A potential seismic shift in the railroad industry is sending shockwaves through U.S. manufacturing circles. If supply chains are the lifeblood of the economy, railroads serve as its vital arteries. As two industry giants—Union Pacific (UP) and Norfolk Southern (NS)—contemplate merging to create a transcontinental rail empire, critical questions emerge: Will this be an efficiency booster or a dangerous step toward monopoly?
ACC's Stance: Efficiency Sacrificed to Monopoly Concerns
The American Chemistry Council (ACC) has maintained consistent opposition to the proposed UP-NS merger since its earliest rumors. ACC President and CEO Chris Jahn emphasized that unless the merger demonstrably enhances competition and improves service quality in freight rail, regulators—particularly the Surface Transportation Board (STB)—should reject the proposal.
This position stems from painful lessons learned through decades of rail industry consolidation. From an original field of 23 railroad companies, the industry has dwindled to just six major players, with four controlling 90% of freight traffic. Each merger has typically brought service deterioration. Today, three-quarters of ACC member facilities find themselves as "rail captives," with severely limited bargaining power against the dominant Class I railroads.
The consequences of diminished competition appear stark: over 15 years, captive shippers saw rates skyrocket by 240%, while competitive routes still experienced 24% increases. These figures reveal monopoly's corrosive effects—unchecked pricing power that ultimately burdens manufacturers and consumers alike.
STB Service Metrics: A False Sense of Security?
While STB service metrics might appear stable, Jahn argues they mask fundamental fragility in the freight rail network. Current acceptable performance stems more from reduced freight volumes than actual service improvements. The industry shows little appetite for expansion, adopting what Jahn describes as a "growth-averse" posture.
Extreme weather and pandemic disruptions have exposed systemic vulnerabilities. Union Pacific's post-pandemic recovery struggles exemplify these challenges. ACC projections suggest chemical industry growth could generate demand for 100,000 additional railcars by the mid-2030s—a prospect that raises serious questions about current capacity limitations.
Scale Matters: Why UP-NS Differs From CP-KCS
Comparing the UP-NS proposal to Canadian Pacific's acquisition of Kansas City Southern, Jahn highlights the critical factor of scale. A UP-NS merger would create a behemoth controlling nearly half of U.S. rail transport—prompting even CPKC CEO Keith Creel to warn publicly about the risks of transcontinental consolidation, citing historical service disruptions following major mergers.
Freight Costs: An American Manufacturing Disadvantage
Shipping expenses remain a top concern for ACC members. One CEO confided to Jahn that U.S. transportation costs create significant global competitive disadvantages. While America ranks as the world's second-largest chemical and plastics producer (though only one-third to one-quarter China's size), its uncompetitive rail network contributes substantially to this gap.
Beyond base rates, railroads levy numerous surcharges—from fuel fees to detention charges and empty car repositioning costs. In 2021 alone, storage fees totaled nearly $3 billion. With limited alternatives, shippers often face take-it-or-leave-it pricing. "The railroads say, 'Here's the price—ship it or don't,'" Jahn noted.
This dynamic persists despite rail's public benefits: greater safety than trucking and quadruple the hauling capacity per unit. Yet pursuit of profits has driven railroads to slash 30% of their workforce (45,000 jobs), degrading service quality.
ACC's Counterstrategy: A Manufacturing Defense Campaign
ACC has launched a multimillion-dollar lobbying effort to educate policymakers about the merger's potential ripple effects across manufacturing, agriculture, and energy sectors. The council aims to refocus attention on "Main Street over Wall Street," arguing that financial market pressures—not operational needs—drive consolidation.
Approval could trigger follow-on mergers by CSX and BNSF, potentially creating a rail duopoly—an outcome Jahn considers decidedly undesirable.
STB Leadership: Guardians of the Supply Chain?
Jahn expressed regret over former STB member Robert Primus's dismissal, praising his advocacy for shippers and efforts to streamline decision-making. ACC urges appointment of successors equally committed to STB's mission of fostering competitive, reliable rail service.
Reciprocal Switching: A Missed Opportunity
The April 2024 STB reciprocal switching rule—later overturned in July—represented what Jahn calls a "half measure" that failed to achieve meaningful impact. ACC preferred a Canadian-style model that fostered competition without service disruptions. Moving forward, Jahn emphasizes that true reciprocal switching—not consolidation—should shape America's freight rail future.
As this debate unfolds, ACC stands firmly as manufacturing's frontline defender against rail monopolization. The outcome will profoundly influence American industry's global competitiveness. Only through efficient, fair, and competitive rail transport can U.S. manufacturing truly thrive.