CSX Acquisition of Pan Am Railways

The parking area on the south side of Franklin St could virtually be doubled in size by taking over a bunch of old mill buildings and a derelict trailer storage yard just on the other side of the fence. Same elevation, no homes, abuts 290, and the only off limits building would be the fire house on the corner The unloading pads have plenty of capacity, it's the lack of storage space that's the problem.

They tried to do that when they first rebuilt the yard, and the owners of the property wouldn't sell, even when CSX tried to go the eminent domain route. What makes you think they would be any more willing to sell now (at a price CSX would be willing to pay), when the value of that land seems even higher than it did back in 2010? At this point, even if they wanted to sell to CSX, I don't think the railroad would be interested in anything higher than rock bottom prices (since they've proven they can work within the space they have). In any case, they already have more storage space along Rt 20 (near the Rt 140 interchange).

You're barking up the wrong tree, if you read my earlier post, the point that I was making was that if they were buying Pan Am for $700M in order to relieve pressure on Worcester, then it would have been a whole lot cheaper to just buy out those properties right next to the yard. I guarantee you it would be south of $700M, by quite a bit in fact. They could also expand Springfield and/or develop other properties in MA that again, could be done for a fraction of the $700M PAR sale price. I also never even suggested that they are desperate to expand, in fact just the opposite, as I was merely making the argument that Maine Intermodal as a way of reducing congestion at Worcester is not high on their priority list and if it was, they would have long ago done something about it in MA.

They are buying Pan Am because it was for sale and there won't be another opportunity like it.

Also to your earlier points, Pulp & Paper traffic moves both in railcars but also heavy in intermodal. In fact, the routing guide I used was default on intermodal for most shipping points in the US over 600 miles, rail if possible (transit time, siding, ect) then truck as escalation. Most rail moves were internal shipments to warehouses/RDCs or port locations, with only a handful of large paper guys (Quad Graphics basically) being able to handle cars.

CN, I agree with you on why CSX is buying Pan Am, but I am still of the opinion that Maine Intermodal, while it certainly has some potential, is not one of the main commercial drivers. The other big printing company that I believe is still a major boxcar receiver is RR Donnelley, though that may have changed .

I think we can all argue why they did it until blue in the face, but I think the public indication given is really the most realistic: "this is a generational opportunity and we took it." Yes I think they have some plans for organic growth in several sectors but I think they really are shooting from the hip on a lot of this. They want the deal to go through, with minimal operational changes other than better velocity and go from there. They know the railroad makes money as-is.

In terms of opportunities, as an example, there's a single piece of business coming out of Irving Oil at St J going to the Gulf Coast that is 5,000 cars per year that CSX is currently not handling. Just capturing that one move alone would likely mean @ $25M in new annual revenue for CSX. That is nothing to sneeze at.

Unless CP gets Kansas City Southern I guess.

Doesn't terminate on KCS so that won't change anything.

roberttosh wrote: ↑Mon Jun 21, 2021 8:35 am The other big printing company that I believe is still a major boxcar receiver is RR Donnelley, though that may have changed .

If you're referring to RRD's plant in Wells, it closed several years ago. The building is now occupied by a candle manufacturer.

Donnelly is a large corporation with numerous locations throughout the US so the Wells facility closing didn't move the needle.

I know, I just wasn't sure if you were referring to a specific RRD plant on Pan Am when you said they still receive boxcars.

A recent discussion about Union Pacific stealing away the Swift Transportation contract from BNSF on the Trains Magazine forums made me start thinking about what kinds of traffic the Class Is are willing to go after. I made the conclusion that the Class Is tend to go after traffic that can only be described as "low-hanging fruit."

In the past, I have described this acquisition as "bizarre." I say that because there is no clear, immediate benefit. With CP-CMQ or CN-KCS, there is a clear, immediate benefit. Intermodal to Saint John or connecting Canada and Mexico through a single railroad. CSX has stated the main benefit of it acquiring Pan Am is truck-to-rail conversion, which is much more abstract and limited in scope than the stated goals of other recent acquisitions. This made me think that this acquisition was the exact opposite of low-hanging fruit, but upon further thinking, I realized I was wrong.

While Pan Am has made leaps and bounds in the past decade or so, I think we can all agree that there is much work to be done before rail can become a more viable transportation option in New England. A railroad that lets its 25mph track deteriorates to 10mph on a yearly basis is not one that is going to capture a significant amount of new traffic regardless of how well the marketing is. You can have the best marketing in the world, but when the customer has to constantly ask why their shipment was late, and the response is "the train derailed," or "the power broke down," or "the crew ran out of hours," all that customer service flies out the window. It's basic stuff that even Class Is get right more often than not (regardless of what you might hear). By simply applying the same standard to Pan Am that already exists on the rest of CSX, of course your going to capture new traffic because Pan Am has some of the lowest standards of any railroad out there. It's low-hanging fruit.

Additionally, most of the traffic coming off of Pan Am already goes to CSX via the Worchester gateway. CSX is simply getting full control of its supply chain by acquiring Pan Am. A customer is going to find it much easier to ship when they only have to deal with one railroad instead of two. No heavy lifting required on CSX's part. Again, low-hanging fruit.

Sidenote: I believe that if intermodal to Maine is on the table, CSX will simply use the existing facilities at Waterville to save on costs. As for Rigby Yard, a Transflo facility would make a lot of sense there and would 100% fit into CSX's truck-to-rail conversion they have been pushing recently.

I guess I'm confused -- you don't seem to indicate you think rail transportation options in New England are viable now? I can assume you that rail is the lifeline for many industries here in New England. Maybe you were thinking more of the GTI days, and surely Pan Am hasn't been perfect, but you have to remember that they've done a significant amount of transformational work in the past 5-10 years given the decline of the paper industry (that has hopefully stabilized) here in Maine. The paper 'crop' for years let GTI just drag along as a steady steam of $$ was guaranteed... getting the reality check in the last 10 that this traffic can and will erode led to greater customer service, greater marketing and finding new opportunities.

So while traffic was declining in a lot of places on the system (coal, paper, ect) they were able to fill out the trains in other ways. Think the water traffic, LPG & energy, Canadian business (lumber) and much more (trash, ect). 2012 was a year that really showed the true potential (and choke points), with oil trains, POSJ/SJPO, daily mill jobs, and other traffic just clogging up the works. Another thing I'd point to is the gradual and steady decline of SLR traffic, which for years marketed itself as an alternative routing gateway to the ST west end, going from daily trains to 3-4 day a week service with little bridge traffic.

Now with CSX coming to town, you have immediate opportunity to grab a lot Canadian traffic off NBSR (heck even SLR could benefit with traffic out of Quebec direct routing to CSX instead of going SLR-CN-CSX), intermodal opportunity for Rigby (heard from multiple sources on this), ethanol trains for Global and much more right out of the gate.

Again, the reason for purchase of Pan Am was 'because it was for sale' (and there is no waiting for the next one) but also they've been able to achieve traffic growth the past few years that outpaced the industry. That means opportunity is there and I think now that CSX is looking under the hood they are quickly realizing it's a bit more of a gem than they thought. Yes -- to your point there is low hanging fruit (there always is anywhere), but I think CSX is going to make some pretty big moves up this way. As for a Transflo operation, I can see Waterville becoming the bulk commodities terminal given how close it is to major manufacturing. Portland has benefit of being closer to retail and distribution, and heck Eimskip might actually get to rail some containers out Portland instead of CN via Halifax to Chicago.

CN9634, if you reread my post, I did not say that rail transportation was not a "viable" option in New England, simply that it could be made "more viable." I say this for two reasons:

Firstly, railroads in New England are very balkanized. This makes it much harder to ship because the customer often has to go through one or two different railroads in order to access the wider North American rail network. Additionally, most smaller railroads simply don't have the resources in order to court bigger customers. The CMQ could not court the types of customers that CP is courting now because they didn't have the resources to do so.

Second, the nature of how Pan Am (the region's largest railroad) operates prevents bigger opportunities from manifesting themselves. Don't get me wrong, Pan Am has improved by leaps and bounds since the Guilford years. As you stated, when their traditional traffic sources declined, they were able to find plenty of new business to keep the trains full; however, I think there is still much work to be done before the former B&M and MEC can live up to their full potential.

Luckily, things have been getting much better. New England is seeing consolidation into four "major" systems, those being CSX, G&W, VRS, and the Irvings, with CN, CP, and NS at the periphery. More resources are being plowed into New England than at any time in the past 70 years. Customers will find it much easier to ship because of the reduction in the number of marketing departments one must contact to do so. Yes, CSX bought Pan Am "because it was for sale," but also because they want to convert truckloads to carloads. They said it themselves in the second STB filing.

I get the feeling that New England was its own little world just a few years ago. In a decade, it will be seen as just another part of the wider North American rail network. Its transformation from backwater to being just as integral as the Carolinas or Upper Midwest will be one of the greatest stories to come out of 21st-century railroading.