Ask The Experts: March 5, 2019

Tony Hatch
Independent Transportation Analyst and Consultant

Q:  Did Mexico experience an intermodal downturn last year with the unresolved NAFTA 2.0 and AMLO issues?
A:  Although Mexico has NAFTA 2.0 and AMLO issues unresolved, the Mexican Association of Intermodal Transport (AMTI) says that intermodal growth was 4-5% last year, led by cross-border up 11%.  What’s interesting about that is KSU, despite some late-year congestion challenges, grew 2X the cross-border market overall

Q:  What do you expect to see from BNSF this year?
A:  It will be very, very interesting to follow BNSF this year; it’s long time leader, the afore-mentioned Executive Chairman Matt Rose, will retire this spring and so far his railroad is the lone holdout from Precision Scheduled Railroading (PSR), potentially setting up the true test of growth potential and strategy, looking at the three rail models out there:  PSR, PHR (Post-Hunter, or PSR 2.0 – think Canada!)  and non-PSR.  BNSF does have three discreet unbalanced (what some might call “boutique”, though more like “big store”) businesses - Intermodal (AKA “Consumer Products”; Ag & Coal - and the bluest of blue chip customers in those units.

Q:  What is the expectation for coal production?
A:  The US Energy Information Administration (EIA) says that coal production will fall even faster than it had expected as recently as 2015, despite the so-called “end of the ‘war on coal’”.  The EIA expects another 20% drop in production  over the next 20 years, versus an earlier expectation of 18%.  Coal shares have been abysmal, reflecting expectations that coal will decline from 29% of energy share to 21% by 2035.

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Alison Babcock