April 7, 2020

ON RAILCAR STORAGE: PT.2 Selecting A Storage Facility

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ON RAILCAR STORAGE is a five-part series written by Robert Skarzynski that explores the railcar storage industry in a concise and easy to understand manner. The insight found within was acquired by facilitating and structuring numerous Railcar Storage transactions with dozens of Railcar Users and Storage Facilities.

Chapters:

  1. Industry Overview

  2. Railcar Users: Selecting Storage Facilities

  3. Railcar Users: Sending Cars to Storage (April 8)

  4. Storage Facilities: Questions to Ask Your Customers (April 9)

  5. Railcar Users/Storage Facilities: Should I Use a Broker? (April 10)

SELECTING A STORAGE FACILITY

There are a number of factors to consider when choosing a railcar storage facility. IMO the order of importance is location, interchange, and capabilities.

Location

Location is the key driver in determining which storage facility a railcar user chooses. When storing empty railcars, it is best to store closest to the loading facility. If storing loaded railcars it makes more sense to store railcars along the route to their final destination.

Railcar users should also take into consideration that railcar storage rates change from region to region based on demand. For example, railcar users pay a premium to park railcars in Alberta, Canada compared to the surrounding areas. This is due to a high concentration of Chemical and Energy shippers who load railcars in Alberta, and limited railcar storage space.

Interchange

Railcar users that ship on the BNSF Railroad, for instance, prefer to store railcars at Facilities that interchange with the BNSF. In fact, some will argue that Interchange is more important than location when looking from a cost-centric viewpoint - and they may be right!

Every time a car is interchanged from one railroad to another it is charged a fee by the receiving railroad, so it is ideal to use as few railroads as possible when routing railcars into storage.

Some Storage Facilities have service from multiple railroads. This can be a Unique Selling Proposition for the storage facility and can be very convenient for a railcar user who ships railcars on multiple railroads. Work with your railcar storage providers to gain an understanding of the intricacies surrounding the interchange rules when more than one Interchange is present.

Capabilities

Railcar storage providers vary from one another in the level of service they provide. In some instances, railcar storage providers can perform maintenance, cleaning, as well as switch out specific railcars. In another instance, the storage provider tucks away railcars on straight track at the end of their line with no access for field crews.

Here are some example capabilities a railcar storage provider might offer:

  • Loaded and Empty Storage
  • Cherry Picking
  • Railcar Repair
  • Railcar Cleaning
  • Transloading Services
  • Railcar Inspection
  • Air Brake Testing

Questions to Ask

How Many Units/Switchers does a Storage Facility have? This is an important question! If the facility only has one Switching Unit and it goes down for repair or maintenance it could affect your ability to get railcars out in a timely manner.

How long does it take for cars to get picked up by the Class I railroad? Many Railcar Storage Facilities have designated interchange dates with their servicing railroad. Some locations have service every day, and some once a week. It's important to ask how long on average it takes for the servicing railroad to physically pick up cars once placed at the interchange.

How many customers can your storage facility serve? Some facilities, such as a Shortline, might store railcars on their main lines. If your cars are towards the back of the line, it could be hard to get them out of storage in a timely manner if there are other customers' cars in front of them. When working with one of these facilities be wary if they are working with more than three other customers.

Are we competing for space? You'll really hate getting approval from upper management to store cars and when notifying the storage facility of your decision, they inform you that space was reserved for another customer. No need to rush decisions, but knowing that a facilities last 200 car spots is against the demand of 1,000 railcars is helpful and can save time.

SUMMARY

I hope this helps in your selection of a Storage Facility. In PT.3 our discussion turns to the actual process of shipping cars into storage.

Thanks for reading, if you have any comments, questions, insights, please let me know either through a comment on this post or by email at [email protected]

 

Rob Skarzynski

 

MGH Railcar is your one-stop-shop for all your railcar storage needs in Canada. Working with Shortline and other private track owners, we provide a single point of contact for responsive and simplified rail car storage communications.

Short or Long Term Railcar Storage / Suitable for any Railcar Fleet Size / Non-Hazardous and Hazardous Railcar Storage / Loaded and Empty Railcar Storage ON