CSX Acquisition of Pan Am Railways

B&M 1227 wrote:i'd speculate with 98% certainty that no part of the par system will wind up in the hands of a class 1. the most likely scenarios are either

Until Canadian Pacific announced their purchase of the CMQ I would have completely agreed. It is possible this sale is occurring because multiple Class Is have expressed interest in Pan Am. Crazy as that might sound it is not an outlandish possibility given a connection with CP at Northern Maine Junction. It might also explain the use of an investment bank to broker the sale. It's not the only explanation but it seems like a plausible one. The choice of a Canadian bank for someone with clear ties to New York banks (Mellon) seems notable.



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MEC407 wrote: ↑Fri Jul 24, 2020 4:44 pm

Gilbert B Norman wrote: ↑Fri Jul 24, 2020 4:35 pm ...did Mellon have any kind of railroad background?

Not that I'm aware of, but he's famously private about his life. When he bought the Maine Central in 1981, he brought in David Fink Sr. to run the show. Fink was a Penn Central man. And the rest, as they say, is history.

Worth watching: a 1983 news story from the NBC Nightly News about the very early days of Guilford Transportation Industries, which at that time had owned the Maine Central for two years and had just recently purchased the Boston & Maine and was already working toward acquiring the D&H: https://youtu.be/tmoH1uZaBb8

That video... What could have been...

@gokeefe

cp is well past their initial psr from the hunter regime. they have a history of selling and buying trackage (dme/ice). cmq also fit into a renewed interest in the eastern canadian deepwater ports that were held captive by cn. there's lots of potential for traffic out of the new brunswick ports- intermodal, import/export autos, import export grain, etc.

the southern new england market is relatively stagnant. ns isn't going to easily drum up much more than what they already have into ayer, save for maybe a resumption of ethanol trains to providence. ns already gets the bulk of the profit from 28n/287 and 22k/23k. the only reason they would even consider purchasing d3 as far as ayer would be to have more control over the auto/intermodal, expand the capacity at ayer, and cut a few hours off the chicago-ayer lane. even so, higher priority containers will always take the b&a due to csx's faster route, so improvements in transit time probably won't make much of a difference for the lower priority containers moving on the b&m.

i don't see ns dropping a dime toward what will likely be an absurd asking price just to gain a little more control over a pair of intermodal/auto trains.

MEC407 wrote: ↑Fri Jul 24, 2020 10:24 amVRS doesn't have the money or the resources to make an acquisition of this size. NECR is a subsidiary of GWI, which does have the money and resources, but they would probably run into obstacles with the STB because they already own four other railroads in New England (CSOR, NECR, P&W, SLR).

One theoretical way around that would be for GWI to sell one or more of their existing New England railroads. For example, let's say they offered to sell NECR and SLR. STB might consider that sufficient to avoid GWI having a monopoly in New England. And you might see VRS buy NECR.

The crux of any measure of railroad competition is Class 1 and inter-regional, not intra-regional, so just because GWI owns multiple non-Class 1's in New England does not mean a purchase of PAR/PAS would raise any serious competitive issues for the STB. And, with CSX's dominant ~75% New England market share, concern of a potential GWI "monopoly" to avoid is unnecessary.

No - it would and should gain scrutiny.

PBMcGinnis wrote: ↑Fri Jul 24, 2020 6:40 pm As for the Wal-Mart DC inbound traffic, they have 2 Distribution Centers: Lewiston, ME and Raymond, NH. My trucking company, New England Transportation, can confirm that the longest length of haul into either is around 400 miles.

Wow Pat---

Well I guess some authority determined you had seen enough of FCI-Danbury (think that's where you did your time), and you're back with the New Haven through their motor carrier subsidiary - New England Transportation

But more to the point of our discussion, the potential 400 mile line haul - even of high value lading, is not railroad transportation today. I have expressed this same concern over at our neo-Panamax topics that as East Coast ports start to supplant those on the West, that nice 2000 mile line haul enjoyed by BNSF and UP, will not begin to be replaced by a, say, 500 mile that, as you note, will simply move to destination by highway.

PBMcGinnis wrote: ↑Fri Jul 24, 2020 6:40 pm As for the Wal-Mart DC inbound traffic, they have 2 Distribution Centers: Lewiston, ME and Raymond, NH. My trucking company, New England Transportation, can confirm that the longest length of haul into either is around 400 miles. The farthest point being western Pennsylvania. So not very conducive to boxcar.

I'm not sure how you can definitively say that all the inbound loads originate within 400 miles of the Walmart DC in Lewiston and Raymond when there are EMHU, SNLU, HGIU and JBHU coming in regularly. Back when I was working for big orange we had intermodal loads coming out of Worcester for both originating in the Midwest and West Coasts, but only a small slice of the pie. I've always wondered now with Walmart getting their own 53' fleet if that'll impact the intermodal operations in this market but they don't seem to be focused up here yet.... besides the inbound to outbound ratio is atrocious up this way. But I can confirm that last December there was a 'serious' discussion with another intermodal provider about trying to get something going to Waterville, they really want to get up there but from what they told me, a certain railroad was unable to figure it out on their end.

Not sure that Waterville has the population density to support a stand alone Intermodal ramp, especially with some changes in how nearby mills get their product to market. For comparison’s sake, Worcester probably has close to 7 million people within a 50-60 mile radius, Waterville has probably closer to 300,000-400,000. That’s obviously a very big difference.

Not all intermodal is created equal. High-priority IM (Walmart, UPS, FedEx ect) wouldn't work in Maine mostly for economies-of-scale reasons, but that doesn't mean there's no IM potential to be developed. PAR has done quite a decent job at nurturing the Poland Spring service, and there is absolutely enough mill / forest product traffic for future IM growth from Waterville and Portland. Maine paper mills are now shifting to making mostly consumer packaging and tissue products, which is the type of cargo that would be well-suited for IM.

Then of course there's Poland Spring, which is expanding its presence in northern and central Maine. Lastly, LL Bean recently announced it would be expanding its retailing into third-party stores nationwide, this also creates a lot of opportunity for outbound containers, since LL Bean maintains a significant manufacturing presence in Maine.

Yeah I mean I worked around the Z trains on CSX terminals... you're talking the parcel and priority stuff. Walmart uses run of the mill intermodal jobs, not necessarily the steel wheel priority hotshots. They are on of the largest users of intermodal to feed into their DC network from other larger DCs or westcoast crossdocks of import goods.

By Pan Am's "decent" job of growing intermodal you mean it fell into their laps and PS did 99% of the work. The benefit of the forum if you can armchair analyze as much as you want, the simple truth was PS was facing capacity issues and needed a solution so they drove one. Who do you think leases the Eimskip boxes?

Well aware of the paper industry, they've prime users of intermodal up here. My refernece was the imbalance of inbound to outbound loads, a lot of empty repositioning happens up here. Also just telling you what I know and JB Hunt guys were disappointed that Pan Am couldn't get them to Waterville and that Ayer is still a forgotten mudpit stuck in purgatory of NS/PARs estranged joint venture. CSX is eating the lunch on intermodal out of New England, even though the UPS RDC is in Chemlsford closer to Ayer, the CSX service and rate structure is way better.

Remember too back 20 years ago Maine had two active intermodal terminals part of the Class I network, serviced by both IMCs and steamship lines. In 2001 Auburn moved 11,000 container loads for CN. I don't know off hand the peak figures for Waterville, but they had a book of business as well about the same time period. Without Conrail/CSX and CN these ventures wouldn't have worked at all, and once those guys lost interest the service fell apart.

To tie it all back in to the original post, a Class I with a strong partner can certainly revive the intermodal fortune in Maine and Waterville is already built and ready to go (with some TLC I'm sure). Talk of CN returning to Auburn (intermodal, not buying SLR) and even CP hobbling together a ramp at Searsport with MPA in the near future may restore some of that fortunate. MaineDOT actually did a study back in the early 90s and determined the most ramps Maine could have and be successful was 2, which was Waterville (Almost Bangor) and Auburn. B&A wasnt pleased about this (effectively they were out of the loop) and blazed ahead with getting a small ramp at Bangor (quickly unsuccessful). The State put up a pitty ramp in Presque Isle knowing that wouldn't work, largely they need the forest product guys and McCains to sign on and they only really got one of those parties to try it with mild and mixed results (how many RRs does it take to ship trailers from PI to NYC?)

CN9634 wrote: ↑Sat Jul 25, 2020 12:29 pm
To tie it all back in to the original post, a Class I with a strong partner can certainly revive the intermodal fortune in Maine and Waterville is already built and ready to go (with some TLC I'm sure). Talk of CN returning to Auburn (intermodal, not buying SLR) and even CP hobbling together a ramp at Searsport with MPA in the near future may restore some of that fortunate. MaineDOT actually did a study back in the early 90s and determined the most ramps Maine could have and be successful was 2, which was Waterville (Almost Bangor) and Auburn. B&A wasnt pleased about this (effectively they were out of the loop) and blazed ahead with getting a small ramp at Bangor (quickly unsuccessful). The State put up a pitty ramp in Presque Isle knowing that wouldn't work, largely they need the forest product guys and McCains to sign on and they only really got one of those parties to try it with mild and mixed results (how many RRs does it take to ship trailers from PI to NYC?)

I grew up in PI and I remember that IM ramp when it was brand new. A "Pity Project" seems like a good way to describe it. I remember that operation fell apart in less than a year.

What I mean when I say PAR has done as decent job with PS is that they've maintained the service for 4 years now without actively pushing PS away with sloppy service and poor transit times (although they have lost a few trainloads of product to freezing in winter) and sometimes that's the best you can hope for from Billerica.

I agree that I don't think Maine can support more than 2 IM facilities. Although I feel like the Portland ramp is a bit of an outlier since it's really designed to cater to ship-to-rail traffic. Based on conversations I've had, Eimskip has been very eager to expand its customer base beyond New England and they would LOVE to be utilizing the Portland ramp to expand their footprint into NYC and the Mid Atlantic. The rust on the rails at Yard 8 in Portland is, as you mentioned, entirely the result of PAR not playing ball.

Cosakita18 wrote: ↑Sat Jul 25, 2020 1:28 pm What I mean when I say PAR has done as decent job with PS is that they've maintained the service for 4 years now without actively pushing PS away with sloppy service and poor transit times (although they have lost a few trainloads of product to freezing in winter)...

A few trainloads??

If that's what qualifies as pretty decent rail service in New England, the bar has gotten much lower than I thought.

It sounds like PS is more understanding than most other customers would be.

If RC Moore had enough drivers,I guarantee you they would not have this business.

Interesting to recall that whoever buys Pan Am probably gets Yard 8. Although tiny and insignificant by any industry standard it has potential for certain types of goods.

Both of the Canadian railroads might be interested in that facility for their own strategic reasons.

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Funny story about the Portland IMT.... About 3 years Eimskip lined up some business in the Midwest, loads going both ways and at a decent volume, so the plan was to rail containers to/from Portland ST-NS and vice versa. On the vessel side, they had to go to weekly sailings to get the biz (which they did). For whatever reason however on the rail side, they couldn't secure the service (I'm told the weak link was... you guessed it Pan Am) but Eimskip wasn't going about the lose the business. So what do they do now? Plan B -- Halifax rail to the midwest via CN. And the lesson learned? Eimskip will probably never send containers on Pan Am as long as they can use CN at Halifax. One and done opportunity lost there as well as any future real rail prospects...