CSX Acquisition of Pan Am Railways

FWIW (and it ain't much), Connecticut's US Senators weighed in the transaction with a tepid response. Notable excerpt:

If the STB is considering approval, it should include mandatory, clear conditions that ensure fair pricing of – and open access to – freight and passenger rail service in the Northeast. It should also require as a condition of such approval the proposed infrastructure upgrades by CSX. In addition, the STB should include conditions that ensure CSX will maintain service to businesses currently served by Pan Am’s freight lines, such as the Springfield Terminal.

I bolded/italicized the inane comment about servicing "the Springfield Terminal". It's pretty obvious Blumenthal (who almost got smacked by an Amtrak Regional while standing in front of the cameras on the Milford CT platform back in 2014) and Murphy are clueless as to the details provided by CSX re: infrastructure work to be done as part of the acquisition.

https://dcms-external.s3.amazonaws.com/ ... 303519.pdf

BTW, did Massachusett's Congressman the Honorable Richard Neal speak his mind at the hearings to offer any credible reasons why he is opposed to the CSX acquisition?

csx2039 wrote: ↑Fri Jan 14, 2022 10:35 pm Absolutely not, but if sale goes through, they might look differently or not, but you can logistically get a through freight Farnham to East Deerfield or Palmer in 10-12hrs. You can’t with the other routes.

Why would you want to?

BTW, did Massachusett's Congressman the Honorable Richard Neal speak his mind at the hearings to offer any credible reasons why he is opposed to the CSX acquisition?

Yes he did. He backed way off on his opposition to the transaction when CSX said they would work with the state on proposed east-west service and allow the Berkshire Flyer trials to begin. They also said that they would give all passenger trains dispatcher priority over their lines so Mr. Neal can run his shiny Choo-Choo's to nowhere if the state decided to do so.

roberttosh wrote: ↑Fri Jan 14, 2022 10:09 pm CSX's takeover of the PAR system will not effect CP's high-profile intermodal and auto business, but it is most definitely going to effect their manifest traffic substantially.

Possibly, but CP didn’t buy CMQ to route cars from Saint John to Saratoga is my point…that would have been foolish. their franchise goal is much further…. And they’ve said numerous times it’s intermodal, autos and (potentially) bulk traffic they are chasing. Also CPKC will surely help that mission too. There’s enough room in the sandbox. CN has the most to lose, lots of out of route miles. You should look at CN 327 when you have a chance. Here’s a good shot to give you an idea https://flic.kr/p/2mUBYci

CN, I'm not denying the fact that CP didn't buy the CMQ for its' DH traffic and that Intermodal/Auto are clearly the higher profile business. That being said, I'm just not sure realistically how much they can expect those business lines to grow. The bulk opportunities are pretty murky in my view as well, though CBR could eventually come back in to play. If you look at what CP moves West across Maine today, a majority of the business is lumber, wallboard, paper, pulp and Refined Oil products from Irving Oil. Most of that traffic is going into the states, with much of it terminating on CSX. That business is as good as gone and the same goes for CN traffic out of SJ heading into the Eastern US. The CP/KCS merger may bring about some opportunities, but the fact of the matter is that both CP and CN are going to be in a very tough position in terms of existing ME and NB traffic once CSX enters the picture and short of one of the two buying the NS, nothing is going to change that.

How do you know the traffic patterns of those volumes? I'd be willing to bet a good chunk is hitting from Toronto up through the Midwest and into Canada.... core markets for CP.

CP told customs that when they took over they wanted to run upwards of 6 trains per day in the next few years. Let's see how that plays out... bulk traffic could be unit ethanol (CP origin, not CSX), unit potash (CP origin, not CSX) or unit grain (CP origin not CSX). Lots of steel originates in Canada... forest products.. and CP hits midwest areas CSX can't touch. You don't just flip the switch day one and run these when you have 25 years of materialistic upgrades to catch up on.... speaking of that, CSX has 40 years to catch up on outside the Passenger routes, thus why they have a 3-year $100M capital plan (CP had a 3-year $90M plan if that sounds familiar).

CBR is deader than dead.... the stuff off BNSF/CP was Bakken shale, right now Irving is taking some Alberta loads via CN, but they've gotten a CTA waiver (Jones Act) to bulk tanker it in from BC to SJ. They also hedge their supply with Saudi/OPEC sources quite a bit.

The price spread needs to significantly change for CBR in any realistic setting to become a thing again... in essence the rest of the supply chain caught up. It could see a pop at some point if there is any sort of large disruptor, but you should look at the forward curve for gasoline... I'll give you a hint its a dying fuel. The Refinery will need to reinvent itself with other petroleum (or chemical) based products or downsize/shutdown entirely in a decade.

Back to the $100 Million that CSX is promising to invest, how much of that is to do the work Pan Am already had grants for? The Royal jct to Waterville upgrade was in the ballpark of $20 million, without looking at the PDF to be sure of the number, the Waterville to Mattawamkeag project included bridge work and was going to be a tad over 24 million. So thats 64 million right there, which I imagine a good amount will be dumped to upgrade between Ayer and Worcester, so that isn't leaving much meat on the bones for upgrades to branchlines and such. CSX also pledged to rehab Rigby and as others have pointed out, the current yard at Mattawamkeag would need to be replaced and expanded to interchange cars at all. That being said, I am skeptical that anything besides the main line will see upgrades in the first 3 years, if CSX decides to hold onto them that long.

CN, all you have to do is go to any lumber receiver up and down the East Coast and you will see Irving and other ME and Maritime shippers cars on spot. You can go on those companies websites and they all are clear that the US Northeast/East Coast is their main markets as that is where the major population centers are. The paper and pulp is distributed over a somewhat wider area, but keep in mind that CP serves basically no customers East of the Mississippi other than on its' D&H lines. Things like Molten Sulphur out of Irving go to CSX points in the south. Inbound wallboard going to NB originates on CSX as does Fertilizer going up to the county. There's already a new LPG terminal going in at Waterville that is bound to cut into CP's Bangor traffic and would be very surprised if one doesn't pop up on CSXT in the Bangor area in the not too distant future. As far as unit Ethanol, grain, etc trains, where do you anticipate these trains going?

I'm guessing their first priorities will be the Worcester main and to get the former MEC North of Royal Jct all the way to Keag upgraded to class 2/3 and 286K. I would imagine that the Rumford and Shawmut branches are both fairly high priorities as well. NH main, Augusta and Bucksport branches are probably further down the list. I believe the Portsmouth branch is in decent shape, but with all the LPG traffic, that may get some TLC soon too.

Csx may not upgrade some branches
They know full well how to leave a branch in crap 10mph or less conditions
See the ag branch from Framingham to Leominster, esp before the new c&d shipper came online
Anyway, I expect big things on Worcester main, including fast work on NS paid clearance projects. That line will be a key artery fir high value cargo and needs a ton of work. Lots of the rail is ancient, beat flat, lighter weight stick rail. The roadbed is lousy in a number of spots as well. Someone mentioned ballast undercutting. I don’t recall seeing that done in the 1990s rebuild and the line could use it. Lots of ties and surfacing needed too. Being only 30 miles long, I think csx’s well staffed, highly efficient and mechanized mow crews could make quick work of Worcester main rehab.

roberttosh, I see some loaded Irving centerbeams in NS train 30T (aka CP 930) that originates in Montreal with CN traffic and that picks up CP traffic at Saratoga on its way down the D&H to Binghamton. And then I'll see Irving loads heading south on NS 11Z train out of Binghamton on the Hagerstown line passing the Greencastle PA and Roanoke live cams. So NS has a measurable piece of Irving lumber traffic that CSX is unlikely to get.

I don't know if PAR tri-weekly train POED brings much Irving lumber to NS 11R at E Deerfield. But I'm not sure if a POED equivalent (eg CSX block from NMJ to PAS at Ayer) will continue to exist following the acquisition.

No hazmat Framingham to Leominster. All of the branches (except Augusta Industrial) listed above range from a lot of hazmat tonnage to "some" in every train.

Combined with adequate tonnage and some may go to Class 2 like NH, Portsmouth and Rumford. The rest will likely remain Class I. Yes CSX knows 10 MPH but it's a consistent 10 not 10 mixed with 5s and taken OOS every time the FRA comes. You know you're cheap when your constantly looking to degrade Class I to Excepted to save pennies.

John, there is no doubt that CSX isn't going to get all the lumber business. That being said, in terms of what NS handles today, both they and CP still have cause for concern. First, some of that NS lumber traffic ends up in shared asset (both North Jersey & Philly), where CSX will now have single line pricing and a more direct route. Then you have traffic that goes to shortlines, regionals, switch carriers or open to switch points where again CSX will now have the upper hand. Lastly, a lot of this lumber goes to reloads and if CSX can go to say Irving, Daaquam or LP and offer them a $1000 per car savings to use a transload on their line, there's a good chance that traffic will be shifted to CSX. Even in terms of Industrial Development, if I'm Home Depot looking to put up a new lumber facility, I would definitely take notice that CSX is better positioned than the NS to deliver ME and Maritime product to me. At the end of the day, the Marketing & Sales folks at CSX will be able to leverage their new, superior, single line routing/pricing off of the Irving roads to go after a lot more business than just what they currently terminate. Same with other commodities as well, this transaction is going to be a real game changer for CSX.

CN9634 wrote: ↑Sat Jan 15, 2022 12:38 pm CBR is deader than dead.... the stuff off BNSF/CP was Bakken shale, right now Irving is taking some Alberta loads via CN, but they've gotten a CTA waiver (Jones Act) to bulk tanker it in from BC to SJ. They also hedge their supply with Saudi/OPEC sources quite a bit.

Why would they need a Jones Act waiver to run a tanker from BC (presumably Vancouver area) to Saint John? Those are both Canadian ports so the US Jones Act wouldn't apply. Even Bellingham or Seattle area to NB wouldn't call it into play.

markhb wrote: ↑Sat Jan 15, 2022 4:54 pm Why would they need a Jones Act waiver to run a tanker from BC (presumably Vancouver area) to Saint John? Those are both Canadian ports so the US Jones Act wouldn't apply. Even Bellingham or Seattle area to NB wouldn't call it into play.

Forgive me for the confusion-- I wrote from my phone it was supposed to say '(Jones Act equivalent)'. Obviously it need not apply in Canada but it was merely the reference since it's a similar requirement to have a Canadian crew and Canadian flagged vessel intra-Canada.

Relative to the other questions--
Drive i95 and you'll see flatbed after flatbed of lumber headed south the southern NE, NY/NJ, and the Mid Atlantic. No secret there, it can all be captured by rail and those places prefer that.

LPG demand is increasing-- folks are replacing heaters and furnaces with LPG units and building more homes in Maine. All the customers on CP just expanded (literally) and the SLR had a few crop up/expand this past year. Plenty of room in the market for more.

CP has plenty of customers east of the Mississippi...considering east of the Mississippi is half of Minnesota, all of Wisconsin and Michigan in the US. Take a look there is plenty of material on the CP website on each commodity and markets (actually check the investor slides updated monthly).

CSX will surely grab Molten Sulfur, asphalt and a good chunk of lumber, but again I think there is plenty of highway traffic to pluck from as well.

How do you know the inbound wallboard originates on CSX? There are tons of CertainTeed plants all over Canada and the US.... Saint Gobain is a massive company as well.

As for unit ethanol, grain, potash.... export, export, export.... actually ethanol for blending. Canada lets provincial rules govern the blends but new laws are starting to push higher ethanol content in gasolines for Canadians. CP already moves E85 (3475) but CN moves E85 plus some 1987 placards.

Grain relies on Montreal or Quebec City (offline) for export as well as Thunder Bay, whereas CP has just Thunder Bay.... which closes three months a year to shipping.

The playbook for these things are basically what each RR, as publicly traded and held to investors, have talked about. I suggest listening in on Q4 results which are all rolling out in the next two weeks for CN, CP and CSX.