A looming transformation in the U.S. rail industry has ignited deep concerns among manufacturers, particularly in the chemical sector. The proposed merger between Union Pacific (UP) and Norfolk Southern (NS) has raised fears of reduced competition, higher shipping costs, and deteriorating service quality—echoing the pitfalls of past rail consolidations. Chris Jahn, president and CEO of the American Chemistry Council (ACC), articulated these worries in a recent interview with Logistics Management , urging regulators to block the deal unless it demonstrably enhances competition and service.
ACC’s Stance: No Competitive Benefits, Risk of Service Decline
The ACC has maintained a firm opposition to the merger since rumors surfaced in late July. Jahn emphasized that regulators—specifically the Surface Transportation Board (STB)—must rigorously evaluate the proposal under the "new merger rules," which require proof of improved competitiveness and service. However, Jahn remains skeptical, citing decades of rail industry consolidation that have left shippers with fewer choices and soaring costs.
Over the past 40 years, the number of major U.S. railroads has plummeted from 23 to just six, with four dominating 90% of freight traffic. Each merger, Jahn noted, has been followed by service disruptions. Today, three-quarters of ACC members’ facilities are "captive" to single railroads, lacking alternative transport options. For these companies, freight rates have surged 240% over 15 years, compared to a 24% increase for facilities with competitive options. "This disparity underscores how consolidation harms shippers," Jahn said.
The chemical industry, a cornerstone of U.S. manufacturing, contributes 25% of the nation’s GDP. Its products underpin everything from clothing to electronics, making rail service disruptions a threat to the broader economy. "Higher costs will ripple through supply chains and ultimately hit consumers," Jahn warned. "Our focus should be on fostering growth, not creating barriers."
Service Metrics Mask a Fragile Network
While STB data paints a rosy picture of current rail service, Jahn attributes the "improvement" to declining freight volumes, not operational efficiency. He criticized railroads for prioritizing profit over capacity, noting that UP struggled to recover from pandemic-era backlogs. "The rail network is fragile. Weather events or demand spikes can cripple it," he said. By 2035, chemical industry growth could require 100,000 additional railcars—a challenge the system is ill-equipped to meet.
Scale Matters: UP-NS vs. CP-KCS Mergers
Jahn dismissed comparisons to Canadian Pacific’s acquisition of Kansas City Southern (KCS), arguing that UP-NS would create a transcontinental behemoth controlling nearly half of U.S. rail freight. He quoted CPKC CEO Keith Creel’s warning that large mergers historically trigger service failures and "meltdowns." "Size is the core concern here," Jahn said.
Pricing Power and Global Competitiveness
U.S. chemical producers already face a competitive disadvantage due to high transport costs, Jahn noted. Railroads’ monopoly power allows them to impose steep fees—from fuel surcharges to detention charges—totaling $3 billion in 2021 alone. "Railroads dictate terms: take it or leave it," he said. While rail remains the safest option for shipping chemicals, staffing cuts (30% of jobs eliminated since 2016) have degraded service reliability.
ACC’s Advocacy Campaign
The ACC plans a seven-figure campaign to educate policymakers on the merger’s risks to manufacturing, agriculture, and energy sectors. Jahn accused Wall Street of driving the deal, warning that approval could spur further consolidation, leaving just two major railroads. "There are better solutions," he insisted.
Regulatory Concerns and Missed Opportunities
Jahn lamented the recent removal of STB member Robert Primus, a proponent of competitive rail markets, and called for new appointees committed to STB’s congressional mandate. He also criticized the scrapped reciprocal switching rule, which aimed to boost competition. "It was a half-measure that changed nothing," he said, advocating for reforms akin to Canada’s successful model.
As the debate unfolds, the ACC’s message is clear: unchecked consolidation risks repeating past mistakes, with far-reaching consequences for the U.S. economy.