An annual RBC Capital Markets survey of railway customers reveals little in the way of surprises for lumber traders. Freight service on North American railways has deteriorated significantly in the past year, according to the report. “Widespread dissatisfaction” with rail service is attributed to the impact of congestion and severe weather on deliveries last winter. About 80% of shippers surveyed expect trucking prices to increase by up to six per cent next year. Last year’s survey results forecasting “flat or modest” trucking price increases in 2014 turned out to be wishful thinking.
Of greater interest, a number of mills reporting that anticipated railcar shortages this winter are already upon us. On my recent customer trip, it’s clear a number of lumber buyers are wary of CN Rail’s new ‘priority destination’ initiative. The initiative, whereby centrebeam cars are allocated as High Velocity Lane (HVL) or Low Velocity Lane (LVL), went into effect mid-November. Under this scheme, railways and shortlines have been designated as either CN “friendly” or CN “unfriendly”. According to CN instructions, “If a mill is shorted cars, expectation is the customer would load all HVL ahead of the LVL” and “any shortages are applied to the LVL orders”. LVL lines reportedly include BN, UP, CP, NS, and CSXT.
Meanwhile, we’ve learned that the timing of a less than flattering report on railway delivery service has nothing to do with news that once again, Santa’s delivery transport of choice is expected to be a reindeer-drawn sled.