U.S. chemical guild renews calls for better rail service, prices after union-railroads deal

Chemical manufacturers reiterated demands for better rail service and prices as the country´s association that includes resins producers expressed relief after a mid-September accord between U.S. freight railroads owners and unions that prevented 7,000 trains from idling in a stoppage that would have threatened North American petrochemicals and fuels distribution.

Image courtesy of CravyFrancy1 Pixabay

“Refiners and petrochemical manufacturers are relieved that the two sides were able to come to agreement and avert what would have been a disastrous event for our economy and energy security,” said on Sep. 15 Chet Thompson, CEO of the Association of Fuel and Petrochemicals Manufacturers.

“We hope the same urgency and energy that brought about this outcome can now be directed to the work of bipartisan Surface Transportation Board re-authorization and service reforms to make America’s freight rail system more efficient and accountable, competitive, and less costly,” added Thompson, also president of the AFPM.

U.S. freight railroads owners reached a mid-September tentative agreement with the Brotherhood of Locomotive Engineers and Trainmen Division, part of IBT (Teamsters). Other labor unions grouping sheet metal, air, rail, transportation workers also participated in talks.

Nearly 950 million tons of chemicals were shipped in the U.S. in 2020 at a cost of over $55 billion, according to the ACC (American Chemistry Council), the guild of domestic and foreign chemical producers with U.S. presence that includes 190 members.

24% pay increase

The sides reached an agreement just before a Sept. 16 deadline to reach accords on their own without intervention.

The new accords will give rail workers a 24% wage increase during the five-year period from 2020 through 2024, including an immediate payout that will be on average about $11,000. A report earlier in the month said portions of the increases for years 2020, 2021 would be paid immediately.

The National Mediation Board did provide “leadership and assistance in reaching these settlements,” the statement said.

$2-billion-per-day losses

“For the American people, the hard work done to reach this tentative agreement means that our economy can avert the significant damage any shutdown would have brought,” according to a separate statement from the U.S. White House released after the accord.

“Rail service interruption would dramatically impact economic output and could cost more than $2 billion per day,” the Association of American Railroads (AAR) had warned on a report released on Sept. 8 when talks continued.

The idling of 7,000 trains could have caused retail product shortages, manufacturing shutdowns, and also job losses and disruptions, the AAR said at the time.

AAR President and CEO Ian Jefferies said in early September that a strike would have coincided with the year´s busiest shipping season. The pay increases are the highest “in nearly 50 years,” the AAR said.

Chemical companies

The U.S. chemical industry has raised concerns on rail prices and service in the past.

The chemical industry´s $486 billion in revenue in 2020, excluding pharmaceuticals, is estimated to be seven times the U.S. freight railroad industry´s revenue.

Figures compiled by the ACC (American Chemistry Council) show that of the 948 million tons of chemicals shipped in the U.S. in 2020, about 20% were sent by rail.

In 2020, chemicals accounted for just over 8% of originated carloads, nearly 13% of originated tonnage, and almost 17% of gross revenue for U.S. Class I railroads, according to the ACC.

U.S. railcars move goods like fuels, soda ash, caustic soda, sulfuric acid, and anhydrous ammonia for uses including as intermediate goods for other manufacturing, or for direct use like fertilizers.

Miscellaneous industrial organic chemicals, that include ethanol, urea, and liquid methanol, makes up 26% of the total transported, followed closely by the plastic materials and resins, a category that accounts for 25% of chemical carloads, the ACC said.

About 12% of miscellaneous material transported by rail are industrial inorganic chemicals such as sulfuric acid, anhydrous ammonia, hydrochloric acid, and 7% are Industrial gases such as vinyl chloride, or liquefied carbon dioxide.

The negotiations between the railroad owners and unions were held in circumstances where some supply chain challenges persisted along the distribution chain.

Rail regulation

The Railway Labor Act “governs the bargaining process between the rail industry and its 115,000 unionized employees, encouraging parties to settle disputes without disruption to national rail service,” according to the AAR.

The Surface Transportation Board, an independent federal agency charged with the economic regulation of diverse surface transportation modes but mainly freight rail, is charged with dispute resolution that supports “efficient, competitive, and economically viable” rail. 

The Surface Transportation Board is evaluating the proposed merger between Canadian Pacific Railway Limited (CP) and Kansas City Southern Railway Company (KCS), according to a late September release.

The seven Class I North American freight railroads are: BNSF Railway, Canadian National Railway (Grand Trunk Corp.), Canadian Pacific (Soo Line Corp.), CSX Transportation, Kansas City Southern Railway, Norfolk Southern, and Union Pacific. 

By Renzo Pipoli