CHICAGO | Freight trains can cut shipping costs, and help make American manufacturing more globally competitive, a rail executive said.
Railroad industry leaders from around the country gathered Friday in downtown Chicago for The Rail Summit 2013, a summit on the economic importance of short-line railroads, which are smaller regional companies that typically haul freight locally and bring in less than $20 million a year. Four different short-lines operate in rail-intensive Northwest Indiana: Indiana Harbor Belt; Chicago South Shore and South Bend; Chicago, Fort Wayne and Eastern; and Chesapeake & Indiana.
Speakers at the annual summit focused on how the rail industry can give local businesses access to foreign markets, expand the reach of locally made products and reduce logistics costs.
Short-line railroads – coupled with cheaper energy costs that have shrunk because of the recent boom in North American oil and natural gas production – are helping spur a re-shoring movement that is bringing back once-outsourced manufacturing to the United States, said Brad Skinner, chairman of the railroad management company OmniTRAX.
"Basic production was the backbone of our economy and a source of national pride," said Skinner. "As recently as a few years ago, we were told we couldn't compete internationally, that we should give up on those industries, and that the service and information technology industries would drive the economic growth. But now our steel mills are economically competitive for the first time in 30 years because of the low costs of oil and natural gas."
Rail can cut distribution costs for businesses because freight trains burn less energy. Trains get 202 miles per gallon for every ton of cargo, as compared to 59 mpg for every ton of cargo semi-trailer trucks, according to a U.S. Department of Transportation study.
Ready mix concrete maker Ozinga, which has a large presence in Northwest Indiana and the greater Chicago area, uses rail links to supply its sand and gravel, said chief operating officer Ed Van Pouke. The vast majority of the materials comes in by truck and the Chicago River, but the company would be open to doing more business with short-line railroads if opportunities emerged.
Sand, limestone and other materials are not high-value items, so it is important for Ozinga to reduce distribution costs as much as possible, Van Pouke said.
Merrillville-based utility NIPSCO relies on local rail lines to haul coal in to feed its power plants, said Donald Babcock, director of economic development. The low transportation costs get passed onto customers, and help keep rates down.
"It's how we create a competitive advantage," he said.
Lower costs of doing business will spur more investment in American manufacturing, and restore activity to underused industrial areas that were gutted by the outsourcing that took place in the 1990s, said Skinner. Factory jobs left the country because labor and energy costs were too high, but that's no longer the case.
"At the risk of sounding optimistic, I am enthused about the future of this country," he said.