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Apr.20, 2015

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SURFACE & DOMESTIC TRANSPORTATION TRUCKING | RAIL | INTERMODAL | AIR & EXPEDITED | DISTRIBUTION 58 THE JOURNAL OF COMMERCE APRIL 20.2015 By Mark Szakonyi MAJOR EASTERN RAILROADS will gain more business if U.S. shippers shift their import cargoes to East Coast ports because of the recent West Coast congestion problems. Just how much CSX Transportation and Norfolk Southern Railway could gain, however, depends on how much of that imported cargo is destined for the Midwest. It's too soon to determine, however. In March, CSX and NS signaled that they are revis- ing their views that the East Coast had experienced the full extent of cargo shifts following the 2002 West Coast terminal lockout. "The East Coast ports, in my view, are going to benefit greatly off this disaster on the West Coast," Clarence Gooden, chief com- mercial officer and executive vice president of CSX, said at the Jaxport Logistics and Inter- modal Conference in Ponte Vedra, Florida. "There is no such thing as a captive shipper." Gooden said some retailers he met with during a recent two-week customer visit didn't use "nice words" to describe their frustration with West Coast conges - tion. Shippers' expression of their interest in alternative routing changed his think- ing that the East Coast already had seen the general extent of a cargo shift. Now, he thinks the West Coast's woes are "probably going to have more strategic implications in the near term" than the opening of the expanded Panama Canal. NS's view has been that the "market share shift from a rail perspective has already taken place," Robert Martinez, vice president of business development at NS, told The Journal of Commerce. Ten years ago, about 40 percent of NS's international intermodal volume flowed through the East Coast, with the rest moving through the West Coast and handed off to NS by western railroads. Now, more than 60 percent of all ocean container volume the railroad handles flows through East Coast ports. "We are becoming more open to the notion that market share shift could con- tinue further" over the next couple of months, Martinez said. From a profitability-per-load stand- point, it doesn't matter to CSX and NS if they interchange cargo from western carriers or pick it up from East Coast ports, said Tom Finkbiner, an intermodal analyst and CEO of Tiger Cool Express, a refrigerated inter- modal rail provider. That's largely because neither category of cargo requires the con- struction of a terminal, nor do the railroads have to pay for the operation of the termi- nals, he said. CSX, which has seen a long-term shift of cargo from the West Coast to the East Coast, is "relatively agnostic on which port the freight enters the U.S." because investments made by the railroad allow it to efficiently handle freight from either direction, spokes- woman Melanie Cost said. The eastern rails could see more volume if shippers feeding Midwest distribution hubs move more cargo through the East Coast, Finkbiner said. Freight hauled from the West Coast by BNSF Railway and Union Pacific Railroad to Chicago is often hauled via truck to other Midwest points. "If the Midwest business comes over the eastern ports, the eastern railroads get the haul," he said. Because the route from the East Coast to the Mid- west is about half the distance from the West Coast to the Midwest, transloading contents from ocean containers into domestic equipment isn't as financially attractive as it is on the West Coast, giving CSX and NS more ocean con- tainers, full and empty, to haul back to the eastern ports, Finkbiner said. JOC Contact Mark Szakonyi at and follow him on Twitter: @szakonyi_joc. RAILROAD SHARE SHIFTERS It's east versus west as shippers consider alternative routing for imports "If the Midwest business comes over the eastern ports, the eastern railroads get the haul."

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