The railroad industry is either riding to
glory or heading for a train wreck, depending on who you talk
to. Rail producers, for example, anticipate a pickup in sales,
with much enthusiasm driven by demand for longer, stronger
rails. But some analysts say shipping volumes and profits are
down and are likely to remain so in the short term, although a
long-term bull cycle might be in the making.
With North American railroads seen moving
toward expanded capacity in coming years, many manufacturers
expect rail sales to be brisk.
The U.S. market consumed about 1 million tons
of rail in 2006, with at least that much anticipated this year
as well, according to Steve Didyk, director of rail sales at
Rocky Mountain Steel Mills (RMSM), Pueblo, Colo. The industry
hasn't seen back-to-back 1-million-ton years since the late
1990s, he added.
And most manufacturers aren't worried about
recent downturns in freight, he said. "Our customers have a
wide variety of goods that they haul. If automotive is down,
they're picking up coal and other materials."
Many observers are particularly enthusiastic
about the market for long-length, heavy-duty rail capable of
handling the increased loads of modern rail cars. Longer,
stronger rails are especially valuable in areas such as the
coal-rich Powder River Basin in Montana and Wyoming, where
heavy coal cars travel long distances in sometimes difficult
But U.S. supply currently doesn't meet
demand, especially for the high-end rail many consumers prefer.
Rosemont, Ill.,-based Sumitomo Corp. of America, for example,
supplies rail from Nippon Steel Corp., Tokyo, to many large
North American railroad companies.
Of the 299,224 tons of standard rail imported
by the United States last year, 66.8 percent, or 199,852 tons,
came from Japan, according to McKees Rock, Pa.,-based
SteelFacts. The Czech Republic accounted for another 22.7
percent, with 67,833 tons. Much of the Japanese rail is premium
strength, while the Czech material is standard strength,
Steel Dynamics Inc. (SDI), Fort Wayne, Ind.,
hopes to grab a piece of the long-rail action. The company
plans to boost rail production at its plant in Columbia City,
Ind., but currently has its hands full with beam orders, Paul
Kotsenas, SDI's manager of rail and special products, said.
But the company plans to install another
rolling mill at Columbia City late this year or early next
year, which should free up more capacity to make rail, Kotsenas
said. The mill will produce rails 240 to 320 feet long and join
them into strips as long as 1,600 feet at an on-site weld shop.
"The only other mills producing those lengths are foreign," he
ArcelorMittal North America also is angling
for a larger share of the premium rail market, which currently
leans toward Japanese product, said Brian Elgart, the company's
rail sales manager.
ArcelorMittal makes standard 80-foot rail but
is discussing longer lengths. It also is making significant
investments at its Steelton, Pa., plant to make harder,
stronger premium rail.
"Domestically, we have another entry," he
said of SDI. "But we face manufacturers from Asia and Europe
all the time." And ArcelorMittal also will continue to slug it
out with RMSM, he said. "They're big in the West, we're big in
the East, and in the middle of the country it's a jump