a tie is made of or what it is treated with, orders will continue to stream in for the forseeable future.

“It’s a good time to be making ties,” says Appalachian Timber Services’ Gibson.

Robert J. Derocher is a Loudonville, N.Y.-based free-lance writer.