UNITED STATES Eye-to-eye with a runaway engine racing down the tracks

Oct 01, 2007 | 12:55 PM |

A showdown between the steel and railroad industries is under way.

It begins with a House Transportation and Infrastructure Committee hearing. The central question is whether the railroad industry, which was deregulated 27 years ago during a period of financial crisis, has grown too consolidated and too powerful. As a result of deregulation, the number of Class I railroad companies serving North America has dwindled from 40 in 1980 to just seven today.

Steel producers forced to rely solely on Class I railroads have been particularly impacted by deregulation, according to the Steel Manufacturers Association (SMA). Those "captive shippers," in industry jargon, have long complained about the lack of competition, deteriorating service and rising prices. On average, rail rates are up 5 to 8 percent from a year ago, the SMA said, and the increases are even more dramatic for captive shippers, with some citing increases as high as 50 percent.

"These rising transportation costs are a real concern for steelmakers," said Adam Parr, manager of public policy for the SMA, which is leading the charge to break what it says is a monopoly on rail service by Class I railroads.....