The effects of the "Train Wreck" appear to be alive and well too:
July 30, 2004, 12:09AM
Rail snarl gums up cement shipments
Builders fear pinch from shipping prices could hurt economy
By BILL HENSEL JR.
Houston Chronicle
Houston-area builders predict serious shortages of cement and asphalt down the road because of a slowdown in gravel deliveries by Union Pacific.
Big problems are expected because Union Pacific slashed the number of carloads of gravel it hauls in Texas by almost a third. That is bad news for Houston and parts east because much of the rock used to make cement here comes from Central Texas, where it is loaded onto trains and shipped.
As a result, the cutback by the nation's biggest rail carrier, to help it avoid further congestion on its already slow system, could crimp everything from home building to street repairs.
Suppliers of asphalt already are short, and builders report suppliers are limiting the amount of ready-mix concrete. So far, it apparently has not slowed major rebuilding projects on local interstates, which Union Pacific said is by design.
"We do look at various project such as I-10 so we can balance things so we don't shut them down or have unnecessary delays," Union Pacific spokesman John Bromley said Thursday. "That being said, we will be reducing service levels at least temporarily as we get into peak season."
Peak season occurs during the late summer and early fall as crops are harvested and delivery of Christmas holiday goods begins.
Since the announcement of curtailments by Union Pacific on July 8, some contractors already have begun switching from trains to trucks. But moving rock by truck kicks up the cost considerably, and those in the construction business say there's already a shortage of trucks to handle what's known in the trade as aggregate.
"The decision to limit the number of rock and aggregate material carloads in Texas will have a severe impact on the economic viability of the entire state, especially Houston," said Marianne Gooch, director of communications for Houston-based Cemex Inc.
Because Cemex is one of the biggest suppliers in town, its problems could be felt throughout this key sector of the local economy.
Because of strong demand domestically and worldwide, cement was in short supply even before the railroad's announcement. Cement is a key ingredient in making concrete, and these shortfalls had already pushed up prices.
System backed up
Union Pacific has said it has no option but to reduce gravel shipments because its system here is already severely backed up, and it could get much worse as it enters its busiest season of the year.
"The steady increase in demand for carloadings has meant that we have been unable to gain on the situation," Jack Koraleski, Union Pacific's executive vice president for marketing and sales, said in his last letter to customers.
Union Pacific's move to cut back carloads of gravel in Texas already has adversely affected production at facilities that make building products.
"If these issues are not addressed in an immediate fashion, a number of facilities in the Houston marketplace will be forced to shut down," wrote Michael K. Stewart, president of the Texas Aggregates and Concrete Association, in a letter to Union Pacific Chairman and Chief Executive Dick Davidson.
The situation could lead to "project delays and a substantial loss of jobs due to a lack of materials," wrote Stewart, who requested a meeting with top officials from the rail company.
A meeting has been scheduled for next week, which Bromley confirmed Wednesday.
Kathy Walt, a spokeswoman for Gov. Rick Perry, said, "Obviously, the governor would be concerned about the economic impact this could have on the state, particularly in the realm of highway construction or residential construction or commercial construction."
Highway projects
The Texas Department of Transportation expects some contractors to request suspension of deadlines on some contracts as a result of the Union Pacific situation, spokeswoman Janelle Gbur said. No requests have been made yet.
"The most critical shortage right now is on the asphalt supplier side," Gbur said. "Producers are starting to ration what they are going to produce each day."
A number of road-building projects are under way in the Houston area.
The Union Pacific system has been seriously congested for many months as the company has battled higher-than-expected demand. But the real fear is that it could turn into 1997 all over again, when the nation was in a virtual rail gridlock after Union Pacific merged with Southern Pacific.
Or worse.
"Predictions are that the 1997 shortages and problems will seem like a small bump in the road compared to the looming situation today," the Houston chapter of the Associated General Contractors said in a bulletin to contractors.
Employee shortage
Union Pacific said the problem stems from a combined surge in demand for rail service and a shortage of employees to run those trains. The company reports that it has hired and trained thousands of new employees and has acquired 500 more locomotives.
However, it can't keep up with the increases in the volume of cargo its customers want hauled, with record demand for six months in a row, company officials said.
The rail carrier said in its release July 8 that it expects demand to increase because peak season is in the fall.
"Because of this, Union Pacific must control the volume of business in several key corridors and terminals by limiting carloadings and train operations," the company said.
The Associated General Contractors said Union Pacific is looking for ways to cut costs, improve efficiency and increase loads with higher profit margins.
That means cutting back on hauling products like gravel, which are lower-profit loads.
Gbur said that from the state's standpoint, if the materials delivered through Union Pacific are curtailed, its contractors will have to find another means to get materials to the projects.
"It will cost twice as much to truck it in than to have it delivered by rail," she said. "What will be significant is if we have to go to a large portion of our contractors trucking it in."
Industry experts said that while trucks have to be looked at as an alternative, there also is a limit on trucking because demand has been so high.
Contractors are under contract with the state to get jobs done in a certain period and can incur penalties if they don't. |
