The American manufacturing sector faces unprecedented challenges—supply chain bottlenecks, rising costs, and intensifying global competition. At the heart of this struggle lies the chemical industry, whose transportation costs and service quality directly impact the broader economy. Now, as the railroad industry contemplates another wave of consolidation, concerns are mounting about the potential fallout for an already strained supply chain.
Merger Concerns: Lessons from History
In a recent interview with Logistics Management , American Chemistry Council (ACC) President and CEO Chris Jahn voiced strong reservations about the proposed Union Pacific (UP)-Norfolk Southern (NS) merger. The ACC, representing chemical manufacturers, has urged the Surface Transportation Board (STB) to reject the deal unless it demonstrably enhances competition and service quality.
"The STB must evaluate this under untested new merger rules," Jahn emphasized, noting that the last major rail consolidation occurred 20-25 years ago. Over the past four decades, the U.S. rail industry has shrunk from 23 carriers to just six, with four controlling 90% of freight traffic. This concentration has left 75% of ACC members' facilities in "captive" markets without competitive shipping alternatives.
The consequences are stark: chemical shippers without rail competition have seen rates skyrocket 240% over 15 years—ten times the increase faced by those with alternatives. "This disparity far outpaces inflation and underscores how lack of competition harms businesses," Jahn stated.
Service Metrics Mask Systemic Vulnerabilities
While STB service indicators suggest adequate performance, Jahn argues they conceal fundamental weaknesses. "Current metrics look acceptable only because freight volumes have declined," he explained. "The rail industry is unique in its resistance to growth and service improvement."
By the mid-2030s, chemical industry growth may require 100,000 additional railcars—a demand the current system appears ill-equipped to handle. Jahn cited UP's pandemic-era struggles as evidence of the network's fragility when facing unexpected disruptions.
Scale Matters: The CPKC Comparison
When asked how the UP-NS proposal differs from Canadian Pacific's recent acquisition of Kansas City Southern, Jahn highlighted scale. A UP-NS merger would create a transcontinental giant controlling nearly half of U.S. rail traffic. He quoted CPKC CEO Keith Creel's warning that such mergers historically trigger service breakdowns during integration.
Pricing Pressures and Global Competitiveness
Beyond base rates, Jahn criticized railroads' proliferation of ancillary charges—from fuel surcharges to detention fees—which totaled $3 billion in storage costs alone during 2021. "These fees exist simply because railroads can impose them," he remarked.
One ACC member CEO identified U.S. transportation costs as a critical competitive disadvantage globally. Though America ranks as the world's second-largest chemical producer, its output lags China's by two-thirds—a gap exacerbated by inefficient rail networks.
ACC's Advocacy Campaign
The council has launched a seven-figure campaign to educate policymakers about the merger's potential ripple effects across manufacturing, agriculture and energy sectors. "Wall Street drives these deals, but Main Street bears the consequences," Jahn asserted, warning that approval could pressure CSX and BNSF to merge—potentially leaving just two major railroads.
Regulatory Environment
Jahn praised former STB member Robert Primus as a "strong defender of freight rail networks" and called for new appointees committed to congressional mandates for reliable service. He also lamented a federal court's July reversal of STB's reciprocal switching rule, calling it a "missed opportunity" to foster competition without consolidation.
"Canada's reciprocal switching system proves real competition is possible without service degradation," Jahn noted. "That should inform America's path forward."