Given that rail-based freight transportation is more sustainable than other modes of transport, what influence do you have on the chemicals industry and the U.S. economy right now?
JH: The chemicals industry is CSX's largest customer base and a significant part of our business, touching every sector of the North American economy. Railroads are the economic backbone to the industry. Rail transportation is not only safer, reducing hazmat spills compared to trucks, but it also brings efficiency and environmental benefits. Rail is notably more efficient over longer distances and emits substantially fewer emissions than trucks, making it a more sustainable option for moving goods.
KB: Recognizing the importance to our stakeholders in industries like chemicals and energy, our operations now prioritize environmental sustainability. The focus is not just on long-term goals for 2050 but also on what can be achieved in the near term.
Has there been a noticeable inflection point in market demand towards more environmentally friendly logistics solutions?
KB: There is a growing demand from end consumers who are increasingly conscious about the environmental impact of the products they purchase. This consumer-driven demand is encouraging companies to minimize their carbon footprint and is increasingly influencing corporate decisions. As a result, we are seeing more clients interested in how rail can help them achieve their sustainability goals. We can provide tangible data on emission reductions when shifting freight from truck to rail, which our clients can use for environmental reporting and to demonstrate their commitment to sustainability.
Given a high perceived barrier to entry in the rail industry, what have been key recent changes in the rail industry?
JH: Over the past decade, there has been a significant shift, with rail companies, including CSX, adopting more efficient and profitable operating models. This transformation is crucial as we aim to attract more businesses to rail by improving service quality and demonstrating the cost-effectiveness and environmental benefits of rail transport.
KB: We are focused on overcoming historical perceptions of rail as an unreliable option compared to trucking. By investing in our infrastructure and service, we are making rail a more competitive choice. The integration with trucking services for last-mile deliveries ensures that while rail forms the backbone of long-distance freight movement, it is complemented by road transport to meet customer needs fully.
What sort of bold steps are CSX considering to enhance value, particularly in the chemicals industry?
JH: With our robust financial position, we are strategically investing in areas like ISO-tanks and acquiring assets such as Quality Carriers and Pan Am Railways to strengthen our network from the docks of New England to Canada. These investments allow us to explore new service offerings and enhance our ability to transport chemical products more efficiently and safely. Our goal is to leverage technology, like GPS locators on railcars, to provide better service and transparency, which are critical for convincing more customers to choose rail due to its safety, cost-effectiveness, and lower emissions.
KB: Our strategy focuses on expanding our service capabilities and reaching new customers through innovative solutions like the patented ISO-tank, which addresses safety concerns and broadens our market. By integrating transloading facilities, we can serve areas without direct rail access, dispersing products via truck to multiple customers. This approach not only extends our reach but also enhances our ability to support the chemical industry's growth, despite its slower growth rate compared to overall GDP growth.
As CSX continues to grow through more transloading facilities, what new geographical areas are you targeting and how is the localization of supply chains influencing your strategies?
JH: The reshoring trend in the U.S. is creating significant opportunities for industrial development, particularly in the Southeast where there is a high demand for new manufacturing facilities. Our network's reach in this region positions us well to meet the increasing transportation needs of these facilities. We are actively expanding our capabilities to serve burgeoning industrial areas like Charlotte, where the concentration of new developments demands robust rail services.
KB: Our expansion efforts are also focused on enhancing our infrastructure to support these new industrial sites. With the majority of the U.S. population and industrial growth east of the Mississippi River, our rail network is ideally situated to serve these areas effectively
Given the challenges and opportunities in the rail industry, what keeps you up at night?
JH:
Safety is our paramount concern. Incidents like the East Palestine, Ohio derailment highlight the critical importance of safety for Rail. This focus is not just about compliance or avoiding negative attention—it's about the profound responsibility we carry every day.
Ensuring the safety of our employees, the communities we serve, and our operations is a relentless pursuit, underpinned by ongoing improvements and a commitment to excellence.
KB: Alongside safety, the potential to positively impact the economy and society through improved rail services is a powerful motivator that also brings its pressures. We are acutely aware of our role in the national economy—interruptions in our service can have widespread repercussions. Our mandate is clear: to enhance our service reliability and efficiency, thereby supporting our customers' growth and, by extension, the broader economy.
Looking forward, what do you think the industry, and CSX, can be doing better to enhance public opinion?
JH: I often say people love trains and that there is a fascination and a nostalgic love affair with trains in the U.S. We need to get them to love railroads. Enhancing public perception starts with being a proactive corporate citizen and demonstrating the tangible benefits of rail transport, not only to our direct customers but to the wider community. Initiatives like participating in industry discussions, improving service reliability, and actively engaging with community leaders are pivotal. By making our operations more transparent and our advantages clearer, we aim to transform appreciation for trains into a broader respect and preference for rail as a transportation mode.
