Crosstie report 2008

Top, Wood ties from RTA's Member Field Trip. Bottom, NARSTCO's steel ties in track. Top, L.B. Foster's concrete ties being installed. Bottom, TieTek's composite ties on Class 1 track. Encore says its largest customer has integrated 21 of its TPI-TG tie pluggers within the consist of its tie gangs to repair ties with spike hole damage that would normally be replaced. According to Encore, repairing these ties not only lengthens their life, but is done at a fraction of the cost of replacement.

Financial market troubles, including the credit crunch and housing downturn, have begun to trickle down and impact some tie suppliers. However, the railroads’ robust business, continued profits and persistent commitment to upgrading infrastructure are bright spots in the market. Here’s a look at what’s new to the industry, what the rest of 2008 may bring and what could be right around the corner in 2009.

RTA

Jim Gauntt, executive director of The Railway Tie Association, says that, all-in-all, the crosstie market remains surprisingly strong.

“Tie demand remains strong even with what we now believe will be a rather protracted recession. Our forecast for the remainder of 2008 is that total new wood tie purchases will be around 19.9 million for all markets. In comparison, 2006 was the peak demand year with 20.6 million and in 2007 we saw 20.4 million ties purchased,” said Gauntt. “Our models suggest that if the recession is mild, we’ll begin to see a return to 2006-7 demand levels starting sometime in 2010. At best, we expect 2009 to be about the same as 2008.”

Gauntt points to three issues that, he says, need to be understood before anyone can feel great about the current market:

“First, while the Class 1 demand is remaining steady, the shortlines and other smaller purchasers are where we are seeing the greatest weakness. This likely has to do with the fact that the shortline tax credit did not get extended in 2008. We estimate that this has caused demand to drop from 500,000-750,000 ties.

“Second, we don’t yet know the extent of the drag that recessionary forces will impose on the overall U.S. economy. Since U.S. GDP is a major driver of railroad traffic expansion or contraction, our forecasts could be a little on the high side if the U.S. and world economies continue to suffer. Moderating oil prices could ease the burden expected from a recession, but even so, the credit crunch that looms appears to us to be the biggest risk to economic growth.

“Third, while demand remains healthy, supply may be constrained. Hardwood sawmills are facing very difficult times as they struggle to sell hardwood lumber that is the by-product of cutting ties. As inventories pile up, cash flow gets restricted and some sawmills may have a hard time keeping the doors open. Thus, even with healthy demand, we may see a shortfall on the supply side of the equation. Some railroads are already reporting that they are behind in procurement for 2009 installations,” said Gauntt.

Matt Clarke, president and chief operating officer of Gross & Janes Co. and a former president of the RTA sees the financial health of sawmills impacting the entire crosstie industry.

“We are seeing an entirely new dynamic in how [the sawmills’] financial health is impacted, everything is increasing as far as their operating costs. Crossties are the only spot that has been constant, and, if not continuous, it has been increasing. All other products have either stayed the same, or, unfortunately, in the case of lumber, it has been severely reduced. It will require unprecedented levels of financial investment to maintain any level of production in the short term,” said Clarke.

RTA research

RTA is currently involved in four research projects that include investigating alternative wood preservatives, studying the tie life curve, comparing inspection techniques and assessing a tie condition-based risk analysis.

“Our new RTA-Alternative Wood Preservative Research Project (AWPRP) at Mississippi State University is designed to be a side-by-side comparison of many new systems to creosote-only standard treatments,” said Gauntt. “This is being conducted on full size ties and in both a Formosan Subterranean Termite-infested location and one not infested with FSTs. Obviously, this is a long-term project, the other three projects are being conducted by ZETA-TECH Associates and will be completed this year with the assistance of BNSF.”

Project Two is looking at validation and calibration of the traditional USDA Forest Products Laboratory tie life curve using recent data from U.S. Class 1 railroads. According to Gauntt, the project will use tie life data from recent Class 1 railroad inspection of ties, both visual inspection (using TieInspect to accurately map the tie locations) and track strength-based inspection (using either GRMS or TrackSTAR). These data will be used to update and modernize the USDA Forest Products Lab tie failure distribution curve.

The third project is a comparison of tie requirements, based on visual inspection as compared to track strength-based inspection (e.g., GRMS).

“This activity will examine the difference in tie replacement requirements between conventional, visual inspection with lateral track strength-based replacement requirements. This difference will include the increased number of strength-related ties usually found by GRMS (as compared to visual inspection) and the reduced number of non-lateral strength-related ties, e.g., ties that have adequate gauge holding strength, but inadequate vertical, track surface, supporting capability, found by GRMS,” said Gauntt.

RTA’s fourth project is a feasibility assessment for the development of a tie condition-based risk analysis.

“In recent years, derailment risk assessment tools have been developed for broken rails, based on ultrasonic rail testing and for track geometry-related derailments, based on track geometry car measurements. This activity will examine whether a tie condition-based risk assessment tool can be developed using new tie inspection techniques to include GRMS measurements and TieInspect measurements.

“These last three projects continue to build on research we have done in the past that was designed to help railroads investigate and determine the optimal maintenance methodologies and strategies for tie replacement in the widest range of track applications. We hope these studies will lead to additional research in risk analysis,” said Gauntt.

Wood

Stella-Jones/BPB Corp. credits good tie demand to the railroads continued prosperity and increased train velocity.

“However, the political scene in Washington has tied up the Shortline Tax Program and RIFF, which had been a huge plus over the past three years and the lack of a defined railroad transportation policy is not helping growth and inviting reregulation and other negative influences,” said Tony Chambers, marketing director for Stella-Jones/BPB Corp.

Matt Clarke of Gross & Janes Co. notes that the market has been affected by increased pricing, but the past five to seven years have been unprecedented in that the market has been working its way toward steady state purchasing.

“A more continuous level of purchasing allows us to look forward and make better planning decisions and align our production and financial commitment to the saw mills, to our operations and to our customers at a much more fluid basis,” said Clarke. “Business over the past year has been impacted severely by commodity pricing specifically fuel, parts, labor and maintenance. In addition, it has been an unseasonably wet period in our operating region.”

Although overall demand is steady, Koppers Inc. sees the impact of financial market woes, specifically the housing downturn, softening the demand for higher-grade lumber, which in turn, softens wood tie production.

Thomas Niederberger, vice president marketing and sales at Koppers, notes that sawmills are “playing it very close to the vest” in terms of log purchases, but finds a bright spot, “Better weather and stronger tie pricing have helped the industry begin to ramp-up needed production.”

George Caric, vice president business development of Tangent Rail Corporation, notes strong demand for rail shipments will mean that railroads will continue to spend money and invest in infrastructure, which means more ties going into the ground.

“When I go out, I hear various people talk about how bad the economy is, but the railroads are very strong and our business is very good,” said Caric.

Jeff Broadfoot, national accounts sales manager at Thompson Industries, Inc., says, “The railroads have seized this opportunity to continue expanding capacity by building new track and replacing worn out ties at record levels. Over the past four years, our business has grown three-fold and we are currently on a pace to treat well over one million crossties by year’s end.”

Concrete

L.B. Foster Company and its wholly-owned subsidiary, CXT®, Inc., have developed the 529S concrete tie engineered specifically for light-density main line, transit system and industrial track construction. A newly-installed production line at L.B. Foster’s Grand Island, Neb., facility is dedicated to the new tie design, which was developed exclusively for growing market demand for an industrial tie in the Midwest.

“Going back to 2001, we have seen a definite uptick in the demand for concrete ties for these markets,” reports Mark Hammons, national sales manager. “Port and industrial markets have been growing in tandem with the capacity expansions we have seen among the Class 1 railroads due to changing world economics and booming global trade and we are positioning ourselves to take advantage of anticipated growth in the future.”

In addition to new tie development, L.B. Foster is focused on bringing other advancements to the market. According to Kevin Haugh, president of CXT, efforts in Research and Development span several areas.

“We continue to invest in our R&D program to enhance the durability of our concrete ties. This starts with examining raw materials to optimize our concrete tie mix formulas. To improve rail seat abrasion, we are looking at epoxy and other polymer coatings, as well as new types of concrete additives. We also remain committed to explore the most cost-effective way to provide fully captive fastening systems and investigate competitive fastening systems and the components used in the systems. Our goal is to recommend an optimum solution for our customers’ needs. And we continue to look into dual or two block concrete tie systems,” said Haugh.

Rocla Concrete Tie, Inc., says the majority of its business comes from Class 1 railroads and when the railroads cut back on capital expenditures, the results trickled down to suppliers, as well. “With high gasoline prices, transit agencies are looking at more projects,” said Al Smith, manager of sales at Rocla. “We have also seen an increase in demand from track contractors.”

Steel, plastics and composites

NARSTCO says it continues to see an increase in business and its steel ties and turnout tie set design are developing a proven success record in the railroad industry.

“We have numerous steel ties in main line, shortline and major intermodal tracks, all over the country for more than 10 years,” said John Fox, vice president sales at NARSTCO. “Comments by a local roadmaster, who has one of these yards, said the ties ‘look like new’.”

Dynamic Composites, LLC, manufactures an engineered composite tie that incorporates steel, concrete and plastic composite components. According to Chuck Cadwell, general manager of Dynamic Composites, the tie’s material make-up better equips it to handle heavier weight loads. Cadwell added that although the company still feels that they are fighting for a spot within the industry, railroads are willing to listen after learning of the tie’s special design.

“The company took many engineering considerations with combining these three ‘green’ materials and feel they have created the best performing tie on the market today,” said Cadwell. “It was tough for the industry to accept a new product. Now that they see we’re a company with longevity and understand what the product can do for them, they’re opening up to us.”

Recycle Technologies International manufactures PermaTie™, a recycled plastic composite tie, used by Class 1s and the U.S. Army. The company notes that demand has been greater than production, which is leading to expansion plans in 2009.

“Composite crossties will, for sometime, remain more expensive than comparable treated hardwoods. However, Class 1 railroads appear to understand the value of composite ties for certain applications and are willing to pay a premium for higher performance,” said Rex Crick, chief executive officer with RTI.

TieTek LLC, manufacturer of engineered composite ties, says railroad demand is clearly up and has seen production increase from 150,000 ties in 2007 to 300,000 in 2008 to an expected 500,000 in 2009. The company notes that its focus on quality has remedied past production issues and led to increased production, as well as higher quality.

“The only negative impact on our business was difficulty in constant supply at a good price. We suffered from transportation costs, like everyone else, because our raw materials all need to be shipped by rail or by truck,” said Rod Wallace, chief executive officer of TieTek. “We are achieving continuous growth and we are totally dedicated to quality improvement as evidenced by getting ISO 9001 certification. We feel that being environmentally sustainable is an integral part of our base business.”

Industry trends

“The biggest new trend is the expansion of the use of borates as a pre-treatment to the creosote wood pressure treating process. Three Class 1 roads now employ this process as a way to significantly improve tie life in high-decay/wet climate locations. More than 1.2 million ties have been installed in the past three years by these roads and other smaller roads and the trend is for this to continue to grow,” said RTA’s Gauntt.

“It’s working,” Caric of Tangent Rail said about the use of borates. “There was a 17-year study done, probably three or four years ago; those ties have been in the ground close to 20 years and they are showing no signs of degradation. It’s really something as simple as borates and it’s really working in this area where the ties are going bad a lot quicker.”

Pre-plating ties is another trend Caric notes and one that is echoed in Thompson Industries teaming with L.B. Foster to set up a high-capacity crosstie boring and pre-plating operation at Thompson’s facility.

Niederberger of Koppers believes the most important trend has been the longevity of solid demand for ties. He thinks the outlook will continue to be encouraging due to the continued strong financial performance of the railroads and their need for consistent maintenance and new capacity programs, but notes that the tie market is feeling the impact of global demand issues.

“While years ago, tie pricing was driven by primarily local or regional influences, tie costs for wood and preservatives are now impacted by national issues such as the financial markets and by the global market for coal tar,” said Niederberger.

Care for the environment is an issue shared by railroads and suppliers. Recycling wood ties for energy is being done by Tangent Rail. Rocla is working with BNSF to recycle its concrete ties by sorting and reloading used ties for placement in siding and yard tracks. NARSTCO points out its steel ties can be recycled as scrap and in some instances repaired and placed back into service with welding repairs. Finally, TieTek, with Union Pacific, received an environmental award from The Society of Plastics Engineers for using its technology in an environmentally sustainable way.

Tie preservation

In March of last year, Chicago-based Steelhead Corporation purchased R-Mac Sales and Leasing, renaming the company Encore Rail Systems. Encore services its customers from its Denver location, as well as the Steelhead facility in Chicago.

Encore says its primary focus has been, and continues to be, wood and concrete tie repair. At the request of its customers, the company has expanded its services to include track maintenance consulting, track inspection, track construction management and a wide variety of track-related training and certification programs.

“Encore is continually researching and developing new tie repair products and application equipment for both wood and concrete ties. Our latest products are thin and thick viscosity epoxies for concrete ties. The thin viscosity material can be used to pre-coat the ties during the manufacturing process or applied to ties that have light rail seat abrasion. The thick viscosity material can be used for repairing ties with rail seat abrasion over 3/16th of an inch. Both of these products cure to 80-85 Shore-D hardness while retaining flexibility to prevent cracking and delaminating from the tie,” said John Coulam, vice president sales at Encore.

The majority of Encore’s business is generated by Class 1 railroads. The company has been working with a new customer, Ferromex, in repairing both wood and concrete ties. Coulam reports that the number of regional and shortline railroad customers continues to grow as Encore makes chemical tie repair more affordable.

Coulam notes that the common goal of all Encore customers is that they are looking for ways to cost-effectively improve their track.

“The most prominent trend we see from our customers is the repair versus replacement of both wood and concrete crossties. Encore is continuing to see the trend of our customers incorporating tie repair in non-traditional applications such as tie gangs, switch gangs and bridge gangs,” said Coulam.

Gross & Janes Co. is the authorized distributor for Tight Spike™, a complete polyurethane foam tie plugging system manufactured by Restoration Technology™, LLC.

“The unique characteristics of Tight Spike, is that it can be applied to the spike holes on wood ties that are worn, elongated or decayed. Tight Spike expands and fills all voids inside a tie, including any natural decay voids,” said Billy Davis, director of sales for Gross & Janes for Tight Spike products. “Our product is formulated to displace water, which eliminates future moisture from entering the area of insertion in the tie after application.

“Railroads are continually looking for new and innovative products and equipment. We continually strive to anticipate the needs of our railroad customers when they seek these products. This is what we feel sets both Gross & Janes and Restoration Technology apart from all others,” said Davis.

Willamette Valley Company has introduced a new polyurethane compound, SRP-210, that acts as a filler and adhesive for damaged shoulder repair for concrete railroad ties. SRP-210 is packaged in a cartridge and is used in conjunction with a shim and helps to recreate the profile of the worn shoulder. WVCO continues to provide its SpikeFast® tie plugging compounds for wood ties and its CTR-100 used for rail seat abrasion in concrete ties.

“Willamette Valley Company is a chemical company, but also has a subsidiary, Precision Technologies, which is involved in automation,” said John Murray, vice president of WVCO. “There is a push in the railroad industry toward suppliers to increase the efficiency of the products provided. WVCO is discussing with the industry ways in which labor burdens can be reduced through the use of automation.”

2009 outlook Over the next year, the crosstie industry will see improved products and new innovations. Here are a few to watch.

RTA is preparing to unveil its new TieReports series of technical notes on wood crossties. These reports will be condensed versions of valuable RTA research on wood ties and will be available in both hard copy and electronic versions, as well as on the Web. More information will be available on TieReports at RTA’s annual conference, October 29-31, in Savannah, Ga.

Gibbs Group/PlasTie™ LLC, a small, conservative, privately-owned company, is in the process of establishing production in the U.S. and, according to Barrie Gibbs, chief executive manager, the company sees a bright future for its “improved” crosstie.

“There are several test beds in Canada and the U.S.,” said Gibbs. “The trend is to go ‘green’ and PlasTie is totally non-toxic and can be used in flood plains, above waterways, highways, etc.” Lastly, Chambers of Stella-Jones/BPB Corp. points out that the railroad infrastructure as a whole needs improvements to handle the growing demand for moving products and people on rails.

“The railroad industry and all industries connected need to pursue the political path to help ensure we get our fair share of economic support from policies that come from Washington,” said Chambers.