Doug,
I have no idea why UP pays Mr. Glass or what motivated him to
say what he did. In the transportation business if you forecast
failure then you will almost certainly fail. The rest is just
excuses, and weak ones at that.Since UP does not maintain the
Joint Line what is this talk about "extensive repair work"?
That's news to me.
As for power plant stockpiles I hope that you would carefully
read what is being said. The producers are upset because prices
are up and they can't load as quickly as they would wish. I do
not think this is actually true, in reality they are loading as
fast as they can right now and usually have empties waiting in
line. From the utilities point of view, in a period of rising
prices, it would be prudent for them to slow down their purchasing
and try and let reduced demand push prices down.
Actually most utilities do not even buy their own coal but
contract with companies like DTE Energy Services that are able
to buy in very large quantities.
This year BNSF has realized that forecasts for future growth are
not really very good models. They are trying to plan for the future
at a level about 5% above what is forecast. If they had started
doing that two years ago they would be in pretty good shape right
now. It would appear that UP is taking an opposite tack and is
going to operate from the point of view that they are going to be
only able to handle reduced volumes.
Note that BNSF said that they are currently one or two trains
short a day. That, of course, is on the loading end. What they
did not say was that, on average, they are holding between five
and ten loaded trains for spacing at their destinations. Does
this really mean they should load faster? Would not consider that
as prudent.
After you shoot yourself in the foot where do you aim next?
Russ
----- Original Message -----
From: Douglas Harding
To: CBQ@yahoogroups.com
Sent: Wednesday, 30 November, 2005 11:11
Subject: [CBQ] RE: Force majeure
Got this from a local railfan list. Hope it helps answer the question.
Doug Harding
Iowa Central Railroad
http://d.harding.home.mchsi.com
Force majeure ends on UP's Powder River coal line
UPDATE 1-Force majeure ends on Western coal rail
Mon Nov 28, 2005 04:09 PM ET
(Updates with more details, comments)
By Steve James
NEW YORK, Nov 28 (Reuters) - Union Pacific Corp. (UNP.N: Quote
<http://www.investor.reuters.com/FullQuote.aspx?ticker=UNP.N&target=%2fstock
s%2fquickinfo%2ffullquote>,
Profile
<http://www.investor.reuters.com/CompanyOverview.aspx?ticker=UNP.N>,
Research
<http://www.investor.reuters.com/StockReports.aspx?ticker=UNP.N>) , the
largest U.S. railroad, has lifted the "force majeure" -- under which it
did not have to honor delivery contracts -- for the track it jointly
runs out of the vast Powder River Basin (PRB) coalfields of Montana and
Wyoming.
But the line, which was severely damaged by torrential rain and
derailments in May, still requires extensive repair work before it can
return to full capacity hauling coal headed for America's power
stations, it said.
Union Pacific said further damage from Hurricane Rita and extremely
heavy rains in October around Kansas City had caused more disruptions to
tracks carrying PRB coal.
And the company's vice president and general manager for energy, Doug
Glass, warned that next year demand may exceed the railroad's capacity
to deliver by as much as 18 percent.
"Demand for the rest of 2005 and throughout 2006 is strong. It may
exceed the capacity of the supply chain," Glass wrote in a letter to
customers.
He said Union Pacific was working on improvements to the track "with the
expectation that coal revenues will ultimately justify continued
investment in our coal franchise."
For more than a year, the major U.S. coal producers have been citing
rail disruptions, especially from the Powder River Basin, as hurting
profits at a time when they are benefiting from high prices. Coal-fired
power utilities, meanwhile, have cut back their inventories -- some of
them dramatically -- as coal prices have soared.
"Obviously, there is considerable frustration among the utilities that
continue to manage low stockpiles," Jim Thompson, editor of the industry
newsletter, Coal & Energy Price Report, said of track delays and
disruptions.
"It's a measure of the depth of inventory woes that even substantially
increased loadings haven't been enough to allow stockpiles to begin to
build -- partly because utilities have cut back on coal conservation on
the news of substantially reduced joint line maintenance," Thompson
wrote in a commentary.
In a posting on its Web site (www.up.com), Union Pacific said the force
majeure, which it declared on May 11, ended on Nov. 23. Force majeure
clauses in a contract excuse a company from liability because of unseen
events such as a natural disaster or "act of God" beyond its control.
A Union Pacific spokesman referred Reuters on Monday to the Web posting,
which said that in September, the company operated 986 loaded coal
trains out of the Southern PRB, for an average of 32.9 per day -- below
the demand target of 38.7 trains per day.
It said Union Pacific and Burlington Northern Santa Fe Corp. (BNI.N:
Quote
<http://www.investor.reuters.com/FullQuote.aspx?ticker=BNI.N&target=%2fstock
s%2fquickinfo%2ffullquote>,
Profile
<http://www.investor.reuters.com/CompanyOverview.aspx?ticker=BNI.N>,
Research
<http://www.investor.reuters.com/StockReports.aspx?ticker=BNI.N>) ,
which jointly operate the line, had a combined average of 60.5
trainloads out of the Southern Powder River in September. The demand
target was 70.7 trains per day.
A spokesman for Burlington Northern, which did not declare force
majeure, told Reuters that in the last four to five weeks, the railroad
was close to its pre-May capacity. It was currently, on average, one or
two trains short per day.
"Loadings are definitely climbing," said Tom Kraemer, BNSF vice
president. "She's picking up a head of steam like I thought she would,"
he told Coal & Energy Price Report.
Kraemer said that although the number of trains was increasing each
month, "it's still not good enough."
He said BNSF tracked power plant stockpiles where a supply of 30-35 days
used to be the norm. "There are definitely people with 15 days or less.
It hasn't gotten worse and really hasn't gotten any better either."
[Non-text portions of this message have been removed]
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