From Trinity Journal: RAILCONNECT SUCCESS FACTORS – Patrick Meagher
In my last commentary I reviewed the Humboldt Bay Alternative Rail Corridor Concept Level Construction Cost and Revenue Analysis Final Report. I wrote that op-ed to ensure (Trinity) Journal readers understand the magnitude of the Railconnect project that is advocated by its promoters. It is important now to dig deeper into the report in order to examine the complexity of that project, and so I quote from page 32 as follows, “The financial feasibility of the proposed rail routes to Humboldt County is only one of several factors in determining whether the project is viable. Other key factors include: rail distance to competing ports, railroad market considerations, vessel characteristics of potential fleet, marine terminal requirements, and navigation channel needs. Without addressing each of these factors, the rail line in and of itself will not generate the traffic needed to justify the construction cost.” So, let’s examine one of the key factors mentioned above; what about that fleet of dry-bulk ships that will be required to service the rail cargo arriving at the Humboldt Bay seaport? Shashi Kumar author of the 2016 U. S. Merchant Marine and World Maritime Review tells us that maritime shipping companies scrapped 359 dry-bulk ships in 2015 due to low demand. He states, “these were not enough to offset the leftward shift of the demand curve caused by the decline in Chinese imports, slower growth in iron ore and steel trades, the fall in Chinese and Indian demand for thermal coal imports, and their increasing reliance on clean-energy sources.” The impact of this decline in commodity exports has resulted in the bankruptcy and loss of assets for twelve dry-bulk shipping lines, sale of ships to rid operators of the cost of maintaining them in lay-up, and lost access to lines-of-credit for violating loan covenants. Given the dramatic change in world markets for commodities, operators are discarding ships and costs to meet the changes in both current and expected future bulk shipping demand. In order to remain profitable the bulk shipping fleet will stabilize at “just-enough” for operators to service current demand at established west coast commodity shipping ports. So where does this leave the proposed $200 million plus Humboldt Bay seaport and the connecting billion dollar plus rail line? Railconnect promoters need to be reminded that maritime intermodal shipping is first and foremost a for-profit business. Maritime bulk shipping operators will go where bulk cargo is ready to move with the ships they have on-hand, and that is not to the proposed Humboldt Bay seaport. Both the 2003 and 2013 studies assert that these projects are high cost and high risk. The 2003 study recommends against a publicly funded cargo seaport in Humboldt Bay for those reasons and is still valid. I argue that support for the construction of Railconnect is not warranted because it will never be able to meet all the 2013 success factors identified above.