Railroads and Chemicals
Association of American Railroads
July 2017
Summary
Producers and consumers of chemicals require a safe, efficient, and cost-effective national
transportation system. America’s freight railroads provide such a system. In fact, chemicals
and rail transportation go hand in hand. In 2016, U.S. Class I railroads originated 2.1 million
carloads of chemicals (7.5 percent of total carloads — third behind coal and intermodal)
carrying 174.4 million tons (11.2 percent of total tons originated — second only to coal) and
yielding $9.9 billion in gross revenue (15.1 percent of total gross revenue, second only to
intermodal).
Overview of Chemicals
Broadly defined, chemicals consists of thousands of distinct products. Using the
Standard Transportation Commodity Code (STCC), they are classified under the two-digit code
28. Major subcategories include industrial chemicals (STCC 281), plastics and synthetic fibers
(STCC 282), drugs and biological products (STCC 283), soaps and allied products (STCC 284),
paints and allied products (STCC 285), gum and wood chemicals (STCC 286), fertilizers and
other agricultural chemicals (STCC 287), and other chemical products (STCC 289). The vast
majority of rail chemical traffic consists of STCCs 281, 282, and 287, though less than half of
chemical industry production consists of these three types of chemicals.
Since most chemicals are used in
the production of other goods, the
chemical industry’s fortunes tend to rise
and fall with the economy as a whole,
especially manufacturing. The chemical
industry is one of the largest U.S. industries
— the chemical industry’s revenue of $768
billion in 2016 ($527 billion excluding
pharmaceuticals) was more than 11 times
the revenue of the U.S. freight railroad
industry.
Chemical Industry Revenue vs. Freight Railroad Revenue
($ billions)
$900
$800
$700
$600
$500
$400
$300
$200
Chemicals Including Pharmaceuticals
Chemicals Excluding Pharmaceuticals
Class I RR Operating Revenue
$100
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Although the U.S. chemical
Source: American Chemistry Council, Association of American Railroads
industry consists of thousands of firms
located throughout the country, many
plants are concentrated in the Gulf States (where petroleum and natural gas raw materials are
readily available), the Delaware Valley, and the Midwest. The top chemical producing states
(including Texas, California, Louisiana, North Carolina, Illinois, Ohio, Indiana, New York,
Pennsylvania, and Iowa) account for approximately two-thirds of total U.S. chemical production.
Railroads and Chemicals
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Chemical Transportation
Because end users of chemicals are spread throughout the country, huge volumes of
chemicals are transported each year.
According to figures compiled by the American Chemistry Council (ACC), some 878
million tons of chemicals were shipped in the United States in 2016 at a cost of $47.3 billion. In
2016, transportation costs were equivalent to 9 percent of the value of chemical industry
shipments excluding pharmaceuticals.
In 2016, trucks accounted for more than half of chemical tonnage shipped and more than
two-thirds of chemical transportation costs, while water transport accounted for 21 percent of
tonnage and 7 percent of transportation costs, according to ACC data. Pipelines and air
transport accounted for 4 percent of tons and costs.
The remainder — 20 percent of tonnage and 21 percent of chemical transportation costs
— is attributable to rail. In 2016, chemicals accounted for 7.5 percent of originated carloads,
11.2 percent of originated tonnage, and 15.1 percent of gross revenue for U.S. Class I railroads.
U.S. Chemical Transportation
by Mode: 2016
Rail Revenue From Chemicals as a % of
Total Chemical Industry Revenue: 2016
Water - 7%
Water
21%
RRs
21%
RRs
20%
Trucks
55%
Trucks
68%
Tons
Revenue
"Other" = 4% of tons and revenue. Source: ACC, AAR
Chemical industry
revenue (excluding
pharmaceuticals):
$526.6 billion
Class I RR
gross revenue
from chemicals:
$9.9 billion
(= 1.9% of
chemical
industry
shipments)
Source: ACC, AAR
Originated Tons by Class I RRs by Commodity: 2016
U.S. Class I RR Gross Revenue by Commodity: 2016
(millions)
($ billions)
Lumber & wood
24.5
2%
Grain
149.4
10%
Total =
1.55 billion
Pulp & paper
31.3
2%
Chemicals
174.4
11%
Coal
491.7
32%
*Mostly intermodal.
Some intermodal is
also interspersed in
other commodities.
Source: AAR
Freight Commodity
Statistics
All others
Food
157.1
98.8
10%
6%
Railroads and Chemicals
Primary metal
products
41.3
3%
Crushed stone,
sand, gravel
129.1
Motor veh.
8%
22.3
1%
Misc. mixed
shipments*
118.9
8%
Crude oil
20.6
1%
Petr. & coal prod.
Waste & scrap
54.6
39.6
3%
3%
Total = $65.4 billion
*Mostly intermodal.
Some intermodal is also
interspersed in other
commodities.
Source: AAR Freight
Commodity Statistics
Coal
$9.1
14%
Grain
$5.6
9%
Food
$5.6
9%
Chemicals
$9.9
15%
All others
7.2
11%
Waste & scrap
$1.2
2% Petr. & coal prod.
$2.7 Crude oil
4%
$1.1
2%
Lumber & wood
$1.9
3%
Pulp & paper
$2.2
3%
Misc. mixed
shipments*
$8.8
13%
Motor
veh.
$5.5
8%
Primary metal
products
$2.1
3%
Crushed stone,
sand, gravel
$2.4
4%
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Originated Carloads of Chemicals by Class I Railroads
Class I Railroad Gross Revenue From Chemicals
(billions of current dollars)
(millions)
$12
2.4
2.3
$10
2.2
2.1
$8
2.0
1.9
$6
1.8
$4
1.7
1.6
$2
1.5
1.4
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: AAR Freight Commodity Statistics
Source: AAR Freight Commodity Statistics
In 2016, U.S. Class I railroads originated
2.1 million carloads and 174.4 million tons of
chemicals. The highest-volume chemical
carried by U.S. railroads is ethanol. More than
half of all rail chemical tonnage consists of
various industrial chemicals, including
potassium chloride, sodium carbonate (soda
ash), sodium hydroxide (caustic soda), urea,
sulfuric acid, and anhydrous ammonia. Plastic
materials and synthetic resins (including
polyethylene, polypropylene, polyvinyl chloride,
and similar products) account for more than 27
percent of rail chemical tonnage. Most of the
rest is agricultural chemicals.
U.S. Rail Chemical Tonnage by Type of Chemical: 2016
Total: 174.4 million tons
Plastic materials and
resins such as
polyethylene, polypropylene, polyvinyl
chloride, etc. - 27%
Fertilizers - 9%
Misc. industrial inorganic
chemicals such as
sulfuric acid, anhydrous
ammonia, hydrochloric
acid, etc. - 8%
Misc. industrial
organic chemicals,
such as ethanol,
urea, and liquid
methanol - 28%
Industrial gases such as vinyl
chloride, liquefied carbon
dioxide, etc. - 2%
Sodium, potassium & other
inorganic chemicals such as
potassium chloride, soda ash,
caustic soda, chlorine, etc. - 15%
Other
11%
Data are originations for U.S. Class I railroads.
Source: AAR Freight Commodity Statistics
Historically, only coal and intermodal have provided more revenue to railroads than
chemicals. Class I gross revenue from chemicals was $9.9 billion in 2016 (15.1 percent of total
gross revenue), down slightly from $10.0 billion in 2015 but (for the first time ever) higher than
revenue from coal. In 2016, Class I rail revenue from transporting chemicals was equivalent to
just 1.9 percent of chemical industry revenue excluding pharmaceuticals.
Average Weekly U.S. Rail Carloads of Chemicals:
Jan. 2011 - June 2017
% Change in U.S. Rail Carloads of Chemicals From
Same Month Previous Year: Jan. 2011 - June 2017
33,000
12%
32,000
10%
31,000
8%
6%
30,000
4%
29,000
2%
28,000
0%
27,000
-2%
26,000
2011
2012
2013
2014
2015
2016
2017
Data are average weekly originations for each month, are not seasonally adjusted, do not
include intermodal, and do not include the U.S. operations of CN and CP. Source: AAR
Railroads and Chemicals
-4%
2011
2012
2013
2014
2015
2016
2017
Data are based on originations, are not seasonally adjusted, do not include intermodal, and
do not include the U.S. operations of CN and CP. Source: AAR
Page 3 of 4
Rail Rates for Chemicals
Avg. Inflation-Adjusted U.S. Freight Rail Rates* for
Chemicals Are About Where They Were in 1989
Revenue per ton-mile (RPTM) is a
8.0¢
useful surrogate for rail rates. Adjusted for
7.5¢
Average inflation-adjusted rail revenue
per ton-mile for chemicals was 20
inflation, RPTM for chemicals was 20 percent 7.0¢
percent lower in 2014 than in 1981.
lower in 2014 than in 1981. (Figures since
6.5¢
2014 were not available at the time of this
6.0¢
publication.) Generally speaking, railroads,
5.5¢
like firms in other competitive industries
5.0¢
(including chemical firms), set their prices
4.5¢
4.0¢
mainly based on the value they provide to
their customers, not on their input costs. This 3.5¢
'81 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
market-based approach allows railroads to
*Revenue per ton-mile, average all commodities. Source: STB Waybill Sample
balance the desire of each customer to pay the
lowest possible rate with the requirement that railroads be able to attract capital and pay for all
the things needed to keep their networks functioning and growing in the future.
Continued Spending Back Into the Rail Network
In the future, transportation demand will grow. Recent forecasts from the Federal
Highway Administration found that total U.S. freight shipments will rise from an estimated 18.0
billion tons in 2015 to 25.3 billion tons in 2045 — a 41 percent increase.
Freight railroads are preparing for this future
demand today. Unlike trucks, barges, and airlines, which
travel mainly on infrastructure that the government
provides and pays for, America’s privately owned freight
railroads operate almost exclusively on infrastructure that
they own, build, maintain, and pay for themselves. In
recent years, America’s freight railroads have been
putting more money back into their networks than ever
before. From 1980 through 2016, they spent more than
$635 billion — their own funds, not taxpayer funds —
on renewal, maintenance, and expansion of their
infrastructure and equipment. That’s more than 40 cents
out of every rail revenue dollar. In the years to come,
railroads will be asked to continue to grow capacity for
current and potential customers. Additional spending on
capacity can only be made if rail earnings are robust
enough to attract the capital needed to pay for it.
Record Railroad Spending
on Infrastructure & Equipment*
($ billions)
$30.3
Freight railroads have been
$28.0
spending record amounts in
recent years to maintain and
$25.9
improve their infrastructure $25.5
$25.1
and equipment.
$23.3
$21.5
$20.7
$20.2
$20.2
'07
'08
'09
'10
'11
'12
'13
'14
'15
'16
*Capital spending + maintenance expenses.
Data are for Class I railroads. Source: AAR
Conclusion
Chemical producers and consumers require a safe, efficient, and cost-effective national
transportation system. By providing fertilizers to Midwest farmers, plastic resins to container
manufacturers, caustic soda to pulp and paper manufacturers, and countless other chemical
products to intermediaries and end users throughout the United States and the world, railroads
provide such a system. The value-added transportation service that railroads provide helps
ensure that chemical producers and consumers can maintain their competitiveness here and
abroad and continue to enhance our health, safety, and quality of life.
Railroads and Chemicals
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