UP currently operates six intermodal facilities in and around the Railroad Capital.
“Many of our ramps handle a mix of domestic and international business. Operating six facilities with a variety of equipment at each creates complexity for Union Pacific (equipment issues, additional switching), as well as our customers (complex drayage arrangements and vendor management), creating a greater likelihood of supply chain failure,” Kenny Rocker, UP’s executive vice president of marketing and sales, writes in a customer update on Thursday.
“Therefore, we will be idling the Global 3 (G3) Intermodal Ramp in early July, and the Canal Street Container Depot will follow shortly thereafter,” Rocker says. “We will also move international volume out of Global 2 (G2), allowing each facility to focus on a specific business segment: Global 4 (G4) will handle predominantly international intermodal shipments, G2 domestic intermodal shipments, and Yard Center auto parts and North/South shipments.”
UP will make investments to upgrade G2 and G4 terminals to support increased volumes and make room for growth, Rocker says.
The changes will benefit customers, Rocker says, by simplifying drayage, chassis management, and billing for intermodal users. The terminals also will be able to offer faster loading and unloading of containers.
UP billed the Global 3 terminal in Rochelle as a state-of-the-art facility when it opened in 2003 to serve serve as an interchange hub and terminal for intermodal shipments moving through western Iowa and Wisconsin.
“That is a big facility to idle,” says intermodal analyst Larry Gross, noting that Global 3 is capable of 720,000 lifts annually and has parking spaces for 7,200 containers or trailers.
Rochelle was not suitable for crosstown moves, given its location 85 miles from Chicago, Gross says. “Global 2 and 4 are better located by far than Rochelle, so dray costs will be reduced,” he says.
“Obviously they will have to absorb the volume at their other Chicago facilities, which may be a stretch,” Gross says. “Presumably by making each terminal single-purpose they think they can improve individual terminal capacity and absorb the overflow and perhaps they are right.”
But the move won’t be good news for shippers in Iowa and Wisconsin. “Economics for freight moving to Wisconsin, far western Chicago, and eastern Iowa will be impaired,” Gross says.
Last month UP Chief Operating Officer Jim Vena told analysts and investors on the railroad’s first quarter earnings call that a consolidation plan for Chicago intermodal terminals was in the works.