Picture of the day: CSX 963

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1. Scott Burger on April 12, 2013 10:30 AM said:

   http://www.bloomberg.com/news/2013-03-06/ge-races-caterpillar-on-lng-trains-to-curb-buffett-cost.html

   General Electric Co. (GE) and Caterpillar Inc. (CAT), the world’s largest locomotive makers, are rushing to develop natural gas-powered models in a potential shift from diesel’s six decades as the fuel of choice for railroads.
   Three of the biggest U.S. rail carriers — Berkshire Hathaway Inc. (BRK/A)’s Burlington Northern Santa Fe LLC, Union Pacific Corp. (UNP) and Norfolk Southern (NSC) Corp. — are working with manufacturers on using gas as an alternative power source for freight trains. CSX Corp. is studying the technology.

   related:

   http://beta.fool.com/catominor/2012/06/17/railroads-prepare-threat-natural-gas/5836/

   These companies will simply have to diversify their shipment mix away from coal. Canadian National (NYSE: CNI) is the leader here, with coal accounting for only 7% of revenue, less than a quarter of its peers. Recently railroads have profited from an increase in the volume of automobiles and intermodal traffic, typically containerized cargo. Ironically the natural gas boom could help railroads, because cheap natural gas is used by American chemical companies as a feedstock for other products. Increased chemical production should translate to increased volumes of chemical shipments on the rails.

   Ultimately, the bigger threat from natural gas could be the advantage it gives to rail’s chief competitor, freight trucking. The trucking industry is in the early stages of converting to natural gas engines, which will drastically reduce truckers’ fuel costs. The better fuel efficiency of rail is what makes it competitive, because trucking benefits from public infrastructure support that rail doesn’t have. Trucks do pay the Federal Highway Use Tax, but this doesn’t cover the full cost of highway construction and maintenance, and truckers only have to pay the tax to the extent that they actually use roads, allowing them to better control expenses when volumes are low.
2. Miketivist on April 12, 2013 2:16 PM said:

   Well said, Scott!
   & nice HDR work, Ross.
3. Denny R. on April 12, 2013 8:02 PM said:

   I actually agree with Scott on this.