East, West Coasts Achieve Competitive Balance

Competition between West and East Coast ports for Asian cargo has hit a point of equilibrium and market share probably won't change much in the coming years.

Therefore, there is very little that either western or eastern railroads can do that will influence cargo routing, according to rail executives who addressed the Trans-Pacific Maritime Conference in Long Beach.

When intermodal rail from the West Coast was at its peak in the 1990s, about 80 percent of the U.S. trade with Asia was routed through West Coast ports and 20 percent went to the East Coast via all-water services.

West Coast market share began to decline in the late 1990s as retailers and large importers diversified their gateways and established import distribution centers on the East Coast. The biggest drop of 3 to 4 percentage points of market share occurred in 2001-02, said Steve Branscum, group vice president of consumer products marketing at BNSF Railway.

Labor problems at West Coast ports and congestion on the rail networks in ensuing years caused a further shift of market share, and today about 68 to 70 percent of the U.S. container trade with Asia moves through the West Coast.

A further shift of any significance is unlikely, said John Kaiser, vice president and general manager, intermodal, at Union Pacific Railroad.

Speed to market is the chief selling point for routing Asian shipments via intermodal rail from the West Coast. Western railroads have invested billions of dollars in recent years to double-track key corridors and develop expedited services, such as fifth day morning delivery from Los Angeles to Atlanta, Kaiser noted. It would be difficult to improve train velocity much more.

Thomas Finkbiner, executive vice president of sales and marketing at Railex, said East Coast importers who ship through the Panama Canal on all-water services from Asia do so because the service is less costly than intermodal rail through the West Coast, so speed to market is not their main objective.

Norfolk Southern is completing construction of its Heartland Corridor from the Virginia ports to Chicago and the Ohio Valley, CSX Railroad is developing a similar corridor with its National Gateway Project and the western railroads are completing the double-tracking of their main east-west corridors from West Coast ports, but these projects will not influence cargo routing and market share, Finkbiner said.

"I don't think there is much railroads and ports can do to influence trans-Pacific freight. There are bigger forces at work," he said.