RCC Blog: Acknowledging Railroad Service Issues

Are Railroads Turning the Corner on Bad Service?

Much has been written about current problems with the United States supply chain. The problems are far ranging, but the primary focus has been on:

  • The backlog of ships at ports;

  • The breakdown of rail service at major ports, which is making it more difficult to clear docks; and,

  • Poor rail service for important Agricultural commodities like Grain and Fertilizer

To assess the current situation with service, this article takes a closer look at railroad’s overall performance of Intermodal, Unit Train, and Manifest traffic. Railroad operating results indicate that service problems are stabilizing on a large segment of rail traffic and the hope is that this is the start of an overall improvement in rail service.

Change in Carloads

Illustration 1 tracks the percent change in monthly Intermodal carloads versus Manifest carloads on the four major U.S. railroads between January 2019 (beginning of pandemic) and May 2022.

Service Issues Blog 1

Illustration 1 shows that Intermodal carloads recovered more quickly than Manifest carloads from the height of the Covid pandemic in May 2020. Unlike Manifest traffic, Intermodal carloads exceeded pre-Covid levels in much of 2020 and 2021. However, by March 2022 Intermodal and Manifest carloads were both above pre-Covid levels.

The percent change in carloads for Coal and Grain unit train movements are tracked against Intermodal carloads in Illustration 2. This shows that Grain carloads fluctuate more than Intermodal, but the cumulative percent change is approximately the same as carloads for Grain and Intermodal are both at pre-Covid levels. Coal carloads are down 20% to 30% for reasons that are not related to the Covid pandemic.

Service Issues Blog 2

The cumulative change in carloads for other major rail commodities between January 2019 and May 2022 are in Illustration 3. The carload data indicates that service problems are unrelated to an increase in carloads on the rail system, as carloads currently reflect levels similar or below pre-Covid volumes.

Service Issues Blog 3

Change in Train Speed and Dwell Time

Most rail traffic is moving slower now than before Covid had an impact on the U.S. economy. Intermodal traffic is doing significantly better than Manifest traffic as well as Coal and Grain Unit Train traffic as it is only slightly down from where it was in January 2019.

Illustration 4 shows that the average speed of all types of traffic, other than Intermodal, on the four major U.S. railroads has been in a steady decline since the second quarter of 2020.

Service Issues Blog Illustration 4

Intermodal Train Speed stopped decreasing in the second quarter of 2021, while the speed of Manifest traffic continued to decline.

Overall, the speed of Intermodal traffic is only down 1% since the first quarter of 2019, while the speed of Manifest traffic is down 7% due to a consistent drop in 2021 and 2022. Illustration 4 shows that the decrease in Train Speed is a more significant problem with Coal and Grain Unit Train movements.

Illustration 5 shows that as Manifest traffic Train Speed started to continually decrease in the second quarter of 2020, the Dwell Time of rail trains at rail terminals continued to increase. This is bad news for rail shippers as trains are spending more time delayed at rail terminals and when leaving the terminal, trains are moving at a slower speed. Illustration 5 shows that this problem has gotten continually worse since the second quarter of 2020. This problem is causing big delays in rail shipper’s deliveries to customers, and it is a significant contributor to the slowdown in the U.S. supply chain.

Service Issues Blog Illustration 5

The one bright spot from this data is that service for Intermodal movements appears to be improving. The Train Speed for Intermodal has been relatively stable since the second quarter of 2021, while Intermodal carloads have had big up and down fluctuations. Intermodal represents a very large percent of all rail traffic, and the hope is that improvements in this area will have a ripple effect on the entire rail system.

Railroad submittals to the Surface Transportation Board (STB) are the source for the data in this report. Current and historical data on rail service, rates, and volumes by commodity and market area are available in the Rail Cost Control program.

Non-Competitive Pricing Practices

Non-Competitive Pricing – The New Norm?

Study shows that shippers need to be more proactive in rate negotiations with their railroads.

The analysis demonstrates that railroads have fundamentally changed how they establish rates for movements. The takeaway from the analysis is that in order to deal effectively with these changes shippers will need to change how they negotiate rates with railroads.

Escalation Consultants analysis of the 8 commodity groups listed below demonstrates a startling finding:

Rail moves with “non-competitive” pricing are no longer the exception. They have become the norm.

Preparing for Rapid Inflation

The study shows that between 2004 and 2019, railroad revenue generated from competitively priced movements has risen 24.3%. Meanwhile, rail revenue generated from non-competitively priced movements has risen a staggering 230.6%.

To put this into perspective, half (50%) of all rail revenue generated in 2019 was derived from non-competitive rates. Compared to just 27%, in 2004.

Non-competitive rail revenue going from 27% to 50% of rail revenue for commodities represents a dramatic shift in railroad pricing practices. The good news is that this is not a situation without a solution.

Escalation Consultants has found that in order to effectively deal with the changes in railroad pricing practices, you must be more proactive with rail rate negotiations. If not, your rates will likely increase each year, and most traffic will move under non-competitive rates. Being aware that railroad pricing practices have changed is an important first step in building a strong case for lower rail rates. However, shippers must then take corrective actions. To generate cost reductions:

Shippers need an effective plan for both determining and obtaining reasonable rates for their rail traffic.

In 40+ years of assisting rail shippers across ALL industries, Escalation Consultants has helped achieve over $4 billion in cost savings.

If you’d like to learn how, we’re here to help!

Registration for the 2022 Rail Negotiation Seminar is now open. This is the #1 recommended program for rail shippers and slots are limited. Click the link below for more information.

Rail Negotiation Seminar

RCC Blog: Impact of Consolidation on Rail Freight Rates

Impact of Consolidation on Freight Rail Rates

An analysis of railroad pricing practices shows that over the last fifteen years there has been a fundamental change in how railroads establish rates for movements. The analysis shows that rail movements with pricing considered potentially non-competitive by the Surface Transportation Board (STB) have become the norm and not the exception.

The analysis, performed by Escalation Consultants, for the Rail Customer Coalition, covers the change in railroad pricing for eight major commodity groups between 2004 and 2019. Table 1 shows these eight commodity groups. In the analysis, non-competitive pricing consists of revenue from rail moves with Revenue to Variable Cost Ratios (RVC’s) greater than the 180% RVC Regulatory Jurisdictional Threshold. Revenue from moves with RVC’s below 180% is considered competitive revenue.

(Table 1)

8 Commodity Groups Included in RCC Analysis

The analysis shows the following changes in railroad pricing practices between 2004 and 2019.

Revenue from rail moves with non-competitive pricing increased by an average of 230% over the last 15 years.
  • Half the commodities had non-competitive pricing revenue increase by more than 300%.
  • Commodity revenue from rail moves without non-competitive pricing either decreased, or had small increases over the last 15 years.
Moves with non-competitive pricing generated 50% of all 2019 railroad revenue (see Table 2).
  • Chemical movements are most significantly impacted, as 68% of all Chemical revenue is generated from rail moves with non-competitive pricing.
    • 64% of Stone and Cement revenue comes from non-competitive pricing
    • 56% of Farm Products revenue comes from non-competitive pricing
  • The percentage of total revenue from moves with non-competitive pricing increased by 23% over the last 15 years. While revenue from moves with competitive pricing decreased by 23%.

The large increase in non-competitive revenue caused the average RVC to increase from 134% to 165% between 2004 and 2019 for shipments of the eight commodities in the analysis.


Conclusions from Analysis

Illustration 1 shows the cumulative percent change in total non-competitive revenue and competitive revenue by year for these eight commodities. This shows that non-competitive revenue has consistently increased over time while competitive revenue has had little change. These historical changes indicate that the STB is regulating a very different rail industry today, than it regulated in 2004.

(Illustration 1)

Percent Change in Non-Competitive vs Competitive Rail Revenue

Based upon the large increase in non-competitive revenue, it would be logical to expect a large number of rate cases before the STB. This has not happened!

Many shippers believe that the existing regulatory process is weighted too much in favor of railroads. The large increase in non-competitive revenue, shown in Illustration 1, supports this contention. Non-competitive revenue has increased 230% over the past 15 years. This indicates that railroads are not worried about regulatory pushback from generating non-competitive revenue from a large portion of their rail traffic.

The analysis shows that commodities are not impacted by a railroad’s non-competitive pricing practices to the same degree. Table 2 shows that 3 commodity groups had non-competitive revenue representing more than 50% of all rail revenue:

          • Chemicals – 68% of all revenue

          • Stone & Glass Products – 64% of all revenue

          • Farm Products – 56% of all revenue

These are very large commodity groups, and they have a significant impact on the total non-competitive revenue railroads make from their pricing practices. These commodity groups benefit the most from an improvement in regulations that impact rates.

(Table 2)

Non-Competitive Revenue as a Percent of Total Revenue

Table 3 shows the largest increase in non-competitive revenue occurred in commodities with the smallest percent of non-competitive revenue in 2004. Paper, Wood, Food, and Transportation Equipment commodities make up a relatively small percentage of total rail revenue under non-competitive pricing in 2004. These commodities now have around a third of all revenue subject to railroad non-competitive pricing. The analysis demonstrates that railroad’s non-competitive pricing practices are widespread and affect more movements now, than they did in 2004.

(Table 3)

Impact of Railroad Non-Competitive Pricing Practices on Commodities


The Rail Pricing Analysis indicates that railroad pricing practices have changed dramatically over the last 15 years. It also indicates that rail rate regulations have not kept pace with these changes. The 230% average increase in non-competitive revenue indicates that railroads do not appear to be particularly worried about existing rate regulations. 

If the pattern of change over the last 15 years continues, the majority of rail traffic will move under rates that generate non-competitive revenue for railroads. To change this, the potential for winning a rate case before the STB will need to be more favorable to shippers than it has been over the last 15 years. This will likely require a more effective and less expensive method to challenge non-competitive rail rates. 

Consolidation within the Transportation Industry is facing additional scrutiny as regulators contemplate additional rail mergers. Mergers that could have further negative impact on the competitive landscape and the affordability of shipping US goods by rail. This analysis indicates that regulators need to carefully consider the changes needed to the regulatory system to protect shippers from the impact of a smaller number of railroads competing for their business. 

Note – The STB Commodity Revenue Stratification Reports are the source for all data used in the Analysis of Railroad Pricing Practices. 


Escalation Consultants, Inc. developed the Rail Cost Control (“RCC”) program to help shippers reduce rail expenses by managing costs and empowering negotiations. For more information about RCC and other related articles, visit the RCC Blog.

Rail Contracts: Preparing for Rapid Inflation

Rail Contracts: Preparing for Rapid Inflation

Prepare for the Impact of Rapid Inflation on Rail Rates and Escalation in Rail Contracts

Rail contract escalation provisions will be impacted by big changes taking place in the overall economy, as well as changes occurring in the rail industry. The railroad index frequently used to escalate rail contracts is titled: All Inclusive Index Less Fuel. This index is frequently referred to as “A-List.”

Illustration 1 tracks the percent change in the A-List index against the change in the CPI since Q1 2012.


Illustration 1

Percent Change of A-List vs CPI Indexes 1

The illustration above shows very moderate increases for both the A-List and CPI indexes through the end of 2020.

The average annual increase in overall inflation, as measured by the CPI, was only 1.6% between 2012 and 2020. Inflation in the railroad industry was even lower as the average annual increase in the railroads A-List index was only 1.3%.

In 2021 the world changed dramatically for inflation in the economy as well as the railroad industry. The inflationary increases in 2021 are the largest the U.S. has experienced since the early 1980’s. This will have a big impact on railroads and rail shippers in the coming months.

To zero in on the changes taking place in 2021, Illustration 2 tracks the changes in these indexes from Q4 2020, to the most current time period available for each index. The A-List index is published quarterly and is always projected out one quarter. This means it is available through Q3 2021, while the CPI is available through June 2021.

Illustration 2

Percent Change of A-List vs CPI Indexes 2

Illustration 2 shows that the A-List increased 6.5%. Roughly half of this increase occurred between Q2 and Q3 of 2021. The CPI increased 4.5% and is expected to have large increases for at least the rest of this year.

If the 2021 changes in the CPI and A-List indexes are annualized, 

they would have a rate increase of close to 9%. 

This type of inflation has not been seen since the 1980’s and this will likely have a big impact on rail rates and the escalation provisions of multi-year contracts. How rail shippers address this will have a big impact on their cost of rail freight.

Escalation Consultants is in a unique position to assist shippers on this issue as we have been active in:
  • Developing escalation provisions for company’s contracts for over forty (40) years and
  • Resolving pricing issues with contract escalation problems that created big winners and losers.

With rapid inflation contract escalation provisions can easily create big winners and losers. For example, in the 1980’s and 1990’s Escalation Consultants helped resolve contract escalation problems where hundreds of millions of dollars were at issue in long term contracts.

We learned that:
  • With rapid inflation, a contract must have an effective process for insuring that the escalation provisions don’t generate big winners and losers; and
  • It is much less expensive to develop escalation provisions properly at the inception of a contract, than to try and resolve disputes after the magnitude of an escalation problem is already known.
Before agreeing to escalation provisions for your contracts, Contact Escalation Consultants to explore the option that best suits your company’s unique shipping needs. This will likely save you significant time, frustration, and money.


Escalation Consultants, Inc. developed the Rail Cost Control (“RCC”) program to help shippers reduce rail expenses by managing costs and empowering negotiations. For more information about RCC and other related articles, visit the RCC Blog.


Track Rail Rate Increased Over Time

Use Past Rail Rate Increases to Reduce Current Rates

Would your position on a proposed rate increase of 3% for a rail move be different if that rate had already increased by 40% in prior time periods?

Many shippers answer this question with a resounding YES! The reason – Your railroad knows how its rates have changed.  If your past rate problems are not addressed in current rate negotiations this either indicates that:

  • You have forgotten about the large rate increases of the past; or,
  • Large rate increases are not causing you a problem.

Either situation can be detrimental to a shipper’s rates, as silence does not send the proper message to a railroad.

If rates increased 20% over two bid cycles, it doesn’t matter whether the 2021 or 2019 rate increases caused the problem. The 20% rate increase is the problem!

Past performance can be a powerful source of leverage for obtaining lower rates from railroads. Unfortunately, it’s difficult to keep track of the impact past rate increases have had on current rates and volumes for specific moves. This is especially true when you have employee turnover as you lose the knowledge of people previously involved with your moves.

Large rail rate increases make an effective Database Management System (DMS) an essential tool for shippers. This is the reason for the DMS in the Rail Cost Control Program (RCC).  The DMS automatically identifies and quantifies past rate problems and establishes an effective source of leverage for shippers. The RCC makes rail negotiations more productive and helps better control the cost of rail freight.


Rail Cost Control (“RCC”) is a program developed by Escalation Consultants, Inc. to help shippers reduce rail expenses by managing costs and empowering negotiations. For more information about RCC and other related articles, visit the RCC Blog.”

Database Management System