On the morning of March 16, Bobby Triesch, vice president and general regional manager at metal recycler and processor SA Recycling, provided testimony before the Surface Transportation Board (STB) on the board’s proposal to expand reciprocal switching between rail carriers. His testimony was the fourth panel of the STB’s two-day virtual hearing on the issue of reciprocal switching and featured testimony from stakeholders among shippers and railroads.
The other speakers on the fourth panel were Herman Haksteen, president of the Private Railcar Food and Beverage Association, Dalton Henry, vice president of policy at U.S. Wheat Associates, Scott DeFife, president of the Glass Packaging Institute, and Chris Greissing, president of the Industrial Minerals Association, North America.
Triesch began by commending the board for holding the hearing and giving shippers such as SA the opportunity to express concerns with the lack of rail competition. Rail transportation, he explained, is critical for shipments of ferrous and nonferrous recycled commodities especially at distances beyond 200 miles. “Ferrous scrap is essential to over 70% of U.S. steel production needed to implement the bipartisan infrastructure law. Steel made from recycled steel also saves energy and reduces greenhouse gases,” he says.
He raised several issues shippers have faced since the U.S. Class I railroads implemented Precision Scheduled Railroading (PSR) as their operating model in 2017. Though the goal of PSR was to improve rail service, Triesch noted that the cost-cutting in labor and equipment generally caused less efficient and less reliable service for SA Recycling and other shippers.
“Our company and many other ISRI members, have experienced significant service disruptions, including congestion, missed switches, bunched railcars, and inadequate railcar supply,” he notes. Not only have these issues gotten worse due to the supply chain challenges, but also freight rates have continued to expand each year at SA’s captive locations.
A captive location or rail customer is one without competitive transportation alternative to a single railroad serving its location. “Many ISRI members are captive rail shippers,” says Billy Johnson, ISRI’s chief lobbyist. “But the steel mills they’re supplying aren’t. That means that while the mills may have several options to buy from multiple producers, our members don’t have those kinds of options.”
Reciprocal switching would allow shippers to switch to another rail that’s served by a different railroad. “It would open a lot of markets from our members and make things more competitive,” Johnson adds. “When you’re captive to one railroad there’s no competition.”
Triesch expressed before the STB how expanding reciprocal switching would allow for more competition and ease some of shippers’ challenges including high freight rates. “In a competitive industry, service providers who under-perform are not usually able to reward themselves with rate increases from their customers,” he says.
He demonstrated that in regions where SA Recycling has competitive rail access at its facilities, those facilities receive significantly better rates and service compared to the captive facilities. “Reciprocal switching will help mitigate service disruptions by providing an alternative to shippers when continuous disruption occurs on the bottleneck carrier’s networks. On the flip side, reciprocal switching will also incentivize bottleneck carriers to work with shippers to resolve service disruptions to avoid losing the traffic to a competing carrier.”
Triesch took questions from board members after providing his testimony. STB Chairman Martin Oberman bought up the issue of shipping recycled materials via truck versus rail and asked Triesch which method recyclers and their customers prefer. Triesch said that not only did SA prefer to ship more materials over the rail, but so do its customers. “The steel mills don’t want trucks, they’ve only added more ability to receive by truck to deal with the congestions and service problems by rail,” he explains. “They would prefer [to receive] the scrap in railcars. The mills use railcars to bring up [the recycled materials] to the melt shop and put it in the charging buckets. In many yards they end up taking what’s on the truck and reloading it onto a railcar to bring it up to the melt shop.”
Johnson thought the hearing was productive and will hopefully move the overdue proceedings toward a conclusion that results in improved rail service for shippers. “ISRI illustrated how competitive switching could help open new markets for recycling in the U.S.,” he says. “However, in order to take advantage of this proposal, the STB must revoke the commodity exemption for ferrous scrap commodities.”