What is Railcar Storage
Railcar storage is a service offered by certain facilities where railway companies or owners of railcars can temporarily store their train cars when they are not immediately needed for service. This may occur for a variety of reasons, such as seasonal fluctuations in demand, a surplus in transportation capacity, during disruptions in the supply chain, or when awaiting new shipments to fill the cars.
Storage facilities are usually strategically located areas where tracks are designated specifically for the purpose of storing these cars. They must be secure and well-maintained to ensure the safety and integrity of the stored railcars.
When to use Railcar Storage
Though railcar storage might not be ideal for generating revenue, there are scenarios where it makes sense and can lead to cost savings. Several factors can come into play when considering storing your cars, including the length of storage time, in and out fees, cherry-picking (if applicable), and the cost of moving cars to and from storage locations. We will look at these factors in just a moment; however, what is important to calculate is the difference between railcar storage factors and demurrage. The charges associated with demurrage can sometimes surpass the expenses of railcar storage, making storage a valuable option.
Particularly, railcar storage becomes ideal in situations where a fleet is oversized due to a decrease in demand or a potential increase in railroad efficiency through initiatives like Precision Scheduled Railroading (PSR). Railcar storage may also be beneficial when internal efficiencies are realized, or during long-term planned outages intended for upgrades to enhance efficiency.
Any of these scenarios can result in railcars being underutilized, and racking up charges as they sit, waiting for good to move. No matter how effectively a fleet is managed, changes in the supply chain are inevitable, and the ability to adapt as seamlessly as possible is crucial. Just as importantly, it is valuable to plan contingencies ahead of time, so that you can respond quickly and efficiently when necessary.
Railcar Storage Factors to Consider
When considering railcar storage for your logistics, certain requirements must be met, particularly for hazardous materials shippers. These requirements might include a secured, gated yard, adequate lighting, or potentially on-site security to meet liability concerns. If you require more specialized railcar storage locations with these amenities, this will typically mean a higher cost. In contrast, rural storage facilities often have a lower cost since space is more readily available.
Regarding the possible costs associated with railcar storage, several factors can affect those charges.
- Per Diem Charge: Daily fees range from $4 to $50.
- In-and-Out Charges: This fee is associated with moving the car into or out of a facility. Some facilities charge this fee entirely upon entry, while others split it between entry and exit. When storing cars on a short line, it is essential to determine ahead of time whether this fee includes moving the car to the storage track or if the cars will be subject to a separate revenue move. Market quotes range from $100 to $800 for in-and-out services.
- Cherry Picking: If a specific car is needed from the railcar storage lot, additional efforts from the storage crew will be required to find and move it from amongst the rest of your fleet. These efforts often result in a “cherry picking” fee. This charge is additional to the in-and-out charge and can range from $150 to $400.
- Revenue Freight Charges: Depending on whether the cars are loaded or empty, or when the railcar last traveled on those lines, revenue freight charges may be applied. This complex fee is influenced by numerous rules and can change depending on the storage facility, so understanding them is crucial to assess potential costs.
When considering storage costs, one important factor that can affect the calculation of charges is your intended duration. Different durations can change what might be the most cost-effective facility. For instance, a short-projected storage time might favor locations that capitalize on in-and-out charges, whereas longer-term storage could offer lower daily rates.
When evaluating storage and associated costs, an alternative to consider is sending cars to a shop if maintenance or upgrades are anticipated. This option is worth exploring since the cost would be incurred eventually anyways, and shop turn times would effectively remove the cars from service for a period – akin to storage.
The Industry Impact of Railcar Storage
Railcar storage levels can serve as an indicator of economic conditions, with high numbers of stored railcars often suggesting a reduction in industrial demand. In contrast, a decrease in storage levels may indicate an increase in economic activity and the movement of goods.
According to the Association of American Railroads, current storage levels are lower in comparison to the elevated volumes experienced during 2020 due to COVID-19. Although certain sectors of the economy displayed a slight increase in storage at the start of the year, there has been a notable reduction of 22,000 cars in storage since the year’s onset.
