FARGO, N.D. - It may be mid-March before container shippers in the North Dakota region provide enough information to see whether a state-supported "cartel concept" could help generate competitive rates out of Dilworth, Minn., and Minot, N.D.
The North Dakota state government has stepped up efforts to eliminate obstacles to this.
A weaker U.S. dollar has improved the economics of back-hauling grain to places like China, Taiwan and Japan and equipment to Eastern Europe.
Manufacturers and producers of specialty ag products - especially for human consumption - currently have to truck goods in containers to Minneapolis or even Chicago so they can be and assembled into trains bound for Pacific Northwest of East Coast ports.
The extra trucking charges force people who grow and market edible soybeans and other exported goods to operate a disadvantage of $1,000 to $2,000 in extra costs near ramps at places like Council Bluffs, Iowa, or Kansas City and Minneapolis, where all the imports come in.
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Making a pitch
North Dakota Gov. John Hoeven wants to change that and has starting by asking Burlington Northern Santa Fe for cooperation, with an eye toward making something happen by summer. For its part, BNSF has said it would consider loading empties on a unit train and send it up to either Dilworth or Minot, so the empties are closer.
Lt. Gov. Jack Dalrymple and Lance Gaebe, Hoeven's deputy chief of staff, were among state officials who unveiled the result of the state-railroad talks, in a Feb. 18 meeting with shippers at North Dakota State University in Fargo. Dalrymple introduced Ron Martin, vice president of international logistics for Midwest Motor Express Inc. of Fargo, which would in charge of arranging the logistics.
Dalrymple says Hoeven recently met with Matt Rose, BNSF's chief executive officer in Fort Worth, Texas. Rose agreed to provide service to Dilworth and Minot terminals if a steamship company requests it. The steamship company owns the containers.
"They did agree - after considerable pressure - to offer Minneapolis-like rates if the two locations can come up with full trains of freight," Gaebe says. "If they aren't able to provide those comparable rates, they agree to describe in writing why that is.
Rose reportedly has said the railroad would provide rates to the steamship lines and actual delivery of requested containers within three weeks, as opposed to months.
Martin says the concept is as simple as offering roundtrip rates to the railroad and shipping company parties. He used the example of Ashley Furniture in Arcadia, Wis., which has partnered with a bulk corn loading facility, to offer a backhauls of containers filled with corn.
"We intend to match importers in the whole region - not just North Dakota - with the exporters in the region both ways," Martin says. "We're going to provide trips both ways. It's as simple as that."
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Martin says it's no secret that imports of container shipment have increased multifold in the past several years.
One factor is the effect of the exchange rate and the increase in containers going back to places such as Asia, loaded with increasingly affordable grain and other products. Exports from this area are struggling because of the rates.
At the same time, BNSF has gone to a "spoke-and-hub" operation, to reduce the turn times and cut congestion at the ports. He says half of those trains are going back empty, but some part of them could be loaded.
Making matchesMartin says that for the deal to work, shippers are "going to have to step up and be counted, quite frankly." They initially need to provide business data on what countries and ports they're shipping to, and in what volume, so that his company could match them up with imports.
The information will be held in confidence and then "join this alliance - call it a cartel if you like" - to assemble volume for thousands of cars a year. He says collecting the containers with a central logistics agent will be better than dealing with multiple shipping companies.
"Here you're sitting on billions of dollars of products, something the world really needs, and you're at a competitive disadvantage with those who are closer to the rail hubs - Minneapolis, Council Bluffs, Kansas City and on and on - Chicago. You see that train go right by your farm fields, and there's no reason why we can't take advantage of that opportunity."
Once the concept is proven on westbound traffic, Martin envisions the plan going to Phase II, to ship equipment to Eastern Europe, or sunflowers to Spain.
Dalrymple says the key is to deal in unit train volumes in Dilworth and Minot locations. At first, the trains would be split in a "joint train between the two, but later, each would have their own separate trains," according to surveys.
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"They (railroad officials) may be feeling comfortable that we're going to have a hard time doing that. But the fact of the matter is they have made that commitment. When it comes to the steamship lines, we don't know yet what the response will be."
Gaebe says the issue dates back two years to a "co-load" concept discussed at a meeting in Minneapolis in 2005. The idea was to involve shipping out of Dilworth and Minot to cooperate to build up full trains. A statewide rail strategy developed and was presented to BNSF in February 2006 and a Regional Intermodal Co-Service Coordinating Board was established. A report was presented to BNSF Oct. 2, 2007. Among other things, the study showed that there would be ample volumes in the two locations to fill trains in both location, especially after 2009 and 2010.
Dalrymple says Martin's commitment is impressive and that commitment itself indicates there is an opportunity.
The state's request of BNSF is that, when the railroad gives shipping rates to the steamship lines that the state thinks are coming - because of the volume the state will demonstrate from Dilworth and Minot - that the rates will be "in line with what an empty train leaving Chicago is going to be with a one-day stop in Dilworth." BNSF says it needs to handle about a train a day to make the deal work, the officials say.
