Canton Railroad tries to keep from raising rates

February 20, 2000

As head of Canton Railroad Co., John C. Magness finds himself thinking a lot these days about fuel -- and about trucks.

He wants to keep customers coming back to the 94-year-old short line that once belonged to Canton Co., developer of industrial land on the harbor's east side during the past century. And that means keeping rail shipping competitive long-term so as not to lose business to trucking.

With fuel prices rising, fuel surcharges have been looked at or imposed by the trucking and rail industries.

But if fuel costs lead to permanent rail increases, shippers might switch to trucks, says Magness, Canton's president and chief executive officer. Canton is hoping to avoid imposing fuel surcharges or raising rates -- for now, Magness said.

The for-profit industrial switching line, owned by the Maryland Transportation Authority, hauls raw materials and other products to manufacturers such as Unilever and GAF Corp. throughout Canton and eastern Baltimore County.

It acts as a go-between for CSX and Norfolk Southern, picking up cargo-laden cars at rail yards outside Seagirt Marine Terminal.

In recent months, Canton's fuel costs have doubled, making up about 11 percent to 12 percent of operating costs.

Magness has been meeting with worried shipping customers.

"This has been a big concern with shippers," he said. "They have come in to see how we're going to react."

Because the company mostly works directly for CSX and Norfolk Southern, with rates for each customer set several months ahead, Canton has little flexibility with those contracts.

But imposing a separate surcharge is not the answer, Magness said. For one thing, a surcharge would amount to a "nuisance" charge of an additional $4 or $5 a carload and be costly to administer.

Fuel increases should not have to mean a more permanent rate increase either, says Magness. That could eventually cost the company business.

"Some business would divert to trucking, so we can't see [doing that,] he said. "We're going to hold the line for a while and see what happens."

In the meantime, the 26-employee company is trimming administrative costs.

It's asking customers to unload rail cars faster, to reduce the hourly charge Canton is billed during the unloading time. Instead of letting Canton's three locomotive's run all night to warm up, the company is using an electrical system.

"In a time like this, it's less expensive to use electric than diesel," Magness said.

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