Much the way the dredging issue dominated the port of Baltimore last year, the battle between CSX and Norfolk Southern over Conrail has taken center stage this year as port officials struggle to attract new cargo.
"It's really critical how this rail merger sorts out," said Tay Yoshitani, executive director of the Maryland Port Administration, which operates the state's marine terminals.
"I consider the rail issue on the same level of importance as dredging. ... It's the infrastructure or the channels on the land side," he said.
While the majority of cargo here is moved by trucks, a third is handled by CSX and Conrail, the two rail systems serving the port of Baltimore. Just how quickly and cheaply cargo moves to and from ships are vital factors for shippers and steamship lines in deciding whether to move cargo through Baltimore.
"There is an opportunity for whoever prevails to view Baltimore as a major market and grow their business here," Yoshitani said.
In October, CSX Corp. and Conrail Inc. announced a $9 billion agreement to merge, which would create a 29,000-mile rail network across 22 states. Two weeks later, a bidding war began with a $10 billion hostile takeover bid by Norfolk Southern Corp.
Since then, the two merger scenarios have raised questions not only about their impact on the port but also about commuter rail service and on jobs in Maryland, particularly in the western part of the state where CSX and Conrail employ hundreds of workers.
Both CSX and Norfolk Southern have been aggressively lobbying state business and government leaders, vowing to help boost business at the port if they are successful in acquiring Conrail.
"Baltimore is one of the world's best street corners. You have a place you can make a lot of money," Tom Finkbiner, vice president of intermodal services for Norfolk Southern, recently told the state's rail advisory council. "You need the best operator to maximize that."
Currently, Norfolk Southern has no service to the port and very little in Maryland. Its presence here would ensure that two railroads continue to serve the port, NS officials said. It has told port leaders that it would try to capture cargo that is moving through Montreal's port from the Midwest.
As evidence that Norfolk Southern would be best for the port of Baltimore, Finkbiner cited the railroad's 9 percent annual growth in its intermodal division, compared with 4.5 percent for Conrail and no growth since 1987 for CSX.
But CSX and Conrail insist that Baltimore would benefit more from the efficiencies and service if those two lines merge. They have promised to spend $25 million in Perryville northeast of Baltimore to connect Conrail and CSX tracks. Merging the two rail systems would enable the port of Baltimore to begin double stacking larger containers for the first time along the East-West corridor - now an impossible task because of tunnel height limitations along the CSX lines out of Baltimore.
While providing no specifics, CSX and Conrail vow that shippers who currently enjoy competitive rates will continue to do so. They are expected to file a detailed operating plan March 1 with the Surface Transportation Board, the federal regulator overseeing railroads.
But many in the port community and elsewhere believe that a merger between Conrail and CSX would significantly reduce rail competition in Baltimore.
"I don't know any situation where a monopoly is good," said Del. Donald C. Fry, a Harford County Democrat and chairman of a special joint legislative committee on rail mergers. "The state of Maryland has put major economic emphasis on the port, and we want to make sure our efforts don't get sidetracked."
Nearly 87,000 jobs stem from the port of Baltimore, with about 17,000 directly dependent on the operation. The port generates roughly $141 million in state and local tax revenues.
While a Norfolk Southern takeover of Conrail would ensure that the port retains two competitive railroads, the prospect of that merger is also fraught with uncertainties. Some fear that Norfolk Southern, which has worked closely with Baltimore's chief competitor, the port of Hampton Roads, Va., will continue to give preference to shippers moving cargo there, thus offsetting the inherent rail cost advantage that Baltimore should enjoy being 400 miles closer to the Midwest.
"If NS is going to play the game correctly and charge less to get containers to Baltimore, then we can be back in the ballgame," said Sigmund Shapiro, president of Samuel Shapiro & Co. Inc., a Baltimore-based customs broker and freight forwarder.
The rail battles come at a particularly crucial time. Along the East Coast, steamship lines that once called at a half-dozen ports have been choosing fewer and fewer ports to save time and money. Within the past 18 months, two major shipping lines have ended most of their service here and taken jobs with them.
Steamship lines are increasingly reluctant to make the time-consuming and expensive journey up the Chesapeake Bay to Baltimore, despite its strategic location in the nation's fourth-largest consumer market. Last year, the port saw a drop in cargo, ending a three-year growth spurt.
Whether it can attract new cargo may hinge on the port's latest strategic plan that calls for more carefully targeting selected types of cargo. But more aggressive rail competition could also make a difference. In the end, the impact of any rail merger is likely to hinge on how Baltimore figures into the railroads' bottom line.
"I think a merger will ultimately result in more North-South activity through this area," said Shapiro. "But my guess is each of these railroads will look out first for their own best interest."
Pub date: 01/19/97
