PB-233 871
TRANSPORTATION RATES AND COSTS FOR SELECTED VIRGIN
AND SECONDARY COMMODITIES
MOSHMAN ASSOCIATES, INCORPORATED
PREPARED FOR
ENVIRONMENTAL PROTECTION AGENCY
1974
DISTRIBUTED BY:
National Technical Information Service
U. S. DEPARTMENT OF COMMERCE
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BIBLIOGRAPHIC DATA
SHEET
1. Report No.
EPA/530/SW59c
PB 233 871
4. Title and Subtitle
Transportation Rates and Costs for Selected Virgin and
Secondary Commodities
5- Report Date
Issued 1Q74
6.
7. Author(s)
David fi. Abraham. William R. Saundprs. Thomas R. WnnHall
8. Performing Organization Kept.
No.
9. Performing Organization Name and Address
Moshman Associates, Inc.
6400 Goldsboro Road
Washington, D.C. 20Q34
10. Project/Task/Work Unit No.
11.
68-01-0790
12. Sponsoring Organization Name and Address
U.S. Environmental Protection Agency
Office of Solid Waste Management Programs
Washington, D.C. 20460
13. Type of Report & Period
Covered
Final
14.
15. Supplementary Notes
16. Abstracts
This report summarizes a study that compared the transportation rates for
competing secondary (scrap) and virgin materials in five industries: iron and steel,
glass, paperboard, rubber, and aluminum products. The three major points researched
in the study are: whether rates are reasonable for each commodity; whether carriers
discriminate against secondary materials in ratemaking to the benefit of the
respective competing virgin materials; and the magnitude of the effect of
transportation charges on commodity prices. For many moves, rate levels were found
to be higher for iron and steel scrap than ore, for cullet than glass sand, for
aluminum scrap than aluminum ingot, and for reclaimed than new rubber. Contrarily,
rates for woodpulp were higher than for waste paper, and rates for new rubber were
higher than for scrap rubber. Enlightened aubfic DO!fey requires the examination
and removal of 'inequities- at the detailed, individual movement level.
17. Key Words and Document Analysis. 17o. Descriptors
*Railroad transportation,*conmercial transportation, industrial commodity management,
aluminum, glass, iron, paperboards, rubber fibers, steels
17b. Identifiers/Open-Ended Terms
*recycling,transportation rates, secondary materials
17c. COSATI Field/Group
18. Availability Statement
Release to public
I
FORM NTIS-33 (REV. 3-72)
19.. Security Class (This
Report)
UNCLASSIFIED
20. Security Class (This
Page
UNCLASSIFIED
USCOrvi,,, _ .
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This report has been reviewed by the U.S. Environmental
Protection Agency and approved for publication. Approval
does not signify that the contents necessarily reflect the
views and policies of the U.S. Environmental Protection
Agency, nor does mention of commercial products constitute
endorsement or recommendation for use by the U.S. Government.
An environmental protection publication (SW-59c) in the
solid waste management series.
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PREFACE
This report was prepared by Moshman Associates, Inc.,
Washington, B.C., under Contract No. 68-01-0790 with the
Environmental Protection Agency. Work was begun in Janu-
ary, 1973, and completed in June, 1973. The statements,
findings and conclusions in this report are those of the
authors and do not necessarily reflect the views of the En-
vironmental Protection Agency.
The project director for Moshman Associates was David
G. Abraham, vice president and director of economic re-
search; William B. Saunders served as the senior project
advisor.
The report was written by Messrs. Abraham, Saunders
and Thomas G. sVoodall, transportation economist. Other
Moshman Associates staff members and consultants who parti-
cipated in the research and report preparation were Dr. Jack
Moshman, Dieter Harper, Leo Marcus, Mark Moshman, Byron F.
Andrews, and Frank .Piovia, who contributed to the chapter on
product equivalencies.
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ACKNOWLEDGEMENTS
In a research project of this scope, involving five
manufacturing industries, the cooperation of dozens of pers.ons,
companies and associations is vital to the success of the pro-
ject. We are grateful to the countless individuals who provided
the assistance necessary to .achieve this undertaking's goals.
Those who answered a single telephone inquiry, or responded to
a traffic survey, are too numerous to list, but their help and
cooperation are nevertheless sincerely appreciated.
Certain individuals and groups deserve a special note of
recognition for their invaluable help, without which this pro-
ject would have been stymied.
First, we are indebted to the personnel of .the Office of
Solid tfaste Management Programs at EPA, which commissioned
this study, and particularly to Lawrence B. McEwen, the pro-
ject officer, an analyst in the Resource Recovery Division.
Assistance in project design and evaluation was also provided
by Arsen Darnay, then director of the Resource Recovery Division,
John Skinner, chief of the Analysis Branch, RRD; and Stephen
Lingle, an analyst in RRD.
Second, we wish to thank the personnel of the Bureau of
Economics at the Interstate Commerce Commission for supplying
a copy of the computer tape of the 1969 One Percent Sample of
Railroad Waybills, and for providing assistance in decoding
and analyzing data. We are especially grateful to Edward L.
Margolin, who then was•the bureau director (since retired),
and to William A. Lesansky, James Nash, and Harvey Levine,
all of the bureau.
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Finally, a note of appreciation is due to the numerous
industry sources who gave much of their time and attention to
this project, thereby insuring that this report was written
in the context of the realities of the business world and
not in a theoretical vacuum. We wish to acknowledge the
help of the following individuals and organizations:
Iron and Steel
Dr. Herschel Cutler, executive director; Gerald S. Gold-
man, director of transportation; and Harold Pockrose, chair-
man of the transportation committee, Institute of Scrap Iron
and Steel, Washington, B.C. (Mr. Pockrose is director of trans-
portation for David J. Joseph Co., Cincinnati, Ohio); and James
Hughes, director of public relations, American Iron & Steel
Institute, Washington, D.C.
Paper
The Traffic Committee of the American Paper Institute,
New York, N.Y., and in particular S. H. Tippett, director of
traffic, Container Corporation of America, Carol Stream, 111.,
and Glenn L. Fast, Corporate manager — rates and regulation,
Brown Company, Kalamazoo, Mich.; W. S. McClenahan, director,
Division of Information Services, The Institute of Paper Chem-
istry, Appleton, Wis.; and A. T. Luey, manager, Boxboard Research
& Development Association, Kalamazoo, Mich.
Glass
John G. McGowan, director of traffic, Glass Container Man-
ufacturers Institute, Inc., Washington, D.C.; E. H. Long, mana-
ger, freight rates and research, Anchor Hocking Corp., Lancaster,
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Ohio; and Pickett Scott, vice president, Glass Containers Cor-
poration, Fullerton, Cal.
Aluminum
Howard Ness, technical director, and John Vaccaro, direc-
tor of transportation, National Association of Secondary Mat-
erials Industries, New York, N.Y.; R. M. Cooperman, executive
director, Aluminum Recycling Association, Washington, D-.C.;
Charles Rosenbloom, executive vice president, and A. T. Super,
general traffic manager, U. S. Reduction Co., East Chicago,
Ind.
Rubber
W. James Sears, vice president, Rubber Manufacturers As-
sociation, Inc., .Washington, B.C.; and Ted Newman, general traffic
manager, Midwest Rubber Reclaiming Co., East St. Louis, 111.
-IV-
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SUMMARY
This study was commissioned by the Environmental
Protection Agency in December, 1972, "to examine and compare
transportation rates for competing secondary (scrap) and -,
virgin materials and to examine the basis for these rates."—
Materials consumed by five industries were specified by EPA
as objects of study: iron and steel, paper, glass, aluminum,
and rubber.
To conduct this analysis of "competing commodities",
six commodity pairs (including two in the rubber industry)
were chosen. Attempts were made to relate consumption of
those commodities and the destinations of their movements to
specific industries, namely, integrated iron and steel plants,
paperboard mills, glass container plants, secondary aluminum
smelters, • and reclaimed rubber plants.
Emphasis was placed on movements by railroad, this being
the predominant mode for all, but perhaps one, of the
commodities in this study. A sample of movements was selected
for study from the 1969 One Percent Sample of Railroad
Waybills. That sample, comprising 281 movements, was used
for most of the analyses herein. It was shown to be
statistically representative of the original One Percent
Sample. However, due to different research methods, including
a constraint that all movements chosen for study be in high-
density corridors, the summary figures for the respective
commodities are not comparable with the averages developed
in the so-called "Burden Study".
Three major points were researched in this study: the
reasonableness of the rates for each commodity, the fairness
of the level of rates for secondary commodities, compared with
their virgin counterparts, and the magnitude of the effect of;
transportation charges on commodity prices.
Average rates for all commodities were found to be in
the zone of reasonableness, but there were numerous individual
situations with such large differences that some inequities
surely exist. Due to the many individual variations, gross
averages tend to obscure the significance of the problems
identified.
I/ Article 1, Statement of Work, EPA Contract No. 68-01-0790.
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Rate levels, on average, for many specific moves, were
found to be higher for iron and steel scrap than ore, for cullet
than glass sand, for aluminum scrap than aluminum ingot, and
for reclaimed than new rubber. Contrarily, the rates for
woodpulp were higher than for waste paper, and the rates for
new rubber were higher than for scrap rubber.
Generally, revenues were found to exceed, variable costs
and to made fair contributions to fixed costs and profit. On
average, the rate of contribution for three of the secondary
commodities, ferrous scrap, cullet, and reclaimed rubber were
from 18 percent to 123 percent higher than for their virgin
material counterparts. However, the contribution rate for
ferrous scrap was about the same as for ore in the l-to-200
mile range of moves, where the preponderance, of traffic was.
The wide variations in rates and their contribution to
constant expense, both by commodity and among pairs of
commodities, prove that carriers do not employ some rigid
master plan in ratemaking and that they have given no
consideration to the possible competition between virgin
and secondary commodities. Because no conclusive finding
has been made by the Interstate Commerce Commission as to
the competition between these commod it ie s , regulated carriers
are not required to prevent any inequalities found in this
study.
The rail rate structures for some disadvantaged
secondary, commodities are not designed to' encourage heavier
ladings of rail cars, probably to the detriment of carriers
and shippers.
The analysis of transport costs relative to product values
included a comparison of equal units of virgin and secondary
materials. Means transportation rates for secondary materials
ranged from six percent to 79 percent of the material values
at their average source prices; the range for virgin materials
was three percent to 171 percent. For cullet, waste paper,
and ferrous scrap, transportation charges represent significant
shares of delivered product prices, substantially more than
for the respective virgin materials with the exception of
g la s s s a n d .
General rate increases authorized by the I.C.C. since
1969 have maintained the approximate rate relationships described
in this study. No action has been taken by the Federal
regulatory agency to correct numerous, spec if ic rate
inequities, many of which were identified in this .study.
It is believed that railroads' and the public interest
could be served by greater application of'incent ive ra t e s
for heavier ladings. Several secondary commodities are
often loaded above prescribed minima without shippers
receiving any share of the cost benefits realized by carriers:
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If a finding as to the real competition between virgin
and secondary commodities were made, the comparison of rates
charged for such competing materials may be a test of rate
discrimination. However, for a finding of undue prejudice to
be made, proof that these rate inequities were the cause of
injury must also obtain.
Contract and private motor carriage are increasingly
participating in the transport of secondary materials, mainly
for waste paper and cullet. These services are often
rendered at charges below fully allocated variable costs.
Though service costs, on average, exceed railroad rates for
all but the shortest hauls, these motor carriers' services
meet a common objective: secondary materials are transported
at relatively low charges where rail services are unavailable,
and the economics of carrier operations are improved through
avoidance of empty backhauls.
The economic principles of round-trip contract carriage
have not been reflected in railroad ratemaking for secondary
materials. Whether such round-trip operations could be
formally implemented and appropriately lower rates obtained
was not determinable within this study's scope.
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TABLE.OF CONTENTS .
Page
PREFACE ............... . .' ... ".. .'•'.. . . . . i-;
ACKNOWLEDGMENTS . . . ii
, - • - i • • ' •
SUMMARY . . ..:..' ..... .•••; . . . .' . . . . „ \ . . '" .. .v,
LIST OF TABLES . . . . . . . ... . „ . . . '. .... xii
LIST OF FIGURES . . . . . . . . . „ „ . ... . . . . xv
I. INTRODUCTION . „ ... . . . . . . . .... ... . 1
II. SCOPE OF STUDY . . . . ..... 2
Objectives . „ . . ^ ... . . . • . . . . . . '..' 2
Constraints „ ........ 0 . 2
Scope Details . . . . . . „ . . ........ 4
Selection of Study Routes 5
Freight Rates 8
Freight Charges . . . . „ . 10
Carrier Costs 10
Reflection of Non-Cost Related
Ratemaking Factors ........... 11
Effects of Transportation Charges . .... 11
III. RESEARCH METHODS AND DATA EMPLOYED 13
Introduction ........... 13
One Percent Waybill Sample, Computerized
Processes . . 13
Industry Furnished Data . . . 15
Rate Search . . . . 16
Costing ................. 19
Contribution . . „ . 23
Statistical Analyses ...... 26
Study Industries . . . 26
Trend of Rates over Length of Haul ... 27
Representativeness of Study Moves .... 27
Product Equivalencies . . . 28
Effects of Transportation Charges ...... 29
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Page
IV. INDUSTRY-COMMODITY ANALYSES . . . . 32
Iron and Steel Industry . 32
Introduction 32
The Commodities ..... 33
Transport Characteristics „ 36
Comparative Analysis 39
Common Moves 40
All Study Moves 41
Analysis By Destination Territory . 47
Findings . . ........ 51
Paperboard Industry 57
Introduction 57
The Commodities . 59
Transport Characteristics 61
Comparative Analysis 63
Common Moves . . . . 64
All Study Moves 65
Analysis By Destination Territory . 74
Motor Carrier Rates and Costs 75
Findings .... 0 78
Glass Container Industry ...... 80
Introduction 80
The Commodities . 82
Transport Characteristics 83
Comparative Analysis 85
Common Moves 86
All Study Moves 87
Analysis By Destination Territory . 95
Findings 96
Secondary Aluminum Industry 98
Introduction 98
The Commodities 100
Transport Characteristics 101
Comparative Analysis . . . . 102
Common Moves . 103
All Study .Moves 105
Analysis By Destination Territory . 112
Findings . 113
Reclaimed Rubber Industry 115
Introduction 115
The Commodities 117
Transport Characteristics , ... . . . . H8
Comparative Analysis 120
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Page
Common Moves 120
New vs. Scrap Rubber . . . . . \: . 121
New vs. Reclaimed Rubber 121
All Study Moves ............. 122
New vs. Scrap Rubber 122
New vs. Reclaimed Rubber 130
Analysis By Destination Territory .... 135
Findings ......... 138
Concluding Overview . 138
V. RATE STRUCTURE ANALYSIS ..... ... 145
Principles 145
Methods of Analyses ........... 146
Findings 147
Iron and Steel 147
Iron Ore 147
Iron and Steel Scrap 148
Comparison Between Ore and Scrap . 149
Paper ...'.... 151
Woodpulp ........ 151
Waste Paper ........... 15i
Comparison Between Woodpulp and
Waste Paper ........... 152
Glass ............ 152
Glass Sand ............. 152
Gullet . . . . . . ... . . . . . 154
Comparison Between Glass Sand
and Gullet ............ 154
Aluminum ................ 156
Primary Aluminum Ingot 156
Aluminum Scrap . . 156
Comparison Between Primary Ingot
and Scrap 157
Rubber 157
Natural and Synthetic Rubber . . . 157
Reclaimed and Scrap Rubber .... 159
Comparison Between New Rubber
and Secondary Rubber 160
Glossary of Rate Bureau Abbreviations . . 162
VI. TRANSPORTATION CHARGES AND COMMODITY PRICES ... 163
Introduction ........... 163
Methodology ..... ............ 163
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Page
Findings ....... 164
Transportation Charges and Delivered
Prices „.„„.... 164
Geographic Analyses 172
VII. RAIL RATE MAKING PRINCIPLES 175
Introduction 175
Reasonableness of Rates 179
Rate Discrimination 179
VIII. CONCLUSIONS -. . 183
Findings—Competing Commodities 183
Incentive Rates 184
Contract Carriage 186
General .....„, 187
APPENDICES
APPENDIX A
Master Tables, Common and Supplemental Study Moves
APPENDIX B
Regression Analysis, Contribution as a Percentage
of Revenue
APPENDIX C
Methodology Used To Evaluate Compatibility of
Study Moves with Randomly Selected Moves
APPENDIX D
Rail and Regulated Truck Traffic By Commodity, 1969
APPENDIX E
Equivalency Formulas
APPENDIX F
Commodity Prices Used in Report Analyses
APPENDIX G
Mean Mileage and Rate/Ton for Study Moves by Commodity
APPENDIX H
Mean Transportation Prices, Per Ton and Adjusted by
Equivalency Factors, For Virgin Commodities
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List of Tables
No. Title Page
1 Industries and Commodities Selected for Study of 6
Transportation Rates and Costs of Virgin
and Secondary Materials
2 Carload Movements by Railroads, Selected for 9
Study from 1969 One Percent Waybill Sample
and Industry Furnished Information
3 Transport Characteristics, Iron Ore and Iron
and Steel Scrap 38
4 Railroad Revenue and Variable Cost for Study 42
Moves by Distance Blocks, Iron Ore and Iron
and Steel Scrap
5 Contribution to Railroad Revenue by Study 44
Moves in Distance Blocks, Iron Ore and Iron
and Steel Scrap
6 Rate Differences by Destination Territory, 50
Iron Ore and Iron and Steel Scrap
7 Paper Stock Consumption by Type 60
8 Transport Characteristics, Woodpulp and 62
Waste Pa-per
9 Railroad Revenue and Variable Cost for Study 66
Moves by Distance Blocks, Woodpulp and Waste
Paper
10 Contribution to Railroad Revenue by Study Moves 69
in. Distance Blocks, Woodpulp & Waste Paper
11 Rate Differences by Destination Territory, 74
Woodpulp and Waste Paper
12 Analysis of Waste Paper Shipments Moving Via 77
Motor Common Carriers, (Sample of Actual
Traffic, First Quarter 1973)
13 Railroad Revenue and Variable Cost for Study 88
Moves by Distance Blocks, Glass Sand & Gullet
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List of Tables (Cont'd)
No. Title Page
•M^MH •»"»™^™--^—• r—"^.^i^—
14 Contribution to Railroad Revenue by Study Moves 91
in Distance Blocks, Glass Sand & Cullet
15 Rate Differences by Destination Territory, 95
Glass Sand and Cullet
16 Transport Characteristics, Primary Aluminum 1°2
Ingot and Aluminum Scrap
17 Railroad Revenue and Variable Cost for Study
Moves by Distance Blocks
18 Contribution to Railroad Revenue by Study Moves
in Distance Blocks, Primary Aluminum Ingot and
Aluminum Scrap
19 Rate Differences by Destination Territory, 112
Primary Aluminum Ingot and Aluminum Scrap
20 Transport Characteristics of Study 119
Commodities in the Rubber Industry
21 Railroad Revenue and Variable Cost for Study Moves 123
by Distance Blocks, Natural & Synthetic Rubber
and Scrap Rubber
22 Contribution to Railroad Revenue by Study Moves 126
in Distance Blocks, Natural & Synthetic Rubber
and Scrap Rubber
23 Railroad Revenue and Variable Cost for Study 131
Moves by Distance Blocks, Natural & Synthetic
and Reclaimed Rubber
24 Contribution to Railroad Revenue by Study Moves 133
in Distance Blocks, Natural & Synthetic Rubber
and Reclaimed Rubber
25 Rate Differences by Destination Territories, 137
Natural, Synthetic, Scrap & Reclaimed Rubber
26 Selected Rate-Cost Relationships for Lading 150
Above Carload Minima, Iron & Steel Scrap
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List of Tables (Cont'd)
No. Title Page
27 Selected Rate-Cost Relationships for Lading 153
Above Carload Minima, Woodpulp & Waste Paper
28 Selected Rate-Cost Relationships for Lading 155
Above Carload Minima, Glass Sand & Gullet
29 Selected Rate-Cost Relationships for Lading 158
Above Carload Minima, Primary Aluminum Ingot
& Aluminum Scrap
-30 Selected Rate-Cost Relationships for Lading 161
Above Carload Minima,Natural & Synthetic Rubber
& Reclaimed Rubber
31 Mean Delivered Costs and Transportation Charges 165
for Equivalent Units of Virgin & Secondary
Commodities
32 Mean Delivered Costs and Transportation .Charges 167
Per Ton of Virgin and Secbndary Commodities
33 Comparison of Equivalent Units of Virgin and 168
Secondary Materials, Average 'f.o.'b. 1969
Prices and Transportation Charges
3J4 Average f.o.b. 1969 Prices and Transportation 169
•.'Charges "Per Ton of Virgin and Secondary
Commodities
35 -Range of Delivered Prices & Transportation 171
Share, Equivalent Units of Virgin and Secondary
Commodities
36 Geographic Distribution of Study Industries 173
and Relative Rail Transportation Charges by
Rate Territory for Study Commodities
37 Average Transportation Characteristics, Rates 182
and Contribution Rates for Study Moves
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List of Figures
No. Title Page
1 U.S. Rail Rate Territories 22
2 Location of Plants and Value of Shipments 34
From Fully Integrated Blast Furnaces and
Steel Mills, SIC 3312-11
3 Average Revenue Per Carload by Mileage 43
Blocks, Study Moves of Iron Ore and Steel
Scrap
4 Average Contribution as a Percent of Revenue 45
by Mileage Blocks, Study Moves of Iron Ore
and Iron and Steel Scrap
5 Iron Ore, Contribution as a Percentage of 48
Revenue
6 Iron Si Steel Scrap, Contribution as a 49
Percentage of Revenue
7 Location and Capacity of Paperboard Mills, 58
SIC 2631
8 Average Revenue Per Carload by Mileage 67
Blocks, Study Moves of Woodpulp and Waste
Paper
9 Average Contribution as a Percent of Revenue 70
by Mileage Blocks, Study Moves of Woodpulp
and Waste Paper
10 Woodpulp, Contribution as a Percentage of 72
Revenue
11 Waste Paper, Contribution as a Percentage of 73
Revenue
12 Location of Plants and Value of Shipments, 81
Glass Containers, SIC 3221
13 Average Revenue per Carload by Mileage 89
Blocks, Study Moves of Glass Sand and Gullet
14 Average Contribution as a Percent of Revenue 92
by Mileage Blocks, Study Moves of Glass Sand
and Gullet
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List of Figures (Cont'd)
Title Page
15 Glass Sand, Contribution as a Percentage of 93
Revenue
16 Gullet, Contribution as a Percentage of 94
Revenue
17 Location of Secondary Aluminum Smelters, 99
Subgroup of SIC 3341
18 Average Revenue Per Carload by Mileage Blocks, 105
Study Moves of Primary Aluminum Ingot and
Aluminum Scrap
19 Average Contribution as a Percent of Revenue 109
by Mileage Blocks, Study Moves of Primary
Aluminum Ingot and Aluminum Scrap
20 Primary Aluminum Ingot, Contribution as a no
Percentage of Revenue
21 Aluminum Scrap, Contribution as a Percentage m
of Revenue
22 Location of Plants and Value of Shipments of 1.16
Reclaimed Rubber, SIC 3031
23 Average Revenue per Carload by Mileage Blocks, 124
Study Moves of Natural & Synthetic Rubber and
Scrap Rubber
24 Average Contribution as a Percent of Revenue 127
by Mileage Blocks, Study Moves of Natural &
Synthetic Rubber and Scrap Rubber
25 Natural & Synthetic Rubber, Contribution as a 128
Percentage of Revenue
26 Scrap Rubber, Contribution as a Percentage of 129
Revenue
27 Average Revenue Per Carload by Mileage Blocks, 132
Study Moves of Natural & Synthetic Rubber
and Reclaimed Rubber
28 Average Contribution as a Percent of Revenue 134
by Mileage Blocksj Study Moves of Natural &
Synthetic Rubber and Reclaimed Rubber
'XVI-
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List of Figures (Cont'd)
No. Title Page
29 Reclaimed Rubber, Contribution as a Percentage 136
of Revenue
30 Contribution as a Percentage of Revenue, 140
Study Commodities 141
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I. INTRODUCTION
It has long been recognized that transportation costs
play a vital role in the economic feasibility to utilize one
raw material as contrasted with another. More recently, an
increased awareness to the effect that the transportation
cost factor may exert an even greater influence in the
usability of secondary materials as raw material substitutes
has been widely discussed by shippers and carriers, executive
and regulatory agencies. Concerns have been voiced by several
interest groups to the effect that some secondary materials
are not accorded fair and equal treatment in the regulated
transport carriers' ratemaking processes and that these
practices unduly inhibit the utilization of these materials
to the detriment of environmental and ecological protection.
This report contains the results of a study of selected
virgin and secondary commodities representing the alternative
basic materials for the production of five basic products,
namely iron and steel, glass, paperboard, rubber, and
aluminum products.
Findings are based mainly on data for the year 1969, the
latest year for which the essential information was available.
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II. SCOPE OF STUDY
Objectives
The principal objectives of this study can be summarized
as the determination of the following:
a. Are transportation rates for each of the commodities
selected for study reasonable, costs and other rate
factors considered.
b. Are the carriers discriminating against secondary
materials in ratemaking to the benefit of the
respective competing virgin materials.
c. What is the magnitude of the transportation charges
as a percent of each material's average delivered
purchase price.
While emphasis was to be placed upon the movement of the
commodities selected for study by rail, consideration was to
be given to motor and barge transportation to the extent that
these play an important role in the conveyance of the study
commodities and data availabilities permit meaningful analyses
Constraints
The project work scope contained a number of constraints.
Among the significant limitations were the following:
a No traffic surveys were ,to be, undertaken; rather,
t
existing data, available from public records and
such as might be made ayaliable by shippers were
to be utilized.
b. No carrier operating studies were to b,e undertaken
in order to identify peculiar characteristics
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attending to the provision of transport services
for the study commodities as distinct from aggre-
gated averages for all types of traffic.
Data available from or provided by agencies of
the U.S. government were to be accepted "as is",
except for the correction of obvious errors of a
typographical, keypunching, data processing or
related nature, if any.
Technological equivalency formulae for the various
study industry products were to be adapted from re-
liable published sources and such changes in these
formulae made as indicated in order to reflect the
most recent expert thinking in the respective fields
of technology. Overall, these formulae were not
intended to be precise definitions of raw material
consumption, but rather approximations of suffi-
cient validity to permit their use for the calcula-
tions intended, namely the delivered cost and the
transportation cost component contained therein of
technologically comparable batches of virgin and
secondary materials.
Calculations of product equivalencies, both virgin
and secondary, in terms of comparative delivered
costs were to exclude any consideration of cost
factors other than delivered costs to the consumer
of the average or specifically defined product mix;
thus, cost variances in plant handling costs, ener-
gy requirements and the like were ignored.
Commodity prices were to be extracted from published
sources and geographical differences ignored; thus,
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benchmark figures were to be developed rather than
the specific delivered prices as applicable in each
of the geographic regions.
Several other constraints were reflected in the study
scope and research methods; those, however, apply selectively
to specific tasks or subtasks and are noted in context with
the discussions of these.
Not so much a constraint as a broadly applicable thrust
of this study was its requirement to conduct an independent
fact finding project rather than to examine and react to re-
cent regulatory and judicial proceedings involving some of
the study commodities. This is not to suggest that the con-
tractor was instructed to ignore or that he was unmindful
of such proceedings, in particular the Interstate Commerce
Commission's Ex Parte 281, Increased Freight Rates and
Charges 1972 (Environmental Matters).
Scope Details
The study scope consists of six (6) distinct tasks
which are briefly summarized below. At the outset, the ba-
sic industries for study having been predetermined, the spe-
cific study industries or consumers and the specific commod-
ities were selected. This selection process, performed in
consultation with the E.P.A. Project Officer and represent-
atives from the various industries, resulted in the selection
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of the consumers and commodities enumerated in Table 1.
Of the 12 study commodities selected, one, iron ore,
was examined primarily for only a portion of its total logis-
tics process, namely from a storage yard at a Great Lakes or
Tidewater port; however, six domestic all-rail moves were
also analyzed. One secondary commodity, reclaimed rubber,
was examined for movements from its point of production to
its consumers, while the movements of all other secondary
commodities studied pertain to those from a collection and/
or processing point to the same type of location as is appli-
cable to the commodities' virgin counterparts. Thus, for
example, the study moves of iron and steel scrap as well as
iron ore both terminate at steel mills.
Selection of Study Routes
The preliminary work scope anticipated the feasibility
of selecting a sufficiently large number of common moves for
virgin and their counterpart secondary materials to obtain a
representative sample of these commodities' movements by rail.
Common moves were at first defined as identical origin and
destination points; points are those for which a specific
multi-digit code in the Standard Point Location (SPLC) file
of the Association of American Railroads has been assigned.
As will be noted in the chapter dealing with data em-
ployed and study methodology, the latest available data for rail
movements revealed only a very small number of common moves,
as initially defined, and none for several pairs of competing
commodities. (The term competing commodities as used in
this report is not meant to imply that these commodities do, in
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Table 1
INDUSTRIES AND COMMODITIES SELECTED FOR STUDY OF
TRANSPORTATION RATES AND COSTS OF VIRGIN AND SECONDARY MATERIALS
INDUSTRY (CONSUMERS)
VIRGIN MATERIALS
SECONDARY MATERIALS
SIC Description STCC
I. 3312-11 Blast lOl
Furnaces &
Steel
Mills -
Fully
Integrated
II. 2631 Paperboard 26111
1 . Mills'
III. 3221 Glass 1441320
Containers
IV. 3341 Secondary 33341
Nonferrous
Metals
V. 3031 Reclaimed 0842325
Rubber
2821220
Description
Iron Ore
'Woodpulp
Glass Sand
Primary
Aluminum
Ingot
Natural
-Rubber
Synthetic
Rubber
From-To STCC
Railhead- 40211
Plant
Pulp mill- 40241
Board mill
Mine-Plant 3229924
Smelter- 4021430
Secondary
Processor
Port-Plant 4026160 ,
- -
Manufacturer- 3031190
Plant
Description
Iron &
Steel
Scrap
Waste
Paper
Gullet
Aluminum .
Scrap
Scrap
Rubber
Reclaimed
Rubber
From-To
Pr oc.es so r-
Mill
Processor-
Board
mill
Processor-
Plant
Processor-
Secondary
Processor
Collection
Point-
Plant
Plant-
Manufacturer
-------
fact, compete in the traditional sense in the marketplace.
Industry experts suggest that effective market competition
exists only for iron and steel scrap, aluminum scrap, paper
waste, and reclaimed rubber from among the study secondary
commodities, but not for cullet and scrap rubber.)
Consequently, the definition of common moves was revised
to insure a valid comparison. The final criteria for an eli-
gible study move were that it must be in a high-density
corridor, and that it must have a common origin territory and
a common length of haul (within 10 per cent plus or minus) with
a move of its counterpart commodity. High density corridors
were defined as those with a significant share of the traffic
relative to other corridors; specifically, those for which the
destination states receive at least 10 percent of the total
traffic for the particular commodity and where each origin state
matched with a destination state supplies at least 10 percent
of the traffic moving to that destination. It should be noted
that this factor was included in the selection criteria to
preclude the selection of moves which are insignificant in
terms of industry traffic, which may be occasional and
incidental traffic and for which applicable commodity rates
would be less likely to be representative of the rate levels
applicable to the preponderance of that commodity's movements.
Since the redefined selection criteria made fewer common
moves available for study, this selection process still was
found to be unsatisfactory. For most of the study commodities
the full distance spectrum was not represented.
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Consequently, the selection process was expanded to in-
clude supplemental moves, so as to reflect, to the extent
possible, for each commodity the entire distance range over
which these commodities were observed to move in high density
corridors.
Table 2 shows the rail moves selected for study from the
two sources mentioned therein; it also shows the distance
over which each commodity was found to move, the average
lading per carload and the ratio of lading for virgin to
secondary materials. It might be noted that the number of
study moves selected for scrap and reclaimed rubber is still
rather small. This is due to the small number of waybills
contained in the data base, 11 for scrap and 20 for reclaim-
ed rubber, approximately half of which were ineligible under
the selection criteria; industry data were used to expand
the sample.
Freight Rates
This task required the identification of the spe-
cific freight rates applicable to the commodity moves select-
ed for study in the preceding task. In turn, these rates
were to be compared for the competing virgin and secondary
materials.
In view of the fact that these rates were also to be
employed in a subsequent analysis, as described in section
following, and the traffic and revenue data available
for the most recent year are for the calendar year 1969, it
was imperative to identify the rates then applicable rather
than the current rates, which reflect general increases author-
ized by the I.C.C. in its several ex parte proceedings since
the end of 1968.
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Table 2
CARLOAD MOVEMENTS BY RAILROADS, SELECTED FOR STUDY
FROM 1969 ONE PERCENT WAYBILL SAMPLE
AND INDUSTRY FURNISHED INFORMATION
Total Movements Average Ratio
STCC Study Distance Carload Lading
No. Commodity Movements Rangej/ ,mi. Lading, tns. V -f S
101 Iron Ore 26
40211 Iron & 30
Steel
Scrap
1441320 Glass Sand 21
3229924 Gullet 17
600
1400
2000
1000
76.3
54.7
68.4
63.2
1.
1.08
33341 Aluminum
Ingot
4021430 Aluminum
Scrap
0842375 Natural &
2821220 Synthetic
Rubber
27
24
29
2200
1200
2400
57.9
33.3
52.8-
1.74
4026160 Scrap 7
Rubber
3031190 Reclaimed 10
Rubber
26111 Woodpulp 48
40241 Waste 42
Paper
Total 281-'
600
1000
2400
1800
22.1
46.3
58.2
34.1
2.39
1.14
1.71
/
I/ Data were segregated by 200 mile blocks up to 2,200
miles; movements in excess of 2,200 miles distance, shown
as 2,400 miles, may exceed that distance; distances refer
to short-line mileage without circuity.
2/ Synthetic = 57.4; natural
3/ Excludes duplications.
34.3.
-9-
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Freight Charges
A distinction was to be made between rates identified
for specifically selected study moves and the revenues re-
ported for such moves by the respective railroads. The
latter are contained in the data base employed and are stated
to reflect the revenues obtained for each haul as shown in
the carriers' audited waybills.
It would be entirely logical to expect no discrepancies
between these reported revenues and the applicable rates iden-
tified in the tariff searches comprising the second study
task. However, as was also noted in prior studies employing
the same data base, such differences do exist with fairly
high frequency and therefore the efforts entailed in a com-
parative study of rates versus reported charges appeared to
be justified.
Carrier Costs
In this phase of the study the scope requires the deter-
mination of carrier costs for the provision of the transport
services reflected in the study moves. Further, these carrier
costs were to be compared with carriers' rates and/or charges
to determine the reasonableness and equity of their relation-
ships for the commodities selected for study and on a compara-
tive basis the competing commodities in particular. The work
scope specifications recognized, a priori, the limitation
attending to this task. In particular, it was recognized
beforehand that I.C.C. costing procedures for services by
regulated modes of transport are designed, in the main, to
reflect differences in costs due to the different types of
equipment used, rather than differences specifically associated
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with or reflecting the characteristics of the various commod-
ities transported and the specific points served. Of course,
it is a distinct characteristic of fresh vegetables to require
refrigerated cars for their transportation and consequently
cost calculations reflecting those peculiar to reefer cars
automatically reflect important characteristics of transport-
ing that commodity.
Whenever possible, the requirements specified that cost
factor adjustments be made to reflect commodity characteris-
tics, so long as such adjustments are defensible on the one
hand and do not entail special operating or cost studies per
se on the other.
Reflection of Non-Cost Related Ratemaking Factors
This task recognized the reality that non-cost related
factors play an important role in the ratemaking process, both
from the carriers' and shippers' viewpoints. In particular,
it was required to assess the specific effect the various
non-cost factors may have had in the carriers' rate setting
procedures. Put differently, to the extent that competing
virgin and secondary commodities are rated at different levels
and consequently provide different rates of contribution to
carrier fixed costs and profit, the rationale employed by
the carriers was to be examined and reflected upon.
Effects of Transportation Charges
In this concluding task, this study is to determine the
relative effects of transportation charges applying to com-
peting virgin and secondary materials, typically expressed as
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a percentage of the commodities' delivered price, including
the cost of transportation contained therein. ,
Here, too, it was recognized beforehand that the mere
comparison of transportation rates or charges applicable on
some average basis and as a component of some average deliver-
ed price for each of the study commodities would not be a
satisfactory or useful study product. Two interrelated
reasons account for this. First, the competing commodities
are not technologically comparable on a unit for unit basis;
simply, a ton of iron ore is not comparable to a ton of iron
and steel scrap. Second, utilization of the secondary ma-
terials selected for study in lieu of virgin materials, in
most cases also requires substitution of or quantitative
changes in the utilization of other materials. For example,
the substitution of glass sand with cullet significantly
affects the use of soda ash.
Consequently, the determination of the effects of trans-
portation charges task has a prerequisite, namely the deter-
mination of product equivalencies to permit the subsequent
comparison of appropriately adjusted quantities and mixes of
virgin and secondary commodities. This prerequisite was in-
cluded as an integral part of this scope item. ,
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III. RESEARCH METHODS AND DATA EMPLOYED
Introduction
This report chapter contains a brief summary description
of the principal research and analysis methods employed in
the performance of the herebefore described work scope; the
data resources utilized are also noted. To the extent
practical, the chronology of these topics follows the task
order described in the preceding section 3.
One Percent Waybill Sample, Computerized Processes
Prior to the initiation of the study, it had been deter-
mined to use, as the principal data source for study commodity
movements, the 1969 One Percent Waybill Sample prepared by
the Interstate Commerce Commission. Hence, upon determination
of the commodities to be studied, an extract of the I.C.C.
Waybill tape containing the full data base for the selected
commodities was obtained from the Commission's Bureau of
Economics. This extract tape was merged with a Standard
Point Location Code (SPLC) data base in order to interpret
the numerical origin and destination codes.
Subsequent to the performance of several control and
correction computer runs of the "master tape", a master
printout of all records in commodity order was prepared. A
series of programs was then prepared to permit the resorting
and extraction of selected items from this data base. Among
these were programs designed to obtain listings of perfectly
matched moves, e.g. same origin and destination points for
the commodity pairs, moves with common origins, common des-
tinations or common destination territories. Next were a
series of programs for analytical functions including summa-
tions of moves expressed in numbers of waybills, cars, tons,
ton-miles, revenue, type of rate, and predominant type of
car used.
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Upon determination of the final "common move" selection
criteria, programs were prepared to select the waybill data
corresponding to the defined criteria. For the resulting
subsample of the I.C.C. furnished data base, printouts were
prepared containing the information needed for tariff searches
and costing. To determine the representativeness of the
common moves selected for study in terms of distance, a pror
gram was designed and an analysis prepared of all waybills
and selected waybills by 200-mile blocks, by origin terri-
tory, destination territory and high density corridor. This
revealed gaps of representation. Thus, for example, common
moves which did not contain some hauls were corrected -by add-
"ing "supplemental moves", chosen from the hitherto unrepres-
ented mileage blocks. This additional selection process was
performed manually; the only constraints placed upon it were
that the supplemental moves be from among those in high-den-
sity corridors, that to the extent such were available in the
computerized data base and/or from industry furnished data,
no fewer than two moves per mileage block be selected and
that the combined number of common arid supplemental Amoves be
no less ithan 25. (These objectives were not reached for
several commodities due to data deficiencies.)
Finally, a summation and analysis of all waybills con-
tained in the data base was completed; it was organized by
destination territory and contained totals and averages .re-
spectively for tons hauled, revenues billed, loaded car-miles
and revenue ton-miles, revenues per car and per ton, per
car-mile and per ton-rmile.
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Industry Furnished Data
Through the auspices of the various trade and industry
associations, requests were made for the provision of move-
ment data for the respective virgin and secondary commodities
by all applicable modes. Each participating organization was
requested to supply pertinent information on at least five
hauls, chosen from among recurring movements and without
bias as to their relative rate levels.
Industry participation turned out to be substantially
less than was anticipated, particularly in those industries
for which the Waybill data base also provided less than the
desired volume of information. However, paper board industry
participants did conduct a survey of their inbound movements
for a randomly selected work week.
Another facet of industry participation dealt with the
reconciliation of carrier rate and charges data. As noted
in the section following, the tariff search results were com-
pared in all instances with the revenue information contained
in the Waybill file. Where differences between the figures
could not be explained or rationalized with the information
in hand, shippers of the respective commodities were queried
for reasons explaining these unreconciled differences.
To secure any available operating and cost studies
which would permit the derivation of adjustments to the
available cost factors, extensive enquiries were made among
industry associations and their members. Regrettably, these
efforts resulted merely in the confirmation that such data
were not available on any basis which would permit their use
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in the context of this study. Review of data available from
several large shippers showed that cost studies made by them
either employed regional cost factors or specific cost fac-
tors applicable exclusively to a particular location or spe-
cific origins and destinations.
Finally, industry traffic officials were also consulted
to obtain their views on rate and cost aspects and product
equivalencies.
Rate Search
Using the computer printouts noted before as the require-
ment log, the tariffs on file with the I.C.C. were searched
for identification of the published rates applying to each of
the study moves. This tariff search procedure included the
location of Rate Bureau Tariffs covering the origin and des-
tination points or group of points and tariffs published by
agents for a particular carrier. Where Bureau and specific
carrier tariffs were found to apply to a particular move,
that rate which either equalled or came closest to the reve-
nue shown in the Waybill data was used» In addition to
identifying the rate per unit of weight and the minimum
weight required per carload, these tariffs were also examined
for any special provision in these categories: limitations
on applicable equipment, accessorial charges, special rules
on free time for loading and unloading, equipment supplied
by shippers. Though these types of special tariff provisions
are not the only significant rules, they were judged to be
those having the greatest economic impact upon the users of
these rates. Put differently, often a rate per se is not
-16-
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the only economic factor of significance to the shipper; if
the tariff restrains the rate's applicability to a loading
period of 24 hours, for example, and it requires special
efforts, such as overtime work, to meet that requirement,
what may appear to be a relatively low rate, could in fact
be a much higher rate when the cost of premium overtime is
also taken in consideration. These special provisions were
impossible to quantify under the constraints of this study,
but their existence is noted in our analyses.
The rate information obtained from these tariff searches
was compared with the rates derived by dividing the revenue
shown in the Waybill data file with the quantity of each
study move (revenue r tons). Where discrepancies were
found to exist, the following procedure was adopted:
a. The derived rate was examined to determine whether
the minimum weight had not been met and therefore
a higher rate per unit of weight was billed.
b. The derived rate was examined to determine whether
an intrastate or switch rate might apply which was
not found in the tariff searched.
c. The tariff was rechecked.
d. Industry traffic officials were consulted to ascer-
tain the cause of the discrepancy (it should be
noted that no reasonable method could be developed
to check the accuracy of the revenue figure, and
for that matter any other figures, contained in the
Waybill file, as access to and detailed examination
of the hundreds of waybills was not feasible).
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Any remaining unresolved differences were then treated
as follows:
a. For industries where only a few discrepancies re-
mained and the rates obtained from tariff searches
mostly corresponded with the derived rates, tariff
figures were used consistently for these industries;
this is the case for the iron and steel, secondary
aluminum and paperboard industries.
b. For those industries where greater numbers of dis-
crepancies were observed and remained unreconciled,
the lower of the published or derived rates was
uniformly used. This method assumes that where the
derived rate was shown to be lower than the lowest
published rate found, some special rate applicable
to a particular move may have been published in a
tariff supplement not located during the tariff
search. Of course, this phenomenon, where the re-
l
ported revenue is lower than the apparently appli-
cable rate provides for, can also mean that some
lower inapplicable rate was in fact used.
c. Finally, the existence of errors in the Waybill re-
venues and/or tonnage data cannot be dismissed.
Though carriers are to have reported these data by
submitting copies of audited waybills, there is
ample opportunity for human error to be contained
in the information reported to the I.C.C. and in
the processing functions creating the Waybill file.
As noted before, no method could be devised to re-
move these types of errors from the file, if indeed
they exist.
-18-
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Motor carrier rates furnished by industry sources
included tariff citations; spot checks only were made of
these rates and found to be accurate.
All rates searched were established at the 1969 rate
levels, generally and where applicable including the Ex
Parte 259 B increases authorized by the I.C.C. as of November
28, 1969.
Costing
Though we are keenly aware of the often voiced deficien-
cies and inadequacies of the costing methods devised by the
Section of Cost Finding of the I.C.C., there is no other costing
method presently available which can be applied on a uniform
and unbiased basis to traffic consisting of different commod-
ities and moving in all parts of the Nation. Consequently,
we have followed the procedures prescribed by the application
of Rail Form A (RFA) and Highway Form B, and in particular
have applied the Rail Carload Cost Scales by Territories for
the Year 1969 (Statement No. 1C1-69, issued by the I.C.C. as
information but not adopted by the Commission). For the
small number of motor carrier moves costed, cost data were
extracted from Statement No. 2C1-70, Cost of Transporting
Freight by Class I and Class II Motor Common Carriers of
General Commodities, also issued as information by the I.C.C.
Bureau of Accounts.
While a full description here of these procedures would
result in an unduly long and unnecessary description, the
following highlights are necessary to provide information on
the specific processes followed:
-19-
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a. For each commodity a predominant type of car was
selected based on the information contained in the
Waybill file.
b. The cost factors for each type of car and each of
the seven cost regions were assembled resulting in
four cost factors, two each for terminal and line
haul cost calculations.
c. These cost factprs were modified for iron ore to
reflect studies by the Section of Cost Finding and
cooperating railroads; these adjustments have cost
reducing effects as follows:
Cost Region III Cost Region VII
per cent per cent
Line haul per ton 26 27
per car-mile 11 18
Terminal per car-load 51 51
per ton none none
The effect of these cost factor adjustments as cpmpared
with the results obtained from costing of study moves by
application of the unadjusted regional cost factors were for
hauls in the various mileage blocks as follows:
Per Cent. Reduction
Of Variable Costs
Haul distance up to 60 miles 42
61-150 miles 35
151-350 miles 26
Over 351 miles 23
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For each of the study rail moves a computer printout
was prepared showing, inter alia, origin and destination
territory, short line mileage and the code for the origin
carrier. Each move was then assigned to a cost region based
on the groupings the origin carriers are assigned by the
I.C.C. Cost Section. It is to be noted that rate and cost
regions are not synonymous, though in large measure they
overlap. Cost regions are not generically geographic re-
gions; they represent groupings of specific carriers and
sub-groupings for two of the territories. Figure 1 follow-
ing shows the five rate territories. Territory I, Official,
is divided into cost regions I - New England, and II - Offi-
cial excluding New England; similarly, rate territory V
covers the approximate geographic areas of cost territories
V, Western District, excluding Mountain Pacific and VI,
Mountain Pacific,and Trans-territory.
While for intraregional moves the cost factors for the
appropriate region were applied, for interregional moves
the following procedure was followed: the shortest avail-
able route was identified by tracing the haul on a standard
railroad map; the mileage for each participating carrier
was calculated and all segments summed; this total was com-
pared with the total short line miles shown in the Waybill
file; the difference between these totals, if any, was ascer-
tained and applied on a percentage basis to each segment of
the interregional move. The resulting mileages were applied
to the line-haul cost factors for each of the applicable cost
-21-
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MM".-
Western Trunk Link (WTL)
Official (OFF)
Southwestern (SW)
U.S. RAIL RATE TERRITORIES
-------
regions. Terminal costs were calculated by applying origin
terminal costs at the level of the origin cost region and
destination terminal costs at the level of the destination
cost region. No adjustments were made for the specific
numbers of line-haul interchanges inasmuch as the calculated
routing is not necessarily the actual routing for that traffic.
The origin carrier will normally move the traffic for the
greatest possible distance over its line, thereby minimizing
the number of interchanges, whereas we calculated the short-
est distance, consistent with the short line mileages contained
in the Waybill file.
The resulting variable cost calculations for each study
move were then posted to the Master Tables, Appendix A, and
the therein shown calculations of revenue to variable cost
relationships performed.
Contribution
The term contribution, as used in this report, refers to
that share of carrier revenues realized for a particular haul
or number of hauls, which exceeds the calculated variable costs
incurred in the performance of those transportation services.
Thus, contribution as a percent of revenue means total revenue
less variable costs with the difference divided by revenue.
Contribution per car means total revenue less variable costs
per car.
Inevitably the question is raised "what about fixed or
constant costs?" The Section of Cost Finding has devised
methods for the allocation of constant costs. While these
methods are recognized as having some limited value in certain
cases of overall revenue need analysis, allocation of constant
costs is not useful in the context of this study. By defini-
tion, these costs are not variable wi.th traffic—they exist
-23-
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regardless of the presence or absence of any particular
traffic. They are therefore unallocatable on .the basis of
any cost-causing responsibility to any traffic.
It is true that there are numerous ways in which rail
constant costs may be distributed for accounting reconciliation
purposes. These include:
a. ton and ton-mile basis
b. car and car-mile basis, similar to the RFA ton and
ton-mile basis
c. carloads originated and terminated
d. loaded car-miles
e. loaded and empty car-miles
f. tons originated and terminated
g. net ton-miles
h. constant costs as a percentage of out-of-pocket
cost separately for line haul and terminal
i. constant costs as a percentage of out-of-pocket
cost without regard to line haul and terminal
Application of these methods in one test case would have
produced constant costs of $1.69 to $2.96 per ton, the low
representing the car-load basis and the high the net ton-tmiles
basis, c. and g. above respectively.
The essential fact is that carrier pricing policies should
a-nd d'o recognize the presence of both variable and fixed costs.
The function of costs is limited to the determination of a-
"rate floor" reflecting the variable costs, including operat-
ing expenses and capital costs. Beyond that cost floor the
ratemaking process is not tied directly to costs. Instead,
the ratemaking factors discussed in a later chapter of this
report come into play in determining the level of rates. Put
succinctly, fully allocated costs, e.g., variable plus constant
costs, serve no purpose in the, railway ratemaking process.
(Variable costs are those which vary directly with changes in
the carrier's operations or volume of traffic; they are the
-24-
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minimum level of expenses which must normally be recovered
by a carrier in providing particular services. Fully
allocated costs, on the other hand, are variable costs plus
those constant costs which are assignable to particular
services.) The judgment of the rate maker is applied typically
•
to determine how far above variable costs he can fix the rate
and still move the maximum amount of traffic. The object,
in principle, is to obtain from each segment of traffic the
maximum total contribution to fixed costs, subject to overall
constraints on total return on investment and other elements
contemplated by the Interstate Commerce Act. Tests of
discriminatory rates, however, do not rest on arbitrary
allocations of constant costs.
In this study, contribution is that share or amount of
carrier revenues which exceeds the cost floor. It is important
to remember that contribution is not synonymous with profit
or return on investment; rather, contribution here represents
the rough equivalent of gross margin or the product of revenue
less direct costs in a manufacturing operation and that this
contribution is the sum of money from which carriers must
defray their fixed costs and earn a return on their investment.
This comparison is imprecise to the extent 1969 railroad
variable cost factors also include an element for cost of
capital which is not the case in conventional gross margin
calculations.
Cost of capital included in the cost factors applied in
this study is defined as the interest payments on outstanding
debt; it, too, is separated between variable and constant
portions. Axiomatically, return on the equity portion of
carrier property is excluded from the variable cost factors.
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Statistical Analyses
Study Industries
The work scope was designed to include a statistical
analysis relating the cost of transportation incurred by the
selected industries, to the extent geographical differences
exist, to the production of these industries on a comparable
geographic basis. To this end attempts were made' to identify
the location of the selected industries' plants, and their
production in terms of value of shipments or value added by
manufacturing. The purpose of such an analysis would be
the development of some estimates showing the effects of
geographically different transportation costs—be they due
to variation in transport service pricing by the carriers,
relative distance of plants to their sources of supply, or
other causes—upon the national output of these industries.
Several causes prevented the completion of this effort
as originally conceived. However, average transportation
costs for rail movements by rate territories were developed
and for most of the industries the collateral effect of the
geographic differences was related, to output.
Among the causes precluding the intended analysis are
the inconsistencies in the statistical series available for
the various study industries, the aggregation of data to
avoid disclosure of proprietary information and the
impossibility to determine whether movements for the study
commodities were, in fact, destined for plants in the selected
industries or others using the same materials.
The geographical overviews developed with the available
data were applied to obtain estimates of the effects of rail
freight charges by applying the territorial rate averages .
-26-
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Trend of Rates Over Length of Haul
The behavior of the rates relative to costs was analyzed
by length of haul. Since rates for any given commodity are
not literally based on mileage alone, it has been found that
often two movements of the same distance in different areas
may pay different rates. Hence, for purposes of a trend
analysis, averages must be developed. This objective was
met by application of regression techniques. The methods and
results are detailed in Appendix B.
To avoid undue influence of atypical rates, observations
which were found to be clearly outside a normal pattern for
reasons which could be explained were excluded from the
regression analysis. For example, unusually low intrastate
rates for moves between a "captive" origin and destination
were excluded. These are moves between shipping points
controlled by the same organization, oftentimes involving
dedicated equipment in shuttle service for which sometimes
special point to point rates are made. Importantly, moves
of this type and others which were found to take unusually
low rates also incur lower than average variable costs.
Hence, their inclusion in the regression without appropriate
cost adjustments would cause distortion. These moves are
noted in the figures contained in each of the industry-
commodity sub-chapters.
Representativeness of Study Moves
In order to determine whether the moves selected for
study for each of the eleven commodities (synthetic and
natural rubber counted as one commodity) are representative
of the universe of traffic contained in the Waybill sample,
sets of randomly selected observations were tested against
the study moves.
-27-
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The statistical techniques applied and the table of
resulting values are contained in Appendix C. These random
sample tests confirmed that both sets of data were of the
same family; in only one case was there a significant
difference at the five percent level and it was only
marginally greater than the five percent value. .This result
is well within the bounds of chance and does not impair the
validity of the findings.
Product Equivalencies
To permit the derivation of the effects of transportation
charges upon the prices paid by consumers for the competing
commodities—a principal objective of this study—it is
necessary to define the technological equivalencies for the
competing commodities. As used here, the terni technological
equivalency is to be understood to mean the quantities
of a virgin material needed to produce a given quantity of
output as compared with the quantity of a secondary commodity
needed to produce the same output; e.g., a ton of waste paper'
and .88 ton of woodpulp produce an equal amount of paperboardl
While it is recognized th.at great variations exist between
different grades, qualities, and the specific methods Of pro-
duction in each industry, broad approximations of product
equivalencies are useful in developing general industry
relationships. Certainly, the factors cannot be used for
any individual plant.
The methods employed to develop the needed equivalency
formulae included the review of existing literature and
personal contacts with technical industry experts. For
several of the industries rather widely differing, opinions
were noted. One such, concerning the appropriate quantity
of coal to be included in the steel making formula, is found
-28-
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in an order of the I.C.C. (Environmental Impact Statement;
page 100) and a study by Battelle Memorial Institute (Summary
Report on the Impact of Railroad Freight Rates on the
Recycling of Ferrous Scrap, to the Institute of Scrap Iron
and Steel, Inc., January 14, 1972, page 13). This difference
appears to revolve around the question of whether coal for
the supply of heating energy must be included to develop
comparable values for a formula comparing the use of iron
ore versus scrap.
The procedures adopted by us have consistently excluded
the energy component except where a fuel is required to
perform a chemical transformation for one material but not
for the competing material. An example is iron ore which
requires coke for the oxygen reduction which is not needed
when scrap is used.
Effects of Transportation Charges
This step requires the application of delivered product
prices (including the transportation component) to the
product quantities determined in the equivalency formulae.
Various sources were used for the identification of
product prices; in the selection of sources emphasis was
placed upon their reliability. While data contained in
price series published by agencies of the Federal government
were generally accepted as reported by those agencies, other
sources (mostly industry and trade papers) were also consulted
to determine whether any significant variations existed.
Where the latter type source was used, efforts were made to
determine the validity of the methods employed by the source
in collecting the information. The results were subjected to
-29-
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review by industry experts and adjustments made to reflect
their comments. For example, the average price of scrap paid
by the integrated steel industry consists of a certain mix
of different grades, excluding those grades which are
predominantly used by foundries. .
Where significant differences in-product prices,
excluding the transportation component, appeared to exist on
a geographical basis, national averages, if available, were
used. In other cases where a national average was not
available, multi-locational averages were developed by
weighing consumption figures for the various regions with
the prices reported for each of these regions. ;
The transportation component, either included in the
delivered material price or added to the price f.o.b. the
supply source, was developed by calculating the mean
transportation charge for the study moves. The mean movement
distance applicable to the calculated transportation charge
was also developed. Consequently, except for the relatively
small geographical differences in transportation charges by
rail, the tables developed permit estimation of transportation
charges for any distance within the mileage ranges applicable
to each commodity. Such estimates, though they may not
accurately reflect the freight charges, incurred by any
specific plant, can be useful in determining the approximate
range of charges applying to consumers of virgin and secondary
materials in the various rate territories.
In addition to the application of this mean value, the
high-low range of transportation charges was also computed
for study commodities by using the average of the two highest
and the two lowest rates found among the study moves.
-30-
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Consequently, it was feasible to apply a high, a low, and a
mean rail transportation charge to the respective quantities
of study commodities.
For non-study commodities, such as coal and limestone,
national average rates as shown in DOT Statement TD-1 were
used. For commodities for which specific figures were not
available in TD-1t either the closest commodity aggregation
was used or a sample of rates was collected from published
tariffs. Generally, the transportation charges for these
miscellaneous commodities are of minor significance.
-31-
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IV. INDUSTRY-COMMODITY ANALYSES
This chapter contains data and findings for each of the
study industries—commodities for the work scope items
described in Chapter II. The methods and data
described in Chapter III were generally employed; exceptions
are noted in specific industry subchapters. In the main,
this chapter's analyses deal with the cost related aspects of
rates paid by the consumers of transportation services.
Findings applicable to more than one industry or pair of
commodities are summarized in the concluding chapter section.
Iron and Steel Industry
Introduction
The integrated steel industry, SIC 3312-11, consists of
plants producing both pig iron and steel. These plants
convert iron ores and other raw materials to intermediate
iron and steel products. In their manufacturing process.es
they produce and consume iron and steel scrap; most of the
scrap produced in the pig iron and steel making process,
called home scrap, is reused by the same mills. However,
these integrated plants also purchase scrap and consume it
as a substitute for iron ore, coke, and limestone.
The integrated part of the industry is the producer of
the largest share of the Nation's steel production. In 1970,
the plants categorized in the above named SIC numbered 59
(Iron and Steel Works Directory, American Iron and Steel.
Institute, New York). Of these, 1.6 were in Ohio, 15 in
Pennsylvania, five in Illinois, four in Indiana, and four
in New York; the remaining 15 plants are located in ten
states including three each in Michigan and Alabama, and
-32-
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two in Texas. As evident from this geographic breakdown,
shown in Figure 2, the industry is heavily concentrated in
the northeast and north-central regions. Figure 2 also
contains the value of shipments for each region, and the
national total for the year 1967. The latter total of
$9.7 billion is over 63 percent total steel mill products
shipments in that year. The integrated industry consists
mainly of large plants. According to U.S. Bureau of Census
data, Concentration Ratios in Manufacturing, MC 671(S)-2.1
and MC 67(S)-2.3, the four largest manufacturers accounted
for 51 percent of total shipments and the eight largest ones
for 69 percent of the total.
While this segment of the steel industry consumes most
of the iron ore, it is not the largest consumer of purchased
scrap. The non-integrated steel industry includes electric
furnace plants which consume almost exclusively purchased
scrap as their primary raw material charge.
The Commodities
Iron ore and iron and steel scrap were chosen as the
competing commodities for the analysis.
Most domestic iron ore is mined in the Lake Superior
region, primarily in the Mesabi Range of Minnesota, It
moves by rail to Lake Superior ports, then by lakers to
consuming mills on the lakes, or to lower lake ports for
transloading to rail cars, thence to interior destinations,
A small amount of Mesabi ore is shipped all-rail to consuming
plants. Ore is also mined in small amounts in various
Southern and Western States.
Import ores come principally from Canada (via the Great
Lakes) and South. America (via the ports of Philadelphia,
-33-
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oo
LOCATION OF PIJAKTS ANB VALUE of SHIPMENTS-FROM FULLY INTEGRATED
titAST FURJ»A'CES': AND STEEL MILLS
sic 33i:'-ii
utal number of
plants, 1971 - 59
dtal shipments - fin
millioiis of $> - 9.056.7
Source: AISI and *
Crn.sus of '
\Heavy lines indicat
census regions
'
-------
Baltimore, and Jersey City) to consuming plants. Imports
have increased in recent years as the high-grade ores of the
Mesabi Range have been gradually exhausted.
Three types of iron ores were included in the 1969 one
percent sample of waybills: direct-shipping ores (STCC lOlll),
beneficiating grade ores (STCC 10112), and iron concentrates
(STCC 10113); no movements of beneficiating grade ores matched
any movements of scrap, so that this type of ore was excluded
in the study. This exclusion is of no importance, however,
since no distinction was made among the various types of ores
in this study except in determining applicable rates.
Iron and steel scrap is used in furnaces and foundries
as a source of iron. It is graded according to source,
cleanliness, iron content, and size. Consumers -obviously
prefer scrap with a known composition and a known source;
sellers are required to abide by specifications promulgated
by ISIS— , and prices are set in accordance therewith.
The Bureau of Mines reported in a news release, December
27, 1972, that approximately 89 million short tons of scrap
were consumed domestically in 1972, and another 7.5 million
tons were exported. The record year for ferrous scrap
consumption was 1969, when mills and foundries used 94.8
million tons.
Three categories of iron and steel scrap are recognized:
(a) Home scrap, generated in iron and steel furnace operations
and rolling mill operations. It is usually reused in the
I/ Specifications for Iron and Steel Scrap 1971, Institute
of Scrap Iron and Steel, Inc.
-35-
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same facility where it was created and hence is not transported;.
(b) Prompt industrial scrap, a by-product of the iron and
steel fabricating industry, (c) Obsolete scrap, which includes
such items as automobile hulks, used railroad cars and
equipment, and incinerator and dump salvage.
Movements of both prompt industrial and obsolete scrap
(collectively called purchased scrap) were included in this
study, but no attempt was made to distinguish between the
two types for transportation analyses.
Transport Characteristics
While nearly all of the iron ore consumed in this
country moves by rail, most of it also moves by water at
some stage. Of the 26 ore movements in the study sample,
all but five were ex-water, the railroad origins being either
East Coast or lower Great Lakes ports.
Waterborne Commerce of the United States, Calendar
Year 1970, published by the Corps of Engineers, shows that
47.9 million short tons of ore were imported, 6.1 million
tons were exported, and 72.2 million tons were moved in
lakewise service (exclusive of lakewise moves from Canada).
Class I railroads hauled 104.2 million tons of ore that year.
We ha-ve examined only that portion of iron ore
transportation which is comparable to iron and steel scrap,,
and have not attempted to construct a model that includes
.all the transportation from mine to steel mill. Thus, for
intermodal movements of ore, we have included only the ex-
water rail costs and revenues in the study.
Ore is very heavy loading; the Department of Transportation's
publication TD-1, Carload Waybill Statistics, 1969 reported
an average load of 76.2 net tons per car in that year. With
-36-
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few exceptions, ore also moves in multiple-car and trainload
lots; the DOT report shows there were an average of 70 ore
cars per waybill. The average move in 1969 was relatively
short—239 miles.
Due to the geographical concentration of iron ore, just
a few railroads traditionally have handled the bulk of the
ore traffic. The Duluth, Missabe & Iron Range Railway in
the Lake Superior District, and the Bessemer & Lake Erie
Railroad and the Detroit, Toledo & Ironton Railroad on the
other end of the lakes, have been the main ore carriers for
decades. Others, such as the former New York Central, the
Erie, and the Reading have also handled large quantities.
With the ore supply coming increasingly from Venezuela
and other foreign points, other railroads have begun to share
in the ore traffic. The Baltimore & Ohio, the Western
Maryland, and the Penn Central are now handling large volumes
of ore through East Coast ports.
The scope of the ferrous scrap transportation study was
also limited to movements from collection or processing
points to mills; movements to the initial collection points
were not examined. These excluded movements are part of the
total logistics process, and affect the total price of scrap.
However, most are performed by exempt carriage; little data
about them are available. These movements represent a
collection, rather than a line-haul function. This study
was concerned with line hauls exclusively.
Iron and steel scrap moves to mills, in the main, by
rail, for several important reasons. Ferrous scrap is
heavy loading and lends itself to bulk rail movements. For
safety reasons, trucks generally are discouraged from entering
most mills. Further scrap is sold subject to weighing and
-37-
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inspection at the receiving mill; rail cars can be weighed
and their loads inspected without interference to mill
operations, while trucks would have to be handled whenever
they arrive. Also, the much smaller quantities trucks would
be able to haul would cause congestion at ;the mills.
Finally, scrap is not an exempt commodity in barge
transportation and thus has been subject to relatively high
rates by that mode (compared with exempt commodities). Over-
all, barge movements of ferrous scrap are not significant.
In the winter, when the St. Lawrence Seaway is closed, some
scrap moves from Chicago to New Orleans by barge for export.
The Granite City Works, located on the -Mississippi River at
Granite City, 111., is the only integrated steel plant known
to be regularly receiving scrap shipments by -barge.
The following statistics abstracted from -TD-l are of
interest:
Table 3
Transport Characteristics
Iron Ore and Iron & Steel Scrap
Iron Ore IfcS Scrap
Average length of haul, miles 239 150
Average cars per waybill 70 5
Average lading per car, tons 76 55
.Average revenue per car, $ 174 246
Some movements of scrap range up to 1,400 miles,
si-gnificantly longer than the longest ore movements; however,
these are some high grades of steel scrap, probably mostly
stainless, for which line-haul transportation costs have a
lesser effect on total costs than for the lesser grades of
scrap.
-38-
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Comparative Analysis
Twenty-five movements each of ore and scrap were selected
for study based on the common moves criteria. In addition,
one supplemental move of iron ore and five of scrap were chosen
to make the sample more representative of the national traffic
picture for these commodities.
In computing the variable costs of the movements, Rail
Form A cost factors for open hoppers were used for the ore
moves and gondola cost factors for the scrap moves.
As noted in an earlier chapter, the cost factors for
iron ore movements were adjusted to reflect trainload
characteristics. Contrarily, cost factors for multiple car
operations of scrap were not adjusted. Some reductions in
terminal switching and clerical costs per car might be
appropriate; however, no reliable adjustment factors are
presently available. The effect of these excluded adjustments
is some overstatement in scrap variable costs and understatement
of contribution.
In assigning rates to the various movements, published
rates found to be applicable as the result of a tariff search
were used, regardless of the revenue stated in the waybills.
In most cases, however, the two figures were reconciled.
Rates shown in the Master Tables (Appendix A) are those
used for analytical purposes, and are solely line-haul charges,
except that port charges for import movements of iron ore are
included where applicable. Ex-Lake rates apply to ore loaded
in cars; the handling charge from vessel to car varies by
season, volumes and other factors; an average handling charge
is customarily applied to the ex-lake ore price, rather than
the freight rate. Accessorial charges are not included.
-39-
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It might be noted that for export shipments of scrap—excluded
from this study—-in addition to the rail freight charges,
shippers also incur a substantial unloading and transfer
charge. It is reported to amount to $3.60 per ton when
export shipment is via a railroad-owned terminal.
Common Moves
The 25 matched movements of ore and scrap revealed some
consistent patterns:
a. Ore loaded heavier than scrap with the exception
of only three pairs of movements. In those three
exceptions, the scrap loads were 88, 72, and 62 tons-
all above the average for that commodity.
b. Without exception, costs per car and per ton were
lower for the ore moves. This is due to the major
cost characteristics applicable to the ore movements,
including the heavier lading and multiple car
shipments.
c. Likewise, rates per ton were always lower for ore
than scrap. Revenues per car were low^er for ore
in all but two cases, in which the ore loaded
considerably heavier than the scrap.
d. Scrap mpyes were more profitable for the railroads—
in terms of contribution per car,—in all but five
instances. In those five cases, the ore movements
were at least twice as heavy as the matched scrap
movements. In three of the cases, the ore cars
were three times as heavy as the scrap.
Variances due to length of haul were minimized in this
.common moves procedure, since the mileage of one move was
always within 10 percent of the other.
-40-
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All Study Moves
These analyses differ from the preceding ones in that
emphasis has been placed on all moves selected for study—
not just the common ones—and on the derivation of broader,
general conclusions.
Taken together, the iron ore moves selected for study
have an average lading of 81.3 tons and a range of 460 miles.
The scrap moves, on the other hand, have an average load of
55.5 tons per car and a range of 1,316 miles.
Table 4 and accompanying Figure 3 show the behavior of
rates and costs over distance. As would be expected,
revenues for both ore and scrap rise with distance, while
revenues and costs per ton-mile decline over distance.
Rates for the scrap are shown to be consistently higher
than those for ore, regardless of distance. In all but one
mileage block, the scrap rates (revenues) per ton are at
least double those of the ore. This difference can be
attributed in part to the higher costs of hauling the scrap,
e.g. the diseconomies associated with moving lighter cars
and fewer cars at a time. In addition, some of the difference
can be laid to other ratemaking factors. The differences in
the amount and rate of contribution generated by the two
commodities are shown in Table 5 and Figure 4. They reveal
two salient facts:
a. The railroads consistently earn a greater
contribution per car for scrap than for ore,
except for the very short moves; and
b. Contribution as a percent of revenue declines with
distance at a greater rate for ore than for scrap.
-41-
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RAILROAD REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
Table 4
Virgin Commodity: Iron Ore
Secondary Commodity: Iron & Steel Scrap
Mileage
Blocks
0-68
112-149
151-177
226-385
434-513
821-1252
All
Blocks
No. of
Moves
5
6
6
7
2
-
26
Average
Rev/Car
$
144
209
174
277
272
211
Average
Rev/Ton
$
1.77
2.28
2028
3.47
3.91
2.60
Average
Rev/
Ton Mile
$
.028
.016
.014
.010
.007
.012
Average
Var .Cost/
Ton Mile
$
.013
,008
.008
o006
.006
.007
No. of
Moves
5
4
7
7
3
4
30
Average
Rev/Car
$
228
288
351
461
472
623
398
Average
Rev/Ton
$
4.08
5.46
6.11
7.52
7.05
17.43
7.17
Average
Rev/
Ton Mile
$
.066
.042
.037
.023
.015
.016
.024
Average
Var .Cost/
Ton Mile
$
.033
.020
.016
.010
.008
.010
.012
Note: Averages for all blocks represent totals for all study moves divided by appropriate
total service units, e.g. total revenue * total tons moved, total variable costs •*
total ton miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
AVERAGE REVENUE PER CARLOAD PY MILEAGE BLOCKS
STUDY MOVES OF IRON ORE AND IRON AND STEEL SCRAP
Figure 3
w
I
Mileage
Blocks
0 - 68-
112 - 149
151 - 177
?6 - 385
434 - 513
821 - 1252
Iron Ore
Iron Ore
fron^CSSVfee"l~Scrap
ron i Steel Scrap
(No iron ore movements at this distance)
Lron & Steel Scrap
100
i
200
400
300 400 500 600
AVERAGE REVEKUE PER CARLOAD (DOLLARS)
700
Source: Computed from Master Tables, Appendix A.
-------
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
Table 5
Mileage
Blocks
0-68
112-149
Virgin Commodity
Iron Ore
i
No. of Confrib. Contri.b.As
Moves Per Car % of Rev.
. . .
5 77.00
6 109.00
151-177 : 6 68.50
£ 226-385 7 103.29
l
434-513 2 55.50
821-1252
All Blocks : '26 87.84
53.3
52.1
39.4
37.3
20.4
41.5
Secondary Commodity:
Iron & Steel Scrap
No. of Contrib.
Moves Per Car
$
5
4
7
7
3
4
30
112.40
149.25
197.00
255.85
207.67
219.50
194.33
ContribiAs
% of Rev.
49.3
51.8
56.1
54.6
43.9
35.2
48.8
Source : Computed from Master Tables, Appendix 'A.
-------
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF IRON ORE AND IRON AND STEEL SCRAP
Figure 4
in
i
Mileage
Blocks
0-68
112 - 149
151 - 177
226 - 385
434 - 513
821 - 1252
Iron Ore
Iron Ore
l\io ore movements)
10 20 30 40 50 60 70 80 90 100
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Source: Computed from Master Tables, Appendix A.
-------
The behavior of these rates and costs over distance can
be summarized as follows:
Mileage Block. 1 (to 68 miters) --Re veiiue per car for scrap
is shown to be high relative to ore ($228 compared to $144, a
ratio of 1.585, see Table 4. Nevertheless, the cost per car
of scrap is even higher relative to ore ($105 compared to
$67, a ratio of 1.71). Therefore, even though it appears
the, carriers are charging considerably more to haul the scrap,
they are obtaining slightly more contribution for moving the
ore in this mileages block.
Mileage Block 2 (to 149 miles) — Revenue per car for
scrap again exceeds revenue for ore, but not as much as in
Mileage Block 1. the ratio is how i.3l ($209 for ore and
$288 for scrap) . The disparity in cost per car, ore compared
with scrap, dwindles even more markedly, to 1.39 ($130 for ore
arid $139 for scrap) . This has the effect of making th£
contribution percentage closely comparable for the two
cotnmoditie's — 52.1 percent of revenue for the oi-e arid 51.8
percerit o'l revenUe for the scrap.
e Block 3 (to 177 miles) --Revenue per carload of
ore drops slightly in this distance block due to some relatively
light ca-rs. fteverifue per ton remains as; high as in the previous
m'iiea'ge' block, frowever. Revenue per car and per ton of scrap
continue to rise. The notable change in this mileage block
is tiraTt wh'ile contribution as a percent of revenue declines
a'ga'in for ore, it actually rises f6r scrap (to 56.1 percent),
so* fh'a't the' contribution' rate for scrap now exceeds tha't for
ore.
Subsequent niileffge blocks— Even though the ore rates
geriefa'lly rise' with distance, costs of ha'uling the ore' rise
-46-
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more, resulting in a lower rate of contribution as distance
increases. Contribution as a percent of revenue drops to 20.4
percent in the last mileage block, from a high of 53.3
percent in the first block.
Scrap rates also rise over distance, but at a lesser
rate than costs, so that contribution as a percent of revenue
declines gradually as distance increases. Nevertheless, the
percentage contribution for scrap consistently exceeds that
of ore. Even in the last mileage block, scrap rates are
contributing an average of 35 percent of revenue.
To illustrate these percentage contribution changes
over distance, the actual observations were plotted and lines
of best fit were calculated by the least squares method; these
representations are shown in Figures 5 —' arid 6.
The line for ore declines at a markedly greater rate
than the line for scrap. The equation of the linear
regression (Appendix B) shows that the ore line declines at a
rate 3.8 times the slope of the scrap line.
Analysis by Destination Territory
A final comparative analysis was done to identify rate
differences by destination territory. Its purpose is to
show what consignees actually paid for transportation on
average, and reflects differences of location, relative
distances from material sources, and, of course, rate
differences between ore and scrap. The entire waybill data
file was used for this analysis, since there was no need to
relate the data to operating costs, which, of course, are
not contained in the data file. The data are summarized in
Table 6.
I/ Solid line depicts line of best fit, broken lines show
confidence bands.
-47-
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Figure 5
66
50
c
o
0>
fi. .
i 40
00 C
! O
•H
•»
-H
£ 30
c
i 5
20
10
i
l •
i
i
i
. .*
i
| s
—i «•-•
L*"*'
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(
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r
i
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ci
s«
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vKT"1
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r r._ , iv
-t- ,
t. i - - 1 -
i
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-
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—
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STCCf 101 iron' Ore-
Cohtributioh as a Percentage of Revenue"
i"
..
|
.
—
:
i
'
.
•
—
.- - . .
i
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i
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i i ! i I
i 1
1
' • '
O Intrastate haul
EJ [Possible rate error
might be 22%
600 ^ 750' 900 t05a- ¥26~0:> 1^00
Miles
-------
IO
70 .
60 \
Figure 6
STCCi ^0211 Iron & Steel Scrap
Contribution as a Percentage of Revenue
"4"~hLtni
10
1
*
!
i
I
i
! i
L . _j__.
' !
i i
i
i \
•
\ -.
\ i
i
i
i
!
i J
Kotos No hauls in high-
density corridors in
aiileage blocks 40G-BOO and
1000-12000.
0 Intrastate haul
Q Light loads of 26 and
46 tons
^00
1050
1200
1350
1500
rales
-------
TABLE 6
Ra.te. Differences By Destination Territory,,
Iron Ore. and Iron & Steel Scrap
IRON ORE I&S SCRAP
De s t .; - , Avg. Rev--.
Ter.r ,.— , Per Tori
i
2.
3
4
5
$2 . 33
2.39
2.22
3.46
2.56
Avg.
Haul
(mi.)
200
216
255
310
246
Avg,. Rev,
Per
Ton -Mile
1.19$
1.13$
0.86$
1.11$
1.07$
•
Avg. Rev.
Per Ton
$4 . 24
4.95
5.13
6.71
4.35
Avg.
Haul
(mi.)
110
184
253
392
207
Avg. Rev.
Per
Ton -Mile
3.69$
2 . 54$
2.10$
1.91$
2.11$
I/ See Figure 1 for description of territories.
This table confirms the point made earlier that scrap
rates are consistently higher than ore rates, the ratio of
scrap rates per ton to ore rates ranging from a low of 1.7 in
Territory 5 to a high of 2.3 in Territory 3, and a mean of
almost twice the amount per ton of scrap as compared with
ore.
Tne comparison of revenue per ton-mile must take in
consideration the distance of the average haul (tho.ugh, of
cou-rse^ the rate analyses have considered this element also) .
The .pattern here, as shown in Table 6 is quite uneven for
orej and more consistent for scrap. The lowest revenue per
ton-mil^ for ore, 0.86$ in Territory 3, reflects an average
distance of 255 miles, about the same distance as in Territory
5., -for which a 24 percent higher ton-mile revenue is shown.
The highest ton-mile revenue is in Territory 1 which indeed
also has the shortest average haul. For scrap, the highest
ton-mile 'revenue is almost three times the lowest figure.
The latter applies fto the longest average haul, .and the
former to the shortest; this is consistent with variable cost
characteristics.
-50-
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Findings
Before summarizing the findings cited in the previous
sections and stating some conclusions, it should be emphasized
that the findings herein are based on a subsample of a sample
of railroad waybills, and that the totals and averages in this
report do not necessarily agree with comparable figures in
the Department of Transportation's so-called "Burden Study".—
Different methods of research account for the variances.
Costs considered, it appears that the rate levels for
ore and iron and steel scrap are not depressed and, in fact,
may be unduly high for scrap, as shown by the relative
contribution percentiles.
For the movements selected for study, ore revenues
amounted to 171 percent of variable costs, while scrap revenues
totaled 196 percent of variable costs. (The complete figures
, in the 1969 Burden Study, reflecting all sampled movements,
are 130 percent and 142 percent, respectively,) Thus, the
average contribution for the scrap was almost equal the
average variable cost. Fixed costs being less than variable
costs, the rates of contribution developed in this study
undoubtedly gave the carriers a return on investment. The
scrap contribution rate is 35 percent higher than that for
ore (96 percent as compared with 71 percent). For multiple
car shipments of scrap, actual costs might well be considerably
lower than those calculated and correspondingly the contribution
rate would be even higher. No doubt the most clearly documented
differences in relationship relate to the rates over longer
distances, where the scrap contribution stays high while
the ore contribution declines.
An Estimation of the Distribution of the Rail Revenue
Contribution by Commodity Groups and Type of Rail Car,
1969, Department of Transportation, September, 1972.
-51-
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The railroads' treatment of rates over distance seems
•' •". ''
more equitable and rational for Iron ore than for scrap.
Revenues per ton-mile for study movements of ore were high
for short moves (2.8 cents on average). Ton-mile revenues
then dropped progressively as mileage increased, so that
succeeding mileage blocks had averages of 1.6 cents, 1.4
cents, 1.0 cents, and .7 cents. Revenue per ton-mile for
the scrap dropped sharply in the second and third mileage
blocks, but rose slightly for the longest moves; no cost
related justification was found to explain this pattern.
Though this rate structure reflects a declining
contribution as a percent of revenue as distance increases
for both ore and scrap movements, their rates of decline are
quite dissimilar. The contribution rate for -the ore rates
dropped at an average of 5.3 percent per iQO'miles over
distance, while it declined at a rate of only 1.4 percent
for scrap. The railroads, in short, are keeping the rates
higher for scrap than ore. Put differently, while for ore
there.is an apparent reflection in the ratemaking of the
fixed terminal cost and the line haul per mile cost, such
is not the case for scrap iron. Quite clearly, the
declining variable costs per mile over increased distance
are not reflected in scrap rates in nearly the same manner
as they are in the ore rates.
The study provides no evidence that 'the carriers are
pricing in such a way as -to differentiate unfairly against
receivers in any particular region, for either ore or scrap.
This analysis varies somewhat from that of the I.C.C.,
as expressed in its report in Ex Parte 281 of September 27,
1972, and its supplemental Final Environmental Impact
-52-
-------
Statement. Citing 1969 Burden Study figures, the Commission
pointed out that in Official Territory (Official to Official
traffic) iron ore produced a higher ratio of revenue to
variable costs (143.1) than iron and steel scrap did (137.8).
Yet the reverse was true for the entire nationwide sample
(U.S. to U.S. traffic in the Burden Study). Those figures
show a revenue to variable cost ratio of 142.1 for scrap
and 130.0 for ore.
The Commission also analyzes revenue per car (see page
51, Final Environmental Impact Statement), using merely his-
toric average revenue per hundredweight and car. This is a
highly misleading indicator when presented without relevance
to costs and distance of haul. Indeed, we have recognized
the importance of the indicator "revenue per car" and have
focused on it in several of our statistical tables, but never
without relating it to a complementary indicator or factor.
As a general guide, a line haul move not generating $70 per
car is not an attractive move, on average, for any Class I
railroad (it may be attractive for a short line carrier or as
a switch move), because it does little more than cover ter-
minal and clerical costs. But how much more attractive is
a scrap car with a billing of $231 as compared with an ore
car producing revenue of $174 can only be shown by relating
these figures to the costs of the traffic. In fact, the
I.C.C. statement fails to provide any answer to the question:
to what extent, if any, is the 29 percent greater revenue for
the scrap car absorbed by greater costs for that average move
as compared with the average ore move?
-53-
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Our findings have, we believe, answered the foregoing
question. . .
In conclusion, emphasis should be placed on the movements
in the first three mileage blocks., since that is where the bulk
of the traffic is. Approximately 77 percent of the ore move-
ments and 76 percent of the scrap movements in the Waybill
Sample were less than 200 miles in length.
Looking only at this "short-haul'' traffic, the rates for
scrap are considerably higher than for ore. As noted previously
in 1.4.2. the difference in rates, .would appear cost justified.
However, while the service cost calculations for the ore :
movements are '.'adjusted" to reflect the peculiar characteris-
tics, of that traffic, those for scrap movements, regrettably,
are not comparably modified due,.tb: lack'of information* It
would be hazardous to speculate what.effects appropriate cost
factor modifications would have on the contribution rates for
these "short haul" scrap movements.. One factor'often mentioned
by the carriers is higher,than average repair costs for gondola
cars used in ferrous scrap service. If indeed it is,; the case—
a contention vigorously refuted by industry traffic men--it
may be.more than compensated for by the use'of relatively old
cars for which the .fixed charges are lower than the average
contained in the RFA formula. ,
An informed estimate tends to suggest that,the contri-
bution rate of 53.3^percent for .scrap, .as compared;with the
48 percent rate for. ore, in this.distance range to be under-
stated. Just how much greater the ^contribution to fixed costs
arid profit might in fact be, as noted, could not.be ascertained
in this study and any quantification of this informed estimate
would indeed be speculative.
-54-
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As noted at the outset of this subchapter, carriers by
railroad are the most significant transport mode for the
industry and commodities subjected to study here. Consequently,
our analyses were limited to movements by rail. It should be
remembered, however, that quite recently concern has been
expressed by scrap industry representatives over proposed
general increases in the freight rates of common carrier
barge lines for iron and steel scrap (see I&S Docket No.
8753, I.C.C., Verified Statement of Dr. Herschel Cutler,
Executive Director, Institute of Scrap Iron and Steel, Inc.).
Two important contentions were expressed. First, iron ore
is an exempt commodity, e.g. the transportation thereof by
barge is not subject to rate regulation, and therefore it
is not affected by any general rate increase applicable to
regulated commodities, including scrap; second, that the
proposed increase will further widen the already existing
gap in ore and scrap rates to the detriment of the latter.
According to I.C.C. rules and precedent the comparison of
regulated and unregulated traffic is inadmissible; moreover,
such comparisons can rarely, if ever,.result in documented and
defensible findings, because no public record exists for the
charges levied by carriers of exempt commodities, such as
the tariff published by an agent in behalf of the rate maker.
Nonetheless, a small sample of information furnished us by
shippers on a confidential basis suggests that, from a cost
viewpoint, a situation somewhat similar to that attending
the average rail hauls may exist. The few figures examined
-55-
-------
by us suggest that'rates charged for the movement of scrap
in barge loads of less than 1,000 tons are twice or"more the
negotiated rates for ore; further, barge doad revenues for
scrap, though they carry on average between 50 percent and
70 percent the ore tonnage, are higher for the secondary
commodity than .for the virgin material. Contrariwise, the
equipment cost for the scrap shipments is typically lower
• ,
as older and smaller barges are being utilized for that
commodity.
Though we are unable to present definitive findings in
this regard, it does appear as if barge rates for scrap
shipments are indeed high and may quite seriously inhibit
the greater utilization of this low cost mode of transport
for scrap shipmentsover routes for 'Which waterborne movements
are otherwise advantageous.
-------
Paperboard Industry
Introduction
The paperboard industry, SIC 2631, was chosen for study
because it consumes large quantities of waste paper in
addition to virgin fiber. Paperboard mills produce a diversity
of paper board products, including milk carton and paper plate
stock, corrugating board, liner board, combination paperboard,
and cardboard tubing.
Post's Pulp & Paper Dictionary for 1972 listed 255 mills
that make one or more types of paperboard. The mills are
located in 39 States, with concentrations in the Far West,
Upper Midwest and East. While there are relatively few mills
in the South, they tend to be larger than those in other
parts of the country. Ohio, for instance, was reported to
have 21 mills with 4.8 percent of the industry's production
capacity, but Alabama, with only seven mills, had about 5.2
percent of the industry's capacity.
The number of mills in each state and the percentage
of total industry capacity contained in each state are shown
in Figure 7. This map also shows distribution of mills and
production capacities by railroad rate territories. While
Official Territory has the largest number of mills, 145,
Southern Territory contains the largest share of production
capacity, 33.6 percent of the national total.
According to the Census of Manufactures for 1967, the
value of market shipments (excluding interplant transfers)
from paperboard mills was $1.9 billion.
The mills consumed about 16 million tons of pulp and
about eight million tons of waste paper that year, producing
about 22 million tons of board. Conceivably, capacity figures
-57-
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-1
en
CO :
LOCATION AND CAPACITY OF PAPERBOARD MILLS
SIC 2631 .
Rate Territory 3
v.il numKor of
plants, l*>Ti - 2SS
(figures above lines
Total capacity for paper-
board ^roJiMi iun , 1^72 - |!
sr,l"7 tons per Jay
(figuriB belcw lines)
S.:-:ircc: POST'S Pulp &
P,-,prr Directory, 1972 I
Uavy lines indicate
railroad rate territories. I'o
Rate Territory
12
16.8
-------
shown in Figure 7 may be understated (82.197 tons/day x 2660
= 21.4 million); this may be due to most mills having also
capacity to produce other paper grades, and the figures
reported by them do not accurately divide installed capacity
between their various production lines.
The Commodities
Woodpulp and waste paper were chosen as the virgin and
secondary commodities, respectively, for study in the paperboard
industry.
Pulp is manufactured from logs or wood chips by several
chemical or mechanical processes. The fibrous material
obtained from these processes can be utilized almost completely
in making all types of paper products, including paperboard.
About 38 million tons of pulp were used by all types of
consumers .in 1967, according to Census data, and all but one
million tons were used in the primary production of paper;
as noted, paperboard mills consumed almost 16 million tons,
or 42 percent of total consumption.
• i .. • -
"Waste paper" as used in this report refers solely to
conversion wastes (material discarded in the production of
finished paper products, including paperboard) and obsolete
paper, e.g. paper and paper products which have served an
end-product purpose before. It does not refer to scrap
generated and consumed in the primary production of paper.
This internal scrap, or "broke" as the industry calls it, is
not included in industry or Census data.
Waste paper that has been sorted and graded to meet
the specifications of consuming industries is called paper
stock. Five broad categories of paper stock are recognized,
each of which includes several specific grades. The
-59-
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categories are as follows, listed with 19619 consumption
figures by all U.S. mills:
TABLE 7
Paper Stock Consumption By Type
Paper Stock Consumption Percent Of
Category (1,000 tons) Total
1.
2.
3.
4.
5.
Mixed
News
Container
Pulp Substitutes
De-inking
2,609
2,171
4,416
1 , 952
821
21.8
18.1
36.9
16.3
6.9
Source: "Tappi," Vol. 55, No. 11 (November, 1972), p. 1606.
The pa per boa. rd. industry consumed 8.6 million tons of
paper stock in 1969, about 72 percent of .a. 11 paper stock
consumed in the United States that year.-^ It used a greater
percentage o,f container grades and a lower percentage of
pulp substitutes and delinking grades than the pa-p.ejr industry
as a whole.
Paper- stoc.k is usually purchased at a seller's shipping
point price. The paperboard mills thus assume the burden of
transportation costs. However, dealers, are selling on a
delivered basis, transporting the wa.ste product in their own
vehicles.
The mills may buy either from a dea ler-rprocessor, or
di'rectly from a converter or a commercia.l trash collector.
In the past two or three years, reclamation centers operated
by civic and environmental groups have been collecting
I/"'"Tappi/' Vol/55, No. 11 (November, 1972), p. 1607.
-------
significant quantities of waste paper, mostly news grades,
and selling it to dealers or directly to mills.
Transport Characteristics
Relatively little pulp moves in interstate commerce.
The usual distribution pattern is for logs and chips to be
transported from forests to pulp mills which are usually
located at the same site as a paper mill. After the wood
is reduced to pulp, it is transported intraplant to the
paper mill. The 1967 Census data showed that only 2.2 percent
of the pulp consumed by paperboard mills was purchased from
outside sources; 93.8 percent was produced by the paperboard
manufacturers on site, and the other 4.0 percent was produced
on site by affiliated mills.
The pulp that does move by for-hire carriers moves
overwhelmingly by rail. In 1969, barge lines transported
about 800,000 tons of pulp, Class I common and contract motor
carriers transported 191,000 tons, and the railroads hauled
8.4 million tons—usually in bales, in boxcars.
While very little pulp moves by regulated motor carriers,
the proportion of paper stock moving to board mills by
regulated contract motor carriers has increased in recent
years. Common motor carriers of general commodities do not
participate, except infrequently, in this traffic. Significant
waste paper movements from collection points to consuming
mills are also performed by private trucks, operated by scrap
paper dealers and the board mills. In 1969, however, freight
commodity statistics published by the I.C.C. show only
17,358 tons as having been carried by regulated motor carriers.
The following characteristics apply to the rail moves of
woodpulp and waste paper shown in TD-1;
-61-
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TABLE 8
Transport Characteristics
Woodpulp & Waste Paper
Woodpulp Waste Paper
Average load per car, tons 58 34
Average length of haul, miles 871 333
Average revenue per car, $ 663 247
On average, the waste paper moves were 62 percent
shorter and.41 percent lighter than the pulp moves.
Common carrier truqkers of general commodities are
disinterested in this commodity because of prevailing rate
levels by rail and contract carriers. The peculiar
characteristics of this traffic are also a disincentive—
including inordinately long loading and unloading periods,
relatively light ladings and day-to-day variations in origin
and destination points, thereby precluding reliable advance
scheduling of equipment.
As would be expected, waste paper hauls by truck are
mostly over short distances, though hauls- of. up to several
hundred miles are not uncommon. The average distance is a
function of the consuming plant's location relative to urban
centers, the main source of this secondary commodity.
Ladings per truckload vary by the type, of paper stock
transported and the preparation facilities available tp the
shipper. Average ladings are in the i.5 to 18 ton range,
with lightest loads around 10 tons, and the heaviest up to
vehicle capacity and/or legal limits, generally not in excess
of 21 tons. The rate structure is mostly based on 16. ton
minimum truckloads or on 10 ton minima and incentive rates
for ladings above that quantity.
-------
The attractiveness of waste paper carriage for contract
and private carriage is exclusively in the avoidance of empty
backhauls to the plants, from which higher rated paper
products are secured by these carriers.
Comparative Analysis
The selection process for common moves by rail produced
32 pairs for study. The addition of supplemental moves
brought the sample size to 48 pulp movements and 42 waste
paper movements. Average loads for these moves were about
the same as those contained in the Waybill sample; the study
moves reflect a distance range for woodpulp in excess of
2,400 miles.and for waste paper of more than 1,600 miles.
Average revenue per car was $535 for pulp (as compared with
$663 in the Waybill sample), and $275 for paper stock (as
compared with $247 in the larger sample).
The pulp moves ranged in weight from 30 to 96 tons,
with a mean of 59.5 tons. The waste paper moves were much
lighter, ranging from 20 to 65 tons and averaging 37 tons.
(It is to be noted that density of waste paper loads depends
in large measure on the shippers' baling.equipment; to
produce highly compacted bales, relatively expensive equipment
is needed. The economics attending to the deployment of such
hardware has been questioned.by industry experts. Prevailing
opinion indicates that of current prices for waste paper,
expensive preparation processes entailing the use of elaborate
capital equipment is only marginally profitable.)
Rates used for the analysis were obtained from a search
of published tariffs; in most cases, these rates reconciled
with the revenues shown in the waybill records.
In determining variable costs for the moves, Rail Form
A cost factors for boxcars were used for both the pulp and
waste paper traffic.
-63-
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Common Moves
The common moves selected for study included two perfect
matches; i.e. the origin and destination stations vwere
identical for .both products. Both pairs consisted of Wisconsin
in tra state moves. One pair was from Appleton to Stevens
Point, a distance of 64 miles, and the other was from Appleton
to Neenah Menasha, only five miles. While the second pair
of .moves appear to be switch .moves and not typical of the
traffic toeing analyzed, the Appleton-Stevens Point moves
deserve a close examination.
The moves had similar ladings, 49 tons for the pulp a-nd
43 for the paper. They moved in the same type ,of cars and
their rates were published by t,he same tariff toureau. This
pair thus provides an uncommon opportunity to compare moves
Of almost identical characteristics for ;two competing commodities.
Due to the heavier lading, the cost p.er car was slightly
higher (two percent) for the pulp than the paper. Dividing
those car costs by the'.different ladings produced a cos^t of
.$2.05 per 'ton for the pulp and -$2.30 for the paper. The
vr.ate wa
-------
rates per ton. All 14 had lower rates than the waste paper
moves paired with them, sometimes amounting only to 25 percent
of the waste paper rates. Some of these pulp moves made no
contribution at all, on the basis of average costs, and with
the exception of only one, made less contribution per car and
per ton than their waste paper counterparts.
Turning to the other 18 common moves, it can be seen
that with only three exceptions, the pulp moves produced more
contribution per car and per ton for the railroads than the
waste paper moves. One of these exceptions was the perfect
match cited above (Appleton to Stevens Point, Wis.). The
other two were pairs in which the waste paper moves were
light (20 and 22 tons) and took exceptionally high rates..
All Study Moves
These analyses deal with the entire sample of moves,
rather than just the common ones, thus permitting judgments
about the woodpulp and waste paper traffic as a whole.
Table 9 shows the behavior of rates and costs for the
competing commodities over distance; Figure 8 depicts the
carload revenues for both commodities. Some discernible
patterns emerge from this Table and Figure:
a. The average revenue per car and per ton rise with
distance in a consistent manner for both woodpulp
and waste paper.
b. The average revenue per ton-mile and variable cost
per ton-mile generally decrease with distance in a
fairly consistent manner for both commodities.
Contrary observations can be seen in the 201 to 400
mileage block for pulp and the 1501 to 2000 mileage
block for waste paper.
-65-
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Table
RAILROAD REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
Virgin Commodity: Woodpulp
Secondary Commodity: Waste Paper
Mileage
B* locks
0-30
31-60
61-120
121-200
» 201-400
fj
401-1000
1001-1500
1501-2000
Over 2000
All Blocks
No :of
Moves
5
6
6
9
4
6
6
2
4
48
Average
Rev/Car
$
111
112
176
217
561
821
1170
ii&s
1224
535
Average
Rev/Ton
$
2.03
2.03
3.23
3.65
9.47
12;96
17.25
19,01
20.23
9.00
Average
Rev/
Ton Mile
$
.105
.041
.034
.025
.028
,018
.013
. 0 10
. 009
.014
Average
Var.Cost/
Ton Mile
$
.092
= 041
.025
.018
.012
.006
.005
.005
. 0'05
. 007
No. of
Moves
5
6
6
9
4
6
4
2
: -
42
Average
Rev/Car
$
112
119
158
185
274
446
556
823
-
275
Average
Rev/Ton
$
3.33
3.95
4.46
5.31
7.84
9.84
12.92
17.70
-
7.43
Average
Rev/
Ton Mile
$
.185
.082
.049
.037
.023
,014
.010
.010
-
.017
Average
Var.Cost/
Ton Mile
$
.159
.062
.035
.026
.016
.009
.007
.006
-
.011
Note: Averages for all blocks represent totals for all study moves divided by appropriate
total service units, e.g. total revenue •!• total tons moved, total variable costs T
total ton miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
AVERAGE REVENUE PER CARLOAD BY MILEAGE BLOCKS
STUDY MOVES OF WOODPULP AND WASTE PAPER
Figure 8
Mileage
Blocks
121-200
201-400
401-1000 Woodpulp
1001-1500
1501-2000
Over 2000
Woodpulp
fc^^^^^^^E^^g^y^
Woodpulp
gy^STg^T'jnffi^C'
Woodpulp
(no Waste Paper movements at this distance)
100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
AVERAGE REVENUE PER CARLOAD (DOLLARS)
Source: Computed from Master Tables, Appendix A
-------
c. With the., exceptior of mileage blocks 1 and 2, to
30 miles and 60 miles respectively; which are
influenced by the Maine intrastate pulp movements'
low-rates--, the revenue per car is, greater for pulp
than waste paper.
d% For moves of up to 200 miles, the average revenue
per ton is greater for waste paper than pulp—again
a result of depressed intrastate rates on, pulp.
For moves that exceed 200 miles, the situation is
reversed, with pulp taking the-higher rates. Pulp
rates for the longest moves in the'sample averag,e
$20.30. For the 1,501 to 2,000 ml,le distance block,
the last one in which there, are both pulp and paper
movements, the average rate per ton for pulp is
$19.01, about seven percent higher than for paper.
The; effect tha-.t these rates and calculated varia.ble costs
ha.ve on. contribution is shown, in Table 1Q a-,nd Figure 9.
The-amount of contribution per car produced by woodpulp
is: .errantiq over distance. Contribution starts at a low. level
($13.60) ', drops*: practically , to. zero, .in the? sec.ond mileage
bllock (31 to 60) , rises steadily in the third through seventh
mileage blocks (61 to 1,500), then declines in the last two
mileage blocks. The same pattern is repeated for the
contribution as-, a percentage of revenue^ as seen in Figure 9,
contrary to the normal downward sloping contribution trends
that apply to most•commodities.
The.31 to 60 mile; block, in. which average contribution
per car of woodpulp is 33 cents, contains s,ix^ movements.
Threesa;re Maine, intrastate movements which,y as noted previously,
have.uncommonly low rates. The other three.;moves are hauls
-68-
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Table 10
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
Mileage
Blocks
0-30
31-60
.61-120
121-200
201-400
401-1000
1001-1500
1501-2000
Over 2000
All Blocks
Virgin
No. of
Moves
5
6
6
9
4
6
6
2
4
48
Coramod i. ty :
Contrib.
Per Car
$'
13.60
.33
46.33
61.00
308.00
512.67
661.67
501.00
442.75
248.92
Woodpulp
Contrib. As
% of Rev.
12.2
0.2
26.2
.28.1
54.9
62.4
56.5
42.1
36.1
46.5
Secondary
Waste
No. of Contrib
Moves Per Car
$
5
6
6
9
4
6
4
2
-
42
15060
27.33
43.50
53.78
83.25
165.67
137.75
331.00
-
83.98
Commodity :
Paper
Contrib. As
% of Rev.
13.9
22.9
27.5
29.0
30.3
37.1
24.7
40.2
-
30.5
Source: Computed from Master Tables, Appendix A.
-------
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF WOODPULP AND WASTE PAPER
Figure 9
i
o
o
Mileage
Blocks
0-30
31-60
61-120
121-200
201-400
401-1000
Woodpulp ....
1001-1500
1501-2000
Woodpulp
sTe Ta per
Woodpulp
taste. Paper,
WoodpuliD
Woodpulp
Woodpulp
Over 2000 |Wood'iulP
(no Waste Paper movements at this distance")
10
30
40
50
I
60
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Source: Computed from Master Tables, Appendix A
I
70
-------
between Green Bay, Wis. and Menominee, Mich.; the low rates
for those moves might reflect non-cost related considerations.
Contribution as a percent of woodpulp revenue appears
to be high in the mileage blocks encompassing the range of
200 to 1,500 miles, and especially so for the 1,000 to 1,500
mile range, where the percentage is 56.6. Waste paper
movements in that mileage block had a contribution rate of
less than half as much—24.7 percent.
The contribution pattern for waste paper is somewhat
less erratic than for pulp. As Figure 9 illustrates, the
contribution rate starts relatively low, climbs gradually as
the lengths of haul approach 1,000 miles, drops for moves in
the 1,000 to 1,500 mile range, and then jumps again for the
longest moves. For the longest waste paper moves, the
percentage contribution rate is 40, just slightly less than
for comparable pulp moves.
In the mileage range of up to 200 miles, it appears that
the carriers earn about the same amounts per car for both
commodities. In the range of 201 to 1,500 miles, the carriers
receive considerably more contribution per car on pulp than
paper. For the longest moves, there seems to be a close
parity again.
Using a regression equation, lines of best fit were
drawn for observations of contribution as a percentage of
revenue, for both pulp and paper (Figures 10 and 11). The ,
slope for pulp drops at a rate of about one percentage point
per 100 miles, while the slope for waste paper drops at a
somewhat greater rate, 1.7 points per 100 miles.
-71-
-------
ro"
70
Figure 10
STCCi 26111 Woodpulp
Contribution as a Percentage
of Revenue
60
50
0)
o
0>
c
o
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•H
c 3°
o
o
20
10
-(—!" i 'v1~~l~
-2To~LJ"J3oo ' '75S
Unusually low rate? two
or more moves to the
same plant
TSOir—^T?50"
Miles
T5t"J mo
2000
2500
-------
ez-
Contriimtion Percent
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500 750 ioc
Figui-e 11
STCCi 40241 ' Waste Paper
Contribution as a Percentage of Revenue
_J
•
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itrastate move
lexplained low rates in
tuls from 1 to 1 and
to 1
lexplained high rate
2000 2250 2500
-------
One reason for the depressed contribution figures for
the short moves of both pulp and paper is contract and private
motor carrier competition. Service offered mainly by contract
motor carriers keeps the rail rates relatively low for
distances up to 300 miles.
Analysis By Destination Territory
This analysis illustrates the differences in amounts
paid by paperboard mills relative to their location. The
following table, based on all moves in the 1969 One Percent
Waybill file, shows rail freight transportation costs by
destination territory.
TABLE 11
Rate Differences By Destination Territory
Woodpulp and Waste Paper
WOODPULP WASTE PAPER
Dest .
Terr.
1
2
3
4
5
Avg.Rev.
Per Tori
$13.35
8.41
12.91
6 .31
1.2 . 83
Avg. Avg. Rev.
Haul Per
(mi.) Ton-Mile
1,059
552
i, 015.6
529
1,065
1.22?
1.58?
1,19?
1.37?
1.18?
Avg.Rev.
Per Ton
$7.30
5.90
.8 ..82
7.20
7.91
Avg.
Haul
(mi.)
292
319
473
367
421
Avg.. Rev.
Per
Ton-Mile
2.27?
1.8.0?
1.64?
1.84?
1.66?
Receivers of woodpulp in destination territories 1, 3,
and 5 appear to be situated about the same average distance
from supply soureeSj and they are paying abou.t the same
amounts, both in absolute and ton-mile terms. Woodpulp
consignees in Territory 2 are located, on average, the same
distance from markets as those iii Territory 4, but ithey are
paying substantially higher rates.
-74-
-------
Buyers of rail transportation for waste paper appear to
be receiving about equal treatment, on average; consignees
in destination territory 1, Official, are paying a relatively
high average rate. As revenue per ton-mile indicates, the
cost related pattern is evident, namely the longer the haul,
the lower the ton-mile revenue.
Motor Carrier Rates and Costs
More recently, motor carriers have played an increasingly
significant role in the transportation of paper stock. This
role has developed as a result of paperboard manufacturers'
increased reliance upon motor carriers for the transportation
of their finished products. Though the paper industry remains
one of the railroads' best and most profitable customers,
both private and contract motor carriage are increasingly
the preferred mode for the movement of paperboard products
over the short to medium distance spectrum.
Our analysis of motor carrier rates and costs is based
on information furnished by shippers; this information is not
available in the public record. While there is no ready
method to test the data for their national representativeness;
there is good reason 'to believe that it qualifies for the
purposes of this study, because these data were furnished by
shippers, generally large components of this industry, who
handle a good cross-section of this traffic.
Common motor carriers of general commodities, as we
mentioned at the beginning of this subchapter, have no interest
in competing for the waste paper traffic. Their general rate
structure is based on class 35 rates, which in some cases
is 50 percent and more the level of contract carrier rates.
Typical comparisons of the minimum differences are:
-75-
-------
common; • ,, . ^.j,,,. (
Northdake,, II. to Ka lama zoo,, Mi.., 153 miles,, 4l£/cwt.
contrac t;
'Chicago II. to Wabash, In., 146. miles, 33
-------
Table 12
ANALYSIS OF WASTE PAPER SHIPMENTS
MOVING VIA MOTOR COMMON CARRIERS,
(SAMPLE OF ACTUAL TRAFFIC, FIRST QUARTER 1973)
Number or
Line Item Amount
1 Truckloads 45
2 Tons 748
3 Revenue ($) 4,937
4 Average length of haul, miles 148
5 Short Line Vehicle Miles 6,677
6 Average Load Per Truckload, tons 16.6
7 Average Revenue Per Truckload ($) 110
8 Average Revenue
8.1 Per 100 Pounds, cents 33.0
8.2 Per Vehicle Mile, cents 73.9
8.3 Per Ton Mile, cents 4.3
9 Variable Cost, all moves, $ 7,084
10 Contribution, all moves, $ (2,146)
11 Ratio of Revenue (%) to Variable Cost 69„7
Source: Lines 1, 2, 3, 4 furnished by shippers; Line 10
extracted from ICC Bureau of Accounts, Statement
No. 2C1-70 for the year 1970. Consequently,
variable cost data stated in Line 10 is understated
to the extent it does not accurately reflect
increases in operating expenses that have been
incurred since 1970.
-77-
-------
Further, it should be emphasized that rail movements
of this commodity appear to be competitive at distances over
60 miles. However, most paper stock collection and processing
points are not located on rail sidings. This inhibits the
use of rail for shipments at or in excess of the average
competitive cross-over point.
Findings
Summarization of the rate situation for these two
commodities is difficult since there appear to be so many
individual, peculiar rate situations. For example, a large
volume of pulp and waste paper moves in intrastate commerce,
and intrastate rates vary widely from state to state. The
only thing common about intrastate rates is that they tend
to be lower than the interstate level.
Nevertheless, some general observations can be made
about the "average" rail traffic. Looking at all study moves,
revenues produced by pulp amount to 187 percent of variable'
•
costs, while waste paper revenues amount to only 144 percent
of variable co&ts.
Those figures mean little, however, unless the length of
haul is considered. For short moves, up to about 200 miles,
waste paper on average takes higher' rates than pulp. On
longer hauls, the situation is reversed, with pulp taking
rates up to 35 percent higher than the paper.
For the short haul, these rate differences appear to be
consistent with cost differences, since the contribution rate
of up to 29 percent of revenue is about the same for pulp and
waste paper on moves up to 200 miles. After that point, the
contribution rate is-considerably higher for the pulp moves,
-78-
-------
dictating a conclusion that the railroads are profiting
relatively more from the pulp rates on the long hauls than
they do in the movement of waste paper. .
The railroad pricing strategy evidently reflects cost
factors as well as responsiveness to competitive factors.
Motor carriers appear to be hauling paper stock at less
than variable costs. They do so because it constitutes a
backhaul which otherwise would produce no revenue at all, or
an even greater out-of-pocket loss.
The industry is served well by contract carriage and
private trucking for the short distance moves; this competition
has also kept rail rate levels low for the short to medium
distance hauls.
-79-
-------
.-]Glass, Container- Industry,
.Introduction -' .:• ~. - ...
The glass container industry, SIC 3221, is composed of
95 plants in 25 .states.— The: plants are well distributed
throughout the country, with, concentrations in five states:
-. California (14 tplan.ts) , Pennsylvania (13), Illinois (nine), and
New Jersey and Indiana.(eight each). Figure 12 illustrates
.numbers of plants by states and value of shipments by Census
regions.
'•:.-. The .industry manufactures, glass containers for commer-
cial packing and bottling and ,f:or home canning. The value
-------
1
00
LOCATION OF PLANTS AND VALUE OF SHIFMENTS, CLASS CONTAINERS - SIC 3221
-------
The Commodities
Glass sand was chosen as the primary material for study
and eullet (crushed or broken glass) was selected as the com-
peting secondary 'material.
Approximately 10 million tons of sand were used by glass
producers in 1968, a miniscule part of the 916 million tons
that were "mined" for construction and industrial purposes.—
Sand must be o>f high purity and specified size to be utilized
in glass making. Deposits of glass sand are located at many
diverse points throughout the country, but the major sources
are in the Midwestern States.
Gullet can be used as a direct substitute for all the .
virgin materials in a glass batch; i.e., a ton of eullet can
replace a ton of virgin materials in a batch. While eullet
can be used as the exclusive input in making glass containers,
it usually does not exceed 30 or 35 .percent of the batch
volume. It is mixed into batches to 'produce a faster smelt,,
to reduce fuel consumption, and to improve the stiffness or
viscosity of the batch.
Three categories of eullet are recognized by glass con-
tainer manufacturers: (a) in-plant eullet, the remains of a
defective toateh, which is recycled into the glass fur-
naces; (b) commercial eullet, collected a?nd shipped by eullet
dealers; and (c) reclamation center eullet, that collected by
civic and environmental .groups and sold to container manufac-
turers on a delivered basis. In-house eullet obviously is
the most desirable type to the manufacturers since they know
its exact composition and purity.
I/ Mineral Facts and Problems, Bureau of Mines Bulletin 650,
1970, ;p. 1193.
-82-
-------
In order to utilize cullet effectively, a manufacturer
must have a steady source; continuity in the production pro-
cess and consistency in batch mixtures are essential.
There are but few cullet dealers in the United States.
Seventeen were counted by the Glass Container Manufacturers
Institute in 1971, and that number is thought to have dwindled
with the opening of the numerous glass container collection
centers in the last two years. Those centei-s have not solved
the cullet supply problems of the manufacturers, for they get
a highly variable mix of glass and an uneven volume from them.
In addition, manufacturers cannot pay more than about $20 per
ton of cullet delivered, a price that covers merely v;ne collec-
tors' cost of transportation in many cases. Faced with the
extinction of cullet dealers, and the uncertainty of supply
from reclamation centers, many container manufacturers are
using little cullet today other than that generated in their
plants.
Transport Characteristics
A heavy loading commodity, glass sand moves predominant-
ly by rail, in loads weighing up to 100 tons. The average
weight for all glass sand cars in the One Percent Waybill
Sample was 68 tons, and for the moves selected for study it
was 66.5 tons. Some sand shipments consist of several cars,
up to five, but most are in single cars.
Glass sand moves in covered hoppers to prevent it from
getting wet and clumping. Some of these hoppers are assigned
exclusively to glass sand traffic, moving empty on the back-
haul to sand pits. Shippers favor this arrangement for two
reasons: they do not need to rely on railroads' general pool
of cars for an adequate supply, and they avoid the necessity
-R3-
-------
of washing the cars after each shipment. Railroads favor it
because they need not be concerned about contaminating the
sand with the residuals from the move of a different material
in the same cars.
Some glass sand moves by truck, but at premium rates
compared; with rail rates. Trucking of sand is performed by
contract carriers in dedicated service between sand pits and
plants, by bulk common carriers, and, to a very limited ex-
tent, by private carriers.
Owens-Illinois Corporation, the largest manufacturer
of glass containers, owns a fleet of van trailers which it
uses to haul new containers outbound and sand or soda ash on
return. The trailers are adapted with hatches in the top and
a. hopper in the bottom, so that the sand can be loaded and
unloaded quickly. From 20 to 25 tons of sand can be hauled
in such trailers.
Gullet also moves predominantly by rail, though in some-
what lighter loads. The average weight for cullet shipments
(all single-car), in the 1969 One Percent Waybill Sample was
63. tons,, a.nd ftor the study moves it was 64 tons.
The average length of haul for all the moves was 472
miles., compared with an average of 359 miles for glass sand.
When cullet moves by rail, it usually is loaded in open-
top, hoppers. By truck it is loaded either from the top or
placed in barrels in vans or trailers.
There is a limited1 amount of cullet moving, free by truck,
in the interest of environmental improvement and public re-
lations,. The motor carriers pick up the cullet'(or uncrushed
empty bottles) near outbound destination points when they
have no other traffic on the backhaul.
-84-
-------
Truckers also have published round-trip rates for glass
container companies, providing a single charge for movements
of containers outbound and cullet on return. The Interstate
Motor Freight System, for example, maintains a rate of $366
(effective January 2, 1973) for truckload shipments of new
glass from Indianapolis to Madison, Wis., and cullet on re-
turn to Indianapolis.
To encourage the movement of cullet and other materials
moving for recycling purposes, the Interstate Commerce Commis-
sion issued new rules in 1971 to facilitate grants of new
operating rights to carry such commodities. Under those
rules, promulgated in Ex Parte MC-85, a trucker can apply for
a special operating certificate to carry specified recyclable
o
materials. The certificates are issued promptly and almost
automatically„ outside of the usual application process.
These certificates can be (and often are) issued for nation-
wide authority.
There are no known movements of glass sand or cullet by
barge.
Comparative Analysis
Thirty-eight rail movements were chosen for the trans-
port analysis of the glass industry. Of that total, 21 were
movements of glass sand and 17 were cullet. Since the match-
ing process turned up only four unduplicated— pairs of moves
of sand and cullet, most of the moves selected for study were
supplemental. Two of the supplemental cullet moves were not
in the waybill file, but were supplied by industry sources.
I/ In several instances, one move of nine virgin or secondary
commodities was used more than once in order to provide
a "matched" move which would otherwise have lacked a
counterpart move.
-85-
-------
In determining the operating costs of these movements,
Rail Form A cost factors for-covered hoppers were used for
oglass sand and cost -factors for open hoppers -were used for
cullet.
The rate search for the sand and cullet. moves turned up
an inordinate number of discrepancies -between published rates
and derived rates (revenues stated on waybills divided by
weights). 'Despite assistance from industrial traffic managers
in the glass container industries, -many of these differences
could not be reconciled. In the interest of employing a
consistent method, the lower of 'the published rate or the
^derived rate was used. The time frame and other study
^constraints have precluded further investigation
-------
One pair of common moves merits close examination because
the movements were so similar. The sand move, 22 miles within
New Jersey, weighed 74 tons, and the cullet move, 22 miles
within Pennsylvania, weighed 73 tons. The cost per car and
per ton were almost the same for each move, but the revenue for
the cullet was 2.7 times the sand revenue. This resulted in
revenues per car of $103 for the sand and $276 for the cullet.
The contribution made by the sand car was only $l,or a little
more than a cent per ton. The cullet car made a contribution
of $175, an average of $2.40 per ton.
All Study Moves
The addition of supplemental moves to the glass sample
broadened it considerably, from eight to 38, and provided a
basis for some general conclusions about the transportation
of the two commodities.
Table 13 and Figure 13 show the behavior of the rates and
costs over distance. Average revenues per car and per ton
rise with distance for both commodities.
In each mileage block, the rates per car and per ton of
cullet exceed those of sand. The average rates for the 800-
1000 mile block were $16.22 per ton for cullet and $9.31 for
glass sand. In the first mileage block, the cullet rates
are 1.88 times those of the sand, and in the succeeding
blocks the ratios are: 1.40, 1.46, 1.12, and 1.73 respectively.
The same pattern is observed for ton-mile revenues. In
the first mileage block, composed of moves up to 200 miles,
the average ton-mile revenue is 7.3 cents for cullet and 4.5
cents for sand. The ton-mile revenues for cullet are greater
in all but one mileage block, 601 to 800 miles.
-87-
-------
Table 13
RAILROAQ REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
oo
Mileage
Blocks
0-200
201-400
401-T600
601-800
801-1,000
Oyer 1,000
All
Blocks
Virgin Commodity:
Average
No. of Rev/Car
Moves $
4 152
7 329
2 362
2 481
.3 690
3 1,037
21 465
Average
Rev/Ton
$
2.32
5.05
6.29
8.74
9.37
13.41
7.00
Glass Sand
Average
Rev/
Ton Mile
$
.045
.017
.012
.017
.010
.007
.011
Average
Var .Cost/
Ton Mile
$
.031
.011
.010
.012
,008
.006
.008
Secondary
Average
No. of Rev/Car
Moves $
4 254
3 530
3 571
5 672
2 836
- —
17 550
Commodity
: Gullet
Average
Average Rev/
Rev/Ton Ton Mile
$ $
4.36
7.09
9.16
9.77
16.22
—
8.57
.073
.020
.020
.015
.019
—
.019
Average
Var. Cost/
Ton Mile
$
.032
.009
.010
.008
.008
—
.009
Note: Averages for all blocks represent totals for all study moves divided by appropriate
total service units, e.g. total revenue-*- total tons moved, total variable costs -t
total ton miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
00
Mileage
Blocks
0-200
201-400
401-600
601-800
801-1000
Over 1000
Figure 13
AVERAGE REVENUE PER CARLOAD BY MILEAGE BLOCKS
STUDY MOVES OF GLASS SAND AND GULLET
Gl Snd
ulle
Glass Sand
Glass Sand
Glass Sand
J. J.
Glass Sand
(no Gullet movements at this distance)
100 200 300 400 500 600 700 800 900 1000 1100
Source:
AVERAGE REVENUE PER CARLOAD (DOLLARS)
Computed from Master Tables, Appendix A
-------
Total variable costs per raile of haul decrea.se gradually
over distance for both commodities. The absolute amounts and
the rates of decline per unit of haul are about the same for
both sand and cullet.
Contribution amounts and percentages are shown in Table
14 and illustrated in Figure 14. These demonstrate that the
railroads earn considerably more contribution for hauling
cullet than sand, regardless of length of haul. The average
contribution is $107 for a carload of glass sand and $282 for
a carload of cullet.
Whereas the rate of contribution ,as a percent of revenue
declined gradually with distance for the sand moves, it
remains about the same for the cullet moves at all lengths
of haul. In the first mileage block, the percentage contribution
is 29..8 .f,o.r sand and 5.6..,6 for cullet, a ratio of 1.9. By the
fifth mileage block,, the percentage contribution for sand has
declined to "21.7, but it has dipped ;only slightly for cullet,
to 53,.,3, a ratio of 2.5.
This difference in rate treatment for the two commodities
is further illustrated in Figures 1.5 and 16, depicting the
"points of observation" .for each of the study .moves and the
lines of best fit Csee Appendix B.) . The lines show not only
that contribution a,s a percentage .of revenue is lower at all
distances for gla.ss sand, but -also that the. contribution
rate drops faster over dista.nce for sand than for cullet.
While it is essentla.l to temper this general conclusion by
the facts that a relatively sma 1,1 number of observations
were used to develop the slope of the contribution line and
that the scatter is widely dispersed, the established trends
appear to have validity.
-9,0-
-------
Table 14
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
Mileage
Blocks
0-200
201-400
401-600
601-800
801-1,000
Over 1,000
All
Blocks
No. of
Moves
4
7
2
2
3
3
21
Virgin Commodity:
Glass
Contrib
Per Car
$
45.50
108.71
63.50
145.50
150.33
145.33
107.05
Sand
Contrib. As
% of Rev.
29.8
33.0
17.5
30.2
21.7
14.0
23.0
Secondary Commodity:
Cullet
No. of Contrib.
Moves Per Car
$
4 144.00
3 285.66
3 291.00
5 310.00
2 471.00
- -
17 282.23
<=
Contrib .As
% of Rev.
56.6
53.9
50.9
46.1
53.3
-
51.3
Source: Computed from Master Tables, Appendix A.
-------
Figure 14
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF GLASS SAND AND GULLET
Mileage
Blocks
0-200
201-400
b 401-600
to
I
601-800
801-1000
Over 1000
Glass Sand
Glass Sand
Glass Sand
Glass Sand
Glass Sand j
(no Gullet movements at this distance)
I
10
I
20
1
30
40
I
50
I
60
Source:
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Computed from Master Tables. Appendix A
-------
CO
i
70 -T-
Figure 15
STCCi 1M-1320 Glass Sand
Contribution as a Percentage of Revenue
60
50
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3 Unusually light lo.ading
200
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1000
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1200
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70
Figure 16
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— STCCi 3229924 Gullet
— j Contribution &s a Percentage of Revenue
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"200
1200
"1800
2000
Miles
-------
Analysis by Destination Territory
Data from the entire waybill data base were used to show
rate differences by destination territory. This analysis
is a look at rates from the vantage point of glass manufacturers,
located at varying distances from material sources. A
summary of the pertinent data follows:
TABLE 15
Rate Differences By Destination Territory,
Glass Sand and Gullet
GLASS SAND GULLET
Dest. Avg. Rev. Avg. Avg. Rev. Avg. Rev. Avg. Avg. Rev.
Terr. Per Ton Haul Per Per Ton Haul Per
(mi.) Ton-Mile (mi.) Ton-Mile
1
2
3
4
5
$4.83
3.73
2.33
4.18
6.47
290
266
94
333
824
1.66*
1.51?
3.73
-------
For an average haul almost nine.times the distance, the
rate per ton; is less than three times that for the shorter
average haul and consequently the carriers' revenue per
ton-mile of service for the long haul is only one-fifth
that for the short haul. This is clearly an example of
ratemaking which reflects both cost factors and other
considerations. The cost factors referred to are the lesser
total variable costs per car-mile or ton-mile for the JLong
haul as compared with short ones.
The above data for the two cullet destination territories
reveal much lesser consistency. The average rate per ton in
Territory 2 is increased over the average rate for Territory
1 by ab.out the same factor as the distance, both being about
90 percent. Consequently, the revenue per ton-mile is about
the same for both territories, quite contrary to the
observations for glass sand where a somewhat similar increase
in the average haul (compare Territory 4 and 5, 824 miles
versus 333 miles, an increase of 147 percent) resulted in a
reduction in average ton-mile revenue from 1.43£ to 0.79£
or approximately 45 percent. .In short, pricing for the
cullet moves terminating in Territory 2 appears to have
.ignored the reduction in unit costs brought about by the
substantially increased length of haul.
Findings
The cullet traffic appe-ars to be considerably more
profitable for the :railroads than the glass sand traffic,
notwithstanding the fact that the sand rates provide
.reasonable contribution rates.
All .study moves considered, revenues earned on the glass
sand movements were 129.8 percent of variable costs, whereas
-96-
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the revenues earned on the cullet moves were 204.5 percent
of the associated variable costs; hence, the contribution to
fixed costs for the cullet movements exceeded the variable
costs of hauling that traffic.
Looking at rates over distance, the cullet rates are
always higher than the sand rates, by magnitudes ranging
from 1.12 to 1.88 times. Operating costs per car, on the
other hand, are about the same for both commodities in the
respective mileage blocks.
Not only is contribution as a percentage of revenue
consistently higher for cullet than sand, but the contribution
rate for sand declines more sharply over distance than for
cullet. In fact, the contribution for cullet hovers around
50 percent of revenue at all mileage blocks and hardly
declines at all with distance.
-97-
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Secondary Aluminum Industry
Introduction
The secondary aluminum industry is a subgroup of SIC
3341, Secondary Nonferrous Metals. It comprises some 86
plants— widely distributed throughout the country, with a
concentration in the East. The number of plants in each state
is shown in Figure 17.
The primary product of the secondary smelters is alloyed
ingot—bars of aluminum alloyed with other metals such as
copper and magnesium to improve castability and strength.
However, the industry also produces other nonferrous alloys,
some of which contain large shares of recycled materials.
Most of these alloys are cast into 15 or 30 pound ingots.
Some secondary smel'ters are primarily in the die casting
business and operate smelters only to supply their own metal
requirements.
The value of secondary ingot shipments in 1967 was
$302.9 million, according to the Census of Manufactures for
that year. The Aluminum Recycling Institute, Washington, B.C.
has estimated the value of shipments in 1972 at a
-------
UD
LOCATION OF SLCONDARY ALUMINUM SMELTERS
SUBGROUP OF SIC 3341
-------
The Commodities
Primary aluminum ingot, the virgin product made from alumina,
and aluminum scrap were selected for study in the secondary
aluminum industry.
Primary ingot.is almost 100,percent pure aluminum. Most
is shipped (or moved intraplant) to fabricators. Small amounts
move to secondary smelters where it is used as a "sweetener"
in the casting process. However, primary ingot makes up less
than five percent of most secondary smelters' inputs.
Pure aluminum is being shipped increasingly in molten
form, especially to large die casters, but this study is
concerned only with ingot shipments.
Aluminum scrap can-be classified as follows:
INDUSTRIAL SCRAP—A byproduct of the smelting or
fabricating process?. About two-thirds of industrial scrap
is recycled within the industry and is dubbed as "runaround"
The remainder is sold to secondary smelters and non-integrated
fabricators.
One grade of industrial scrap is the residue left from
the smelting process, known as skimmings and drosses. This.
type of industrial scrap, though, is a different commodity,
being very low in aluminum content; it was excluded from this
study.
OBSOLETE SCRAP—Fabricated aluminum products that have
been discarded. Obsolete scrap makes up about 25 percent of
the aluminum scrap consumed in. the United States. It is
collected by dealers who sort and grade it before forwarding
it to consuming plants.
Secondary smelters often search for obsolete scrap that
is already alloyed to meet a particular customer's specifications.
Toward this end, scrap dealers and processors sort their
scrap not only on, the basis of grade but. also metallic content.
-100-
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Some processors also separate aluminum scrap attached to
iron. The product of this process, known as "sweated pig",
is sold to secondary smelters.
Transport Characteristics
Primary aluminum ingot moves mostly by rail, though
some moves by other modes. Of all primary ingot transported
in regulated service in 1969, about 89 percent moved by rail,
nine percent by truck, and two percent by barge.
Motor carriers' share of the traffic is believed to be
increasing. Ingot is attractive traffic to truckers because
it is a compact, heavy loading commodity that is quickly
loaded and unloaded.
It also loads compactly in rail cars, of course, and
ladings of 80 tons per car are not unusual. Boxcars are
usually used for the ingot traffic.
Aluminum scrap has varying transport characteristics,
depending on type and grade. Dealers play an important part
in collecting the scrap (both old and new industrial) and
processing it into transportable forms.
Sheet, extruded material, and castings are usually baled
into bundles for ease in handling and transporting. Borings
and turnings of known analysis are stored in separate bins
until sufficient quantities of each are available for
shipment. Some borings and turnings of high purity and
cleanliness are briquetted for shipment. Food containers and
other thin packaging materials such as foil are pressed into
bales for shipment.—
Whereas most scrap moves to dealers' processing points
by truck, it moves from these to consuming mills mostly by
rail. Open hoppers are normally used for this commodity.
I/ U.S. Bureau of Mines, Impact of Technology on the
Commercial Secondary Aluminum Industry, Information
Circular 8445, page 9. Washington, U.S. Government
Printing Office, 1970.
-101-
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The following table, based on all movements (except
shipments of skimmings and drosses) of aluminum ingot and
scrap in the 1969 One Percent Sample of Waybills, illustrates
the transport characteristics of the competing commodities.
TABLE 16
Transport Characteristics
Primary Aluminum Ingot and Aluminum Scrap
Primary Ingot Scrap
Average load per car, tons 57 33
Average length of haul,, miles 1,152 640
Average revenue per car, $ 974 537
These data demonstrate that ingot loads almost twice
as heavy as scrap and moves about twice as far, on average.
The revenue per car reflects those differences.
The moves selected for study had mean ladings similar
to those for the entire data base. The study movements of
ingot have an average lading of 58.7 tons, and the scrap
moves an1average load of 31.5 tons. The average revenue
per car of ingot was $1,004, compared with $443 for scrap.
• Comparative Analysis
Six movements of ingot and three of scrap were- selected
for study based on the common moves criteria. One of the
scrap moves was paired three times with ingot moves, and
another scrap move was paired twice. Selection of supplemental
moves expanded the sample to 27 ingot moves and 24 scrap
moves.
Rail Form A cost factors for boxcars were used in
computing costs of the ingot moves and cost factors for o'pen
hoppers were employed for the scrap moves.
-102-
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Published rates were used for rate and revenue data
shown in Appendix A and for all computations. However, in
a few cases applicable rates were not readily available and
the revenue amounts contained in the Waybill file were used
instead.
Common Moves
The small number of common moves do not permit drawing
any definitive conclusions. Nevertheless, some patterns
are evident:
a. The ladings of the ingot moves were heavier than
the scrap ladings.
b. The cost per ton was consistently higher for the
scrap, and the cost per car was higher for scrap
in all cases but one. The exception was a pair in
which the ingot load was almost as light as the
scrap load (42 tons of ingot and 40 tons of scrap).
c. The rate per ton was consistently higher for the
scrap.
d. The ingot moves made a greater contribution per ton
in all cases but one—the pair with the light ingot
movement. However, contribution as a percent of
revenue was higher for the ingot moves without
exception.
. All Study Moves
Judgments about the behavior of transportation rates and
costs for the two commodities can be made with greater
confidence on the basis of all study moves.
Table 17 and accompanying Figure 18 show the behavior
of rates and costs for all moves over distance.
-103-
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Table 17
RAILROAD REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
1
1
M
0
1
Mileage
Blocks
0-200
201-400
401-700
701-1000
1001-2000
Over 2000
All blocks
Virgin
Primary
Average
No, of Rev/Car
Moves $
3 259
2 632
4 705
4. 886
7 956
7 1716
27 1004
Commodity
Aluminum Ingot
-
Average
Rev/Ton
$ -
3.25
10,19
10.51
18.74
18.43
29.89
17.10
Average
Rev/
Ton/Mile
$
.023
.032
.018
.021
.012
.013
.014
Average
Var .Cost/
Ton Mile
$. •
.011
.009
.007
.008
.006
.006
.006
Secondary Commodity:
No. of
Moves
6
4
8
3
i
2
24
Average
Rev/Car
$
241
381
416
372
1198
1008
443
Aluminum
Average
Rev/Ton
$"•
6.82
10.73
12.71
24.80
21.39
50.40
14.04
Scrap
Average
Rev/
Ton Mile
$
.065
.041
.026
.026
.019
.020
.027
Average
Var .Cost/
Ton Mile
$
.034
.019
.015
.026
.008
.016
.017
Note: Averages for all blocks represent totals for all study moves divided by appropriate total
service units, e.g. total revenue -f total tons moved, total variable costs -r total ton
miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
Figure 18
AVERAGE REVENUE PER CARLOAD BY MILEAGE BLOCKS
STUDY MOVES OF PRIMARY ALUMINUM INGOT AND ALUMINUM SCRAP
Mileage
Blocks
0-200
201-400
Pr. Al. Ing.
craps
Pr i ma r v _ A1 u IT. i num^J[ ns^ot
., &S.'sfs'SfS,SsssSss.f",f,-'f. VJ
jA1 uminum Scrapy^;./^
Primary Aluminum Ingot
401-700 ••-.'•;;,-.;; ;r;™ r -•----——--.
fc^A-±''4nura'bcr'a n/ f_:. ,-s
701-1000
1001-2000
Over 2000
BH«iklM
Primary Aluminum JCngot
-; ^<'''s<'s^3-AS''--.-:SJs;~'-W
j'Alumij^n Jacrap^
100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800
AVERAGE REVENUE FICR CARLOAD (DOLLARS)
Source: Computed from Master Tables, Appendix A
-------
For aluminum ingot, the revenues per car and per ton
rise consistently with distance. The revenue per ton-mile
figures decline gradually over distance, as would be expected,
except that they rise from the first to the second mileage
block. This phenomenon can be attributed to the low ton-mile
revenues in the first mileage block (up to 200 miles). TWO
of the 'three shipments in that first distance block weighed
more than 90 tons, accounting for the low unit revenues.
The average variable cost per ton-mile for the ingot
moves is 1.1 cent for the first mileage block and a lesser
amount in each succeeding block. The average cost per ton-
mi.le for the longest moves is 0.6 cents.
The ra-te pattern over distance is more .erratic for
aluminum scrap. The expected regular progression of rates
is exceeded in mileage block 4 (700 to 1,000 miles) where
the average rate per ton is high. Yet revenue per car is
•lower than for moves in the 201 to 400 mile block. This
peculiarity, high rate per ton/low revenue per car is
explained by the fact that two of the three study moves in
this distance block have ladings of only 11 tons. Variable
costs per ton-mile are shown to be equal to revenue per
ton-mile. The single move in the next mileage block (1,001
to 2,000 miles) demonstrates the effect of heavy lading.
This car was loaded with 56 tons which produced revenue of
almost $1,200, more than 1.3 times the variable .costs.
Comparing the rates for ingot with those for scrap
more generally, it is shown that scrap rates are higher in
all mileage blocks, but in a few the difference is not significant.
-106-
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There is a wide divergence in rate levels only in mileage
block 1, where the low ingot rate of $3.25 per ton is
attributable to the 90-ton shipments, and in the longest
mileage block (over 2,000'miles), where the resulting very
high scrap revenue of $50.40 per ton is explained by light ladings
of only 20 tons for each of the two movements. The average
revenue per car for these two movements is lower than for
the shorter move in the preceding mileage block. Put
differently, the high rate per ton merely resulted in about
the same ton-mile revenue as a rate which is only 42 percent
of that high rate.
Both commodities produce a sizeable contribution, as
illustrated in Table 18 and Figure 19. Contribution per car
of ingot ranges from $137 in the first mileage block to $924
in the last, and contribution as a percent of revenue is
less than 50 percent in only one mileage block. Contribution
per car figures are not so large for the scrap moves, but
contribution as a percent of revenue is above 40 percent in
four of the six mileage blocks. In one mileage block, where
two of the three moves had ladings of only 11 tons, the scrap
moves produce a very low average contribution, $5 per car,
or 1.3 percent of revenue.
The ingot movements produce nearly as high contribution
rates at the longest hauls as they do for shorter move-
ments. Regression technique to obtain a line of best
fit, as shown in Figure 20, shows that over the entire
distance spectrum the average decline in rate of contribution
as a percent of revenue is only one-half percent per 100
miles of incremental distance. For the aluminum scrap
movements contribution as a percent of revenue, Figure 21
-107-
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Table 18
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
-
Mileage
( Blocks
00
1 0-200
201-400
401-700
701-1000
1001-2000
Over 2000
All Blocks
Virgin Commodity:
Primary Aluminum Ingot
No. of Contrib. Contrib.As
Moves Per Car % of Rev.
$ . .
3
2
4
4
7
7
27
137.00
454.50
428.75
547.25
448.29
924.57
549.41
52.9
71.9
60.8
61.8
46.8
53.8
54.7
Secondary Commodity:
Aluminum Scrap
No. of
Moves
6
4
8
3
1
2
24
Contrib
Per Car
$
113.50
201.75
172.25
5.00
666.00
222.00
166.29
Contrib.As
% of Rev.
47.0
52.9
41.3
1.3
55.5
22.0
37.5
Source: Computed from Master Tables, Appendix A
-------
o
CD
I
Mileage
Blocks
0-
201-400
401-700
701-1000
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF PRIMARY ALUMINUM INGOT AND ALUMINUM SCRAP
Figure 19
Primary Aluminum Ingot
lurn num cr a
Primary Aluminum Ingot
Primary Aluminum Ingot
[Primary Aluminum Inecot
Aluminum Scrap
1001-2000
Over 2000
Primary Aluminum Ingot
Primary Aluminum Ingot
uminum
10
20
30
0
50
60
0
80
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Source: Computed from Master Tables, Appendix A
-------
Figure 20
STCCr 33341 Primary Aluminum Ing«t
Contribution as a Percentage of Revenue
i ; i I I i
. J .i .--.i.. I j ~ .-—--J
- • 1 . ' '• : i
f\ I I
b 300
2^00
"'2700'"" 3000
-------
Figure 21
STCCi 4021^30 Aluminum Scrap
Contribution as a Percentage of Revenue
90
75
+»
c
-------
shows a lower average level and a greater rate of decline
over distance. The line of best fit shows a.n average
contribution rate of about 47 percent for the shprtest moves
and about 22 percent for the longest, averaging in a decline
of about one percent per 100 miles of incremental distance,
or approximately twice the rate of decline for the primary
product. However, as can be seen from the upper confidence
band in Figure 21, the "range" indicated produces an almost
flat line, and if it were not for the observations in the
2,4QO mile distance block, indeed no decline of any significance
would be notable in the scrap contribution rate.
Analysis By Destination Territory
This comparative analysis shows freight costs in
different destination territories. This analysis employs
the data contained in the Waybill file; it is summarized
in.the table following.
TABLE 19
Rate Differences By Destination Territory
Primary Aluminum Ingot and Aluminum Scrap
Dest,
Terr,
1
2
3
4
5
INGOT
Avg. Rev.
Per Ton
$19.62
14.30
19.30
15.85
11.14
Avg.
Haul
(mi.)
1,260
972
1,515
1,140
760
Avg. Rev.
Per
Ton-Mile
1.51$
1.52$
1.28$
1.47$
1.59$
Avg. Rev.
Per Ton
$15.61
20.04
18.22
14.18
13.07
SCRAP
Avg.
Haul
(mi.)
601
888
744
536
538
Avg. Rev.
Per
Ton-Mile
2.52$
2.22$
2.13$
2.67$
2.38$
-112-
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Both ingot and scrap are shown to follow distance-
based patterns, though there are some inequities as
between territories.
Territory 3 ingot receivers are located the farthest
from their supply sources; they pay the lowest ton-mile
rate and a lower rate per ton than consignees in Territory 1,
though the latter's average haul is some 250 miles shorter.
Conversely, Territory 5 receivers are closest to shipping
points and pay the highest rates per ton-mile, and the
lowest average rate per ton.
Scrap receivers in Territory 2 are located farthest
from shipping points and accordingly are paying the
highest rates per ton, but they are not getting the
lowest rates per ton-mile. Territory 3 receivers, though
their average haul is about 20 percent shorter than those in
Territory 2, are paying the lowest ton-mile rates. Consignees
in Territories 4 and 5 incur almost exactly the same average
distance haul, but the Territory 4 railroad customers are
paying $1.11 more per ton and . 29£ more per ton-mile than
those in Territory 5. Overall, the differences are not
great. The ton-mile rate in Territory 4 for the
shortest average haul is 25 percent higher than the lowest
ton-mile rate, in Territory 3, to which an average haul 39
percent longer than in the shorter haul territory applies.
Findings
Despite different loading and length of haul
characteristics, the rates for the two commodities are at
similar levels. Table 17 shows, for example, that for moves
of about 400 miles, the rates per ton are about $10 and $11
-113-
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for ingot and scrap respectively.. Where a considerable
difference in the rate per ton was no.ted, it was attributable
to a light lading.
The transport costs being higher for scrap, and the
rate,s being roughly the same, the ingot movements consistently
make a higher contribution. For all ingot movements in the
study, the average contribution per car was $549, or about
55 percent of revenue. This compares with an average
contribution of $166 per car of scrap, which was approximately
38 percent of revenue.
Contribution rates decline as distances increase for
both commodities; the decrease over distance in the contribution
made by the scra^p traffic is about twice that for ingots.
The latter averages over 50 percent for all study movements,
but some observations showed contribution rates of 33 percent
and 3:6 percent.
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Reclaimed Rubber Industry
Introduction
Rubber reclaimers comprise a small and declining industry.
SIC 3031, as the Commerce Department classifies it, had 24
establishments in 1967, according to the Census of Manufactures
for that year. A Public Health Service report in 1969 listed
20 plants—, and the Rubber Manufacturers Association's 1972
Red Book listed only nine U.S. plants. Most of the reclaimers
are located in Official Territory, as Figure 22 shows.
Reclaimers buy used tires, other obsolete rubber products,
and industrial scrap, such as buffings, and convert them into
a substance that can readily be used by rubber fabricators.
The reclaimers principally supply tire manufacturers, but they
also sell to makers of floor mats, tubing, hoses, and other
products. Reclaimed rubber is often produced to custom
specifications.
The value of shipments from reclaiming plants was $43.8
million in 1967, according to the Census data.
Reclaimed rubber has been steadily declining as an input
to the rubber fabricating industry. The Rubber Manufacturers
2/
Association reports— that in 1940 the reclaimed rubber consumed
amounted to 29.2 percent of the new rubber (natural and
synthetic) consumed. By 1950, the percentage had dropped to
24.1 percent; in I960 it was 17.7 percent, while in 1970 it
was only 8.1 percent.
I/ Pettigrew, R.J., and F. Roninger, Rubber Reuse and Solid
Waste Management (Public Health Service Publication No.
2124) Washington, U.S. Government Printing Office.
2/ Rubber Manufacturers Association, Rubber Industry Facts,
New York, 1972.
-115-
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PLANTS AND VALUE OP SHIPMENTS OF RECLAIMED RIJBBER
Total n-.imt'i'r o!'
nla;its, 1973 -
Total shipment - (in
millions 01' $) - 43.8
Source: 1972 Rubber Red
Book and I9ul Census of
Manufactures
lint's indicate
-------
The Commodities
Four commodities were chosen for study in the rubber
industry analysis: natural, synthetic and scrap rubber moving
to reclaiming plants, and reclaimed rubber moving out. The
transportation characteristics are very similar for synthetic
and non-latex natural rubber; consequently, for most of the
analyses herein the two commodities were treated as one.
Two transportation models were devised for this industry.
In the first, new /rubber (natural and synthetic) was compared
with scrap, and in the other, new and reclaimed rubber were
compared.
Natural rubber moves in two forms—liquid latex and solid.
Movements of only the solid form were used for this study.
Natural rubber is produced in the Far East and Africa and
imported through the East, West and Gulf coasts.
Synthetic rubber is shipped only in solid form. Virtually
all of the synthetic rubber consumed in the country is
produced domestically. About 78 percent of the new rubber
consumed in the United States in 1971 was synthetic, according
to the RMA.- Consumption consisted of 2.1 million long tons
of synthetic and 577,800 long tons of natural rubber.
Reclaimed rubber is a composite slab material which has
varying characteristics, depending on the original rubber
product that goes into it. It contains not only rubber
hydrocarbon, but other ingredients such as carbon black and
zinc oxide which otherwise would have to be introduced
separately into a fabricator's batch.
I/ Rubber Industry Facts, supra.
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Obsolete rubber scrap is generally worthless as a marketable
commodity. This is exemplified by the fact that auto service
stations pay to get rid of old tires. Reclaimers, however,
at times pay amounts ranging up to $15 per ton for old tires
delivered to them.
Industrial scrap has a considerably higher value than
old tires. Reclaimers pay $25 to $35 per ton for retread
buffings, $120 to $160 per ton for natural rubber inner tubes,
and $100 to $120 per ton for butyl rubber inner tubes.—
Scrap consumed by reclaimers in 1968 included discarded
tires, tire parts (from tire splitters and others), retread
buffings, inner tubes, and similar obsolete products (43.7
percent of inputs); rubber manufacturing scrap (7.5 percent);
and other industrial rubber scrap (48.8 percent). Rubber
2/
reclaimers used about 71,000 tons of old tires that year.—
Transport Characteristics
Natural, synthetic and reclaimed rubber move in slabs and
bales, with bales averaging 70 pounds each.
I.C.C. statistics for regulated intercity traffic in 1969
indicate that railroads hauled about 80 percent of the natural
rubber, 75 percent of the synthetic rubber, and half of the
reclaimed rubber (see Appendix Table D). Those figures do
not take into account the quantities moved by private carriers
or local exempt truckers.
I/ Darnay, A., and W,E0 Franklin, Salvage Markets for
Materials in Solid Wastes, p. 82. Midwest Research
Institute, Kansas City, Mo., for the U.S. Environmental
Protection Agency, 1972.
2/ Salvage Markets for Materials in Solid Wastes, p. 8l.
-118-
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Scrap tires, not having an established market demand like
other commodities, do not move in any regular transport
pattern. If they move at all, they move the cheapest way
possible, especially since the "seller" must absorb the
freight and seldom collects more for the shipment than the
freight cost. In order to rid their garages of old tires,
dealers and service stations will use their own trucks to
take tires to scrap dealers, retreaders or reclaimers„
Industrial scrap, being of higher value, usually moves
u'
to reclaimers by motor common carrier or railroad. Scrap
dealers buy common carrier transportation and also use their
own trucks to ship scrap to reclaimers.
The following table summarizes data from the One Percent
Waybill Sample on the four commodities selected for study
in the rubber industry.
TABLE 20
Transport Characteristics of Study Commodities
in the Rubber Industry
Natural Synth. Reclaim. Scrap
„ _ ' Rubber Rubber Rubber Rubber
Number of-, ; ——
Waybills- 67 331 20 11
Average load
per car, tons 34 57 46 22
Average length
of haul, miles 664 817 809 482
Average revenue
per car, $ 491 774 820 301
The average ladings of the moves chosen for study were
34 tons for natural rubber, 52 tons for synthetic, 51 tons
for reclaimed and 29 tons for scrap.
!_/ These data are included to show the deficiency in the
number of waybills for reclaimed and scrap rubber—a
deficiency that somewhat restricted the analysis
of these commodities.
-119-
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Comparative Analysis
As noted previously, two analyses were made for this
industry: a comparison of new and scrap rubber movements, and
a comparison of new and reclaimed rubber movements. A total
of 29 waybills of new rubber (20 of synthetic and nine of
natural), 10 waybills of reclaimed, and seven waybills of
scrap were chosen for study. The scrap movements incorporated
in this study include three heavy corridor moves supplied by
industry sources„
Rail Form A cost factors for boxcars were used in determining
costs of the movements of all four commodities.
Due to numerous differences between derived rates and
those found in the search of the published tariffs, there was
some doubt as to whether the right published rates had been
found. Assuming that shippers would pay only the lesser of
the published rates or the Waybills, revenues, the lower of the
two rates used in this study. Very scant industry
participation, an association seemingly unable to provide any
of the much needed information, and the dearth of publicly
available data account for the uncertainties and lack of
definitiveness in our study of this industry.
Common Moves
In the selection of common moves, natural and synthetic
rubber were treated as a single commodity. Hence, matched
movements of new and scrap rubber may represent a scrap
waybill matched with a haul of natural or synthetic rubber, the
same methodology was used in matching new and reclaimed rubber
movements. However, waybills matched with the scrap are
different from those matched with the reclaimed, due to the
-120-
-------
different origins and destinations for the two secondary
commodities.
New vs. Scrap Rubber
Five pairs of movements resulted from the matching of
new and scrap rubber waybills. One scrap movement, from
Medford, N.J. to Akron, Ohio, had to be used four times to
match movements of new rubber.
All cars in this analysis were lightly loaded, the
heaviest being 30 tons. The new rubber weighed less than the
scrap in four of the five pairs.
The cost per ton and rate per ton were higher for the new
rubber in four of the five pairs. The exception was a very
light (15-ton) movement of scrap paired with a 29-ton movement
of new rubber. Contribution comparisons for the five pairs
of moves produced inconclusive results. Contribution per car
and per ton were higher for new rubber in two cases. However,
in only one pair did new rubber have both a higher revenue
per car and revenue per ton.
New vs. Reclaimed Rubber
Eleven movements of new rubber were matched with five
movements of reclaimed to produce 11 pairs of common moves.
Few conclusive findings resulted from this analysis.
As in the previous comparison, the new rubber moves were
exceptionally light, with the new rubber shipments weighing
less than the reclaimed in seven of the 11 pairs.
Costs per car were higher for the reclaimed in seven of
the pairs, a consequence of the weight differences. However,
the cost per ton was higher for the reclaimed in only four
cases.
-------
Rates were very similar in most of the pairs. Scrap
rates were higher in seven cases and new rubber in four.
Amounts of contribution per car and per ton were higher
for the scrap in all but two cases. Over the movement range
of 185 miles to 1,027 milesj the range of the contribution
per car for the scrap moves was $391 to $578, while it was
$9'1 to $595 for the new rubber. Contribution as a percent of
revenue was greater for the scrap in the same nine pairs.
All Study Moves
The following analyses are based on all study moves,
including supplemental ones chosen from the One Percent
Waybill Sample and from industry data.
New ys. Scrap Rubber
When the natural and synthetic rubber movements are
arrayed by mileage blocks (Table 21 and Figure 23), they show
a regular progression: average revenues per car and per ton
increase with distance, while average revenue per ton-mile
and average variable cost per ton-mile decrease with distance,
There are no scrap rubber moves in the two longest
mileage blocks, but the scrap moves in the three distance
blocks for which data were available behave in the normal
manner. The two moves in the 601 to 1,000 mileage block
have rates that appear somewhat low in relation to the other
scrap moves. This is probably because they are 40-ton moves,
considerably heavier than the other scrap shipments.
The average revenues per car are markedly lower for the
scrap than the new rubber„ In the first mileage block, they
are 46 percent lower; in the second, 31 percent lower, and
in the third, 34 percent lower. Revenues per ton are about
the same,,
-122-
-------
Table 21
RAILROAD REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
1
M
1
Mileage
Blocks
0-300
301-600
601-1000
1001-2000
Over 2000
All Blocks
_ Virgin
No . of
Moves
3
8
7
8
3
29
Commodity
Average
Rev/Car
$
360
509
683
1156
1777
845
: Natural
Average
Rev/Ton
$
7.88
11.30
14.95
20.06
36.77
17 . 23
& Synthetic Rubber
Average Average
Rev/ Var. Cost/
Ton Mile Ton Mile
.029
.027
.025
.014
.017
.018
.013
.013
.012
.00(5
.00(5
.003
Secondary
Average
No. of Rev/Car
Moves $
3
2
2
-
-
7
193
351
444
-
-
310
Commodity :
Average
Rev/Ton
$
7.72
15.60
11.10
-
-
10.85
Scrap Rubber
Average Average
Rev/ Var. Cost/
Ton Mile Ton Mile
$ $
.037
.032
.014
-
-
.022
.027
.020
.007
-
-
.013
Note: Averages for all blocks represent totals for all study moves divided by appropriate
total service units, e.g. total revenue r total tons moved, total variable costs f
total ton miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
AVERAGE REVENUE PER CARLOAD.BY MILEAGE BLOCKS
STUDY MOVES OF NATURAL fc SYNTHETIC RUBBER AND SCRAP RUBBER
Figure 23
Mileage
Blocks
0-300
301-600
601-1000
1001-2000
Over 2000'
Nat & Synth Rubb
Nat & Synth Rubber
"Scrap "Rub ber?%$;£| '.'.-•
Nat
& Synth Rubber I
r^uHK Ml^flCMva-B. £^T.~
Nat
(no
Na t
(no
& Svn
Scrap
th Rubber
Rubber movements at this distance)
t
& Synth Rubber
Scrap
1
Rubber movements at this distarce)
r r i" i i i i
9
100 200 300 400 500 600
r i i i it
700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800
Source:
AVERAGE REVENUE PER CARLOAD (DOLLARS)
Computed from Master Tables, Appendix A •
-------
Revenue per car is a more important indicator of well-
being for the railroads than revenue per ton. On this basis,
it is evident that the new rubber traffic is far more
desirable than the scrap traffic.
This judgment is reinforced by the calculated contribution
figures in Table 22 and Figure 24. These data show that on
average the new rubber makes a considerably greater contribution
per car than the scrap rubber. Contribution as a percent of
revenue is not less than 40 percent for the new rubber
movements in any mileage block. For the scrap movements,
however, the percentage is less than 40 percent in two of
the three blocks,,
Curiously, for both the new and scrap rubber, contribution
as a percentage of revenue rises with distance, contrary to
the normal trend. As distance increases, the carriers' costs
per ton-mile decline at a greater rate than their unit revenues.
In other words, the railroads are not giving the shippers of
these commodities the full benefit of the unit cost savings
associated with the longer moves. Hence, the farther the
movement, the more contribution the railroads earn, both in
absolute amounts per car hauled and as a percent of revenue.
The behavior of contribution as a percent of revenue over
distance is shown for new rubber in Figure 25 and for scrap
rubber in Figure 26. These lines of best fit are drawn from
a regression equation. The line for natural and synthetic
rubber starts at about 50 percent and rises gradually, whereas
the line for scrap rubber starts at about 23 percent and
rises to 50 percent over the relatively short spectrum of
about 750 miles. While these observations would indicate a
rather unusual rate treatment from the variable cost viewpoint,
-125-
-------
Table 22
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
Mileage
Blocks
tL 0-300
to
¥ 301-600
601-1000
1001-2000
Over 2000
All Blocks
Virgin Commodity
Natural & Synthetic Rubber
No. of Contrib. Contrib.As
Moves Per Car % of Rev.
$
3 150 . 66
8 238 . 00
7 322.14
8 618.37
3 1109.33
29 444.34
41.9
46.8
47.1
53.5
62.4
52.5
Secondary Commodity
Scrap Rubber
j
No. of Contrib. Contrib.As
Moves Per Car % of Rev.
3
2
2
-
-
7
$
51.67
131.00
223.50
-
-
123.43
26.8
37.3
50.3
-
• -
39.8
Source: Computed from Master Tables, Appendix A.
-------
Mileage
Blocks
0-300
301-600
I
I-1
to
601-1000
1001-2000
Over 2000
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF NATURAL & SYNTHETIC RUBBER AND SCRAP RUBBER
Figure 24
Natural & Synthetic Rubber
Natural fc Synthetic Rubber
Natural & Synthetic Rubber
an R
. - -**u -V"
Natural & Synthetic Rubber
(no Scrap Rubber movements at this distance)
Natural & Synthetic Rubber
(no Scrap Rubber movements at this distance)
10 20 30 40 56
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Source: Computed from Master TaMes, Appendix A
-------
OO
r~~i
3 Light lo'adlttf:
10,-- = -i- --.._,;, ..'- - —-L
500
2000
2250 2500
Miles
-------
I
ro
i
Figure 23
STCCi 4026160 Scrap Rubber
Contribution as a Percentage of Revenue
I i : . / .
., ,.|
i j j.. i .1
i , : i I
..!_..4-J..-L-- -L.l-4
j I ! i I I 1TT
;L L_i_LJJ
I'D
Miles
-------
caution must be expressed not to draw broad conclusions due
to the small number of observations. In general, there is
no evidence that the secondary material is paying high rates
relative to the virgin material.
New vs. Reclaimed Rubber
This analysis is essentially a comparison between a raw
material— and a semi-manufactured material. It differs from
all prior analyses in that a virgin and a competing processed
secondary material are being compared. This point must be
kept in mind, since freight rates reflect the values of
commodities as well as their physical transportation
characteristics.
Table 23 and Figure 27 show the behavior of rates and
costs over distance. The figures for the new rubber are the
same as those shown in the New vs. Scrap Rubber analysis and
will not be discussed further„
The reclaimed rubber moves, like the scrap rubber moves,
extend only to the third mileage block. Average revenues
per car and per ton rise with distance, and revenues and costs
per ton-mile decline with distance, as would be expected0
The revenues per car are about the same for reclaimed
and new rubber in the first mileage block (1 to 300 miles),
but the revenues for the reclaimed are greater in the subsequent
mileage blocks. Rates (revenues per ton) are shown to be
*c=^n
aoout the same for the two commodities. Revenue per ton-mile
is somewhat higher for reclaimed rubber in the first mileage
block, but about the same as for new rubber thereafter. The
amounts of contribution, both in absolute terms and as a
percentage of revenue, are higher for reclaimed than for new
rubber, as seen in Table 24 and Figure 28. For moves of
— A manufactured "raw material" in the case of synthetic
rubber.
-130-
-------
Table
RAILROAD REVENUE AND VARIABLE COST
FOR STUDY MOVES BY DISTANCE BLOCKS
1
h-1
CO
I-1
1
Mileage
Blocks
0-300
301-600
601-1000
1001-2000
Over 2000
All Blocks
Virgin
No. of
Moves -
3
8
7
8
3
29
Commodity: Natura
Average
Rev/Car
$
360
509
683
1156
1777
845
Average
Rev/Ton
$
7.88
11.30
14 . 95
20.06
36.77
17.23
1 & Synthetic
Rubber
Average Average
Rev/ Var.Cost/
Ton Mile Ton Mile
$ $
.029
.027
.025
.014
.017
.018
013
012
012
006
006
008
Secondary Commodity:
Reclaimed Rubber
No. of
Moves
2
1
7
-
-
10
Average Average
Rev/Car Rev/Ton
$ $
389 7.01
815 12.53
815 16.88
- -
- -
730 14.20
Average
Rev/
Ton Mile
$
.036
.028
.023
-
-
.024
Average
Var.Cost/
Ton Mile
$
.015
.008
.009
-
-
.009
Note: Averages for all blocks represent totals for all study moves divided by appropriate total
service units, e.g. total revenue f total tons moved, total variable costs 4- total
ton miles, etc.
Source: Computed from Master Tables, Appendix A.
-------
AVERAGE REVENUE PER CARLOAD BY MILEAGE BLOCKS
"STUDY MOVES OF NATURAL & SYNTHETIC RUBBER AND RECLAIMED RUBBER
Figure .27
Mileage
Blocks
0-300
301-600
601-1000
1001-2000
Over 2000
Nat & Synth
R ec'Iitirp.eo.
,.
Nat & Synth Rubber
H
fc
Nat & Synth Rubber
1
Natural & Synthetic Rubber
(no Reclaimed Rubber movements at this distance)
Natural & Synthetic Rubber
(no Reclaimed Rubber movements at this distance)
i rl ii i» -i- -r ^•-^- — en i ' nii-»«»-p»-—i—«»—j-c»^-» i • Ljujmnj I [[•^••••••••••.••.•••••i
)0 200 300 400 500 ' 600 700 800 900 1000 1100 1200 loOO 1400 1500 1GOO 1700 1SOO
Source:
100
AVERAGE REVENUE PER-CARLOAD (DOLLARS)
Computed from Master Tables, Appendix A
-------
Table 24
w
CONTRIBUTION TO RAILROAD REVENUE BY
STUDY MOVES IN DISTANCE BLOCKS
t
Mileage .
Blocks
0-300
301-600
601-1000
1001-2000
Over 2000
All Blocks
Virgin Commodity
Natural & Synthetic Rubber
No. of Contrib0 Contrib.As
Moves Per Car % of Rev.
$ .
3 150.66
8 238.00
7 322.14
8 618.37
3 1109.33
29 444.34
41.9
46.8
47.1
53.5
62.4
52.5
Secondary Commodity:
Reclaimed Rubber
No. of Contrib. Contrib.As
Moves Per Car % of Rev.
$
2 223.50
1 578.00
7 544.14
- —
- —
10 483.40
57.5
70.9
66.7
-
' -
66.2
Source: Computed from Master Tables, Appendix A0
-------
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE BY MILEAGE BLOCKS
STUDY MOVES OF NATURAL & SYNTHETIC RUBBER AND RECLAIMED RUBBER
Figure 28
I
£-"
CO
1001-2000
Over 2000
Nat & Synth Rubber I
*jmm***~Zii-^rrm+r^mrrt+*±~£r^—-L-
Mileage
Blocks
0-300
301-600
601-1000 Nat^ fe Synth^Rubber
Nat & Synth Rubber
Synth. Rubber
(no Reclaimed Rubber movements)
aX & Synth.Rubber
(no Reclaimed Rubber movements)
10 20 30 40 50 6*0 70 80 90 100
AVERAGE CONTRIBUTION AS A PERCENT OF REVENUE
Source: Computed from Master Tables, Appendix A
-------
reclaimed rubber in excess of 300 miles, the contribution
per car exceeds $500, a rather large amount relative to gross
revenue. Contribution averages 66 percent of revenue for
all moves.
The line of best fit for the regressed contribution as
a percentage of revenue in Figure 29 slopes downward with
distance, but reflecting the figures noted above is at a
rather high level.
Analysis By Destination Territory
Table 25 shows prices paid, per car and per ton-mile, by
receivers in the respective destination territories.
The data for the natural and synthetic rubber demonstrate
that transportation prices for those commodities are not
based on distance alone, but also reflect territorial
differences. With the exception of receivers in Territory 4,
all the consignees are paying essentially the same amount
per* ton-mile„ If these rates followed a uniform pattern,
receivers in Territory 5 would be charged substantially less
per ton-mile than the average, while those in Territory 2 would
be charged more,
Contrarily, the rates for scrap appear to be fairly well
influenced by distance, rather than territory. Receivers
closest to shipping points pay the largest amount per ton-
mile and the least amount per car, whereas those farthest
from the shipping points, those in Territory 2, pay the
largest amount per car and the least amount per ton-mile.
While distance is an important factor in the rates for
reclaimed rubber, there are some territorial inconsistencies.
Receivers in Territory 5, who are recieving reclaim from the
most distant points, are paying the highest amounts per car
-135-
-------
80
70
60
•p
r«.
O
o
•H
-P
3
•P
c
O
O
30
20
10
Figure 29
1 i-
1
1
i i i . S
i ''
\ ' *-
i .
L :
j ;
— .
..
*-, .
X
^•v,
"•4^.
' 1 I
j
. i i
. ; i
^^v
" ^
' ; ' !
1 i
.
j
'• i
; i
1 , •
! !
.
j
1 • ; •
i :
c
-i .
i i i
: i i
i I
i- :
i
i- i •
i .
"."
:• 1 :
0
! i
: i i i
; i
• i
I i
l !
i
i i i
i I
• ! ! ;
•ill
i j
i j
'• \ i
; i
; ' :•'•
!
250
1
1
: ' !
1
I
>
•^s,
» ~
—
„*
—
•
* --•
—
i
i
[ j
: i
— •»
^
'. —
1
i
i
.
1 ;
i i
'
i
I
500 ••
X
— :
• 1
^
***•*«*
'.V-
^
to'
.
'. 1 '
i :'
•
.
. 1
1
j
1 \
750
1
S2CC i
Corit
1 !
- !
! J
: !
.._
.._
j
| -
'
• . ! .
:
1 |
; | j
—
.
.
3631,190 Reclaimed Rubber
ributiori as a Percentage of Revenue
t
.'
• i 1 ; : •"
-
i ! j
| -1
j i
j
j 1
• ! ' 1 i-
' 1 i
i
i !
'
i - .
i
•
- i
1 j
. ! |"
t - -i
1
1000
Mi'lo
i
!' i
1250
.
! |
\ '• '
| ;
v i
i
i
1
| -
t
1500
1
17.
— 1 _: —
i
i •
' i i
4 i 1
i i : ! -i.-
i i
i i ; ' •
i ! •
\ ' • i
i !
i
i '•
\ ;
i
i
j
i
i -1
i !
i
' I ! -
I
; i
i i
1 ! 1
' : i
• ' i
' ! i
i i !
! 1 i
:
! i i
:-i ' >
i | j
j ! ; .'
i ;
' i ! !
i •
i
: ! • •
| •
; ;
M
: ;
! i '
; I -1 i '
1 ' '
! i
!
:
! i
1 !
i i
CD -' Unexplained low rate
50 ' 200Ci; 2250 250C
-------
Table 25
Rate Differences By Destination Territories
Natural, Synthetic, Scrap and Reclaimed Rubber
NATURAL & SYNTHETIC
SCRAP
RECLAIMED
1
h-1
CO
1
Dest .
Terr.
1
2
3
4
5
Avg.Rev.
Per Car
$ 866
552
855
414
1,762
Avg. Avg. Rev o Avg .Rev,
Haul Per Per Car
(mi.) Ton-Mile
857
487
1,220
709
2,023
.016$ $264
00l5$ 362
.014$
0023$ 183
0016$
. Avg. Avg .Rev,
Haul Per
(mi.) Ton-Mile
404 ,,032$
624 .021$
— —
179 .128$
— —
AvgoRev.
Per Car
$ 556
860
1,228
675
1,520
Avg. Avg.Rev.
Haul Per
(mi.) Ton-Mile
483 .028$
Q nn r\Q *}f*
oUU o U^^V
927 .025$
869 0026$
2,250 .016$
Source: Computed from 1969 One Percent Waybill Sample
-------
a.nd the lowest amounts per ton-mile, and those in Territory 1,
closest to the shipping points, are paying the least per car
and the highest ton-mile rates, as might be expected. On
the other hand, the average hauls in Territories 2 and 4 are
about the same, but th.e rates per ton-mile are 20 percent
different.
Findings
The rates for short and medium range movements of new
rubber (natural and synthetic) appear to be consistently
related to costs, with contributions of about 45 percent of
revenues, on average. For the moves over 1,000 miles,
however,, the rates appear to be relatively high. At that
distance the rate of contribution, is still rising, whereas
it could be expected to be declining. Rates per ton-mile do
not drop, appreciably over distance, another indication that
rates are held at rather high levels.
Scrap rubber ra;tes are relatively low compared:; with new
rubber, when measured; in terms of revenue per.car and net
contribption.
Reclaim.ed rubber rates make ge-nerous contributions,
averaging- 66 percent of revenues:, for the ten study moves.
In relation to the other rubber- commodities,, the rates for
reclaimed rubber seem to- be high,,, cos>ts. considered,,
Concluding Overview.,
Five virgin and- six secondary commodities were discussed.
in- the. preceding sections of this: chapter from: a rate-cost
viewpoint., These analyses? indicate widely diverse and
inconsistent, results. To some extent, this is not surprising,
because a) cost considerations a;re but one factor in the
.-138-
-------
ratemaking process, and b) the costing procedures do not
reflect the specific characteristics of each movement,
although they do reflect the average handling experienced
by the types of equipment utilized.
The use of averages, regardless of the sample size and
its statistical significance, though helpful in gaining an
overview, has the disadvantages of a mathematical medium that
obscures those observations which could be most significant
for some groups of shippers and consignees. Nevertheless, the
study does permit some meaningful conclusions.
In three pairs of competing commodities, the rates for
secondary materials were shown to be priced, on average, less
favorably to the users than their virgin counterparts. Iron
and steel scrap, cullet, and reclaimed rubber movements contri-
bute appreciably more to the railroads' net revenue than do
iron ore, glass sand, and natural and synthetic rubber. Figure
30, depicting the lines of best fit and their confidence bands
for each pair of commodities, provides a ready illustration.
While for the shortest moves both ore and scrap make about
the same contribution, around 50 percent, ore pricing reflects
a sharp drop as distance increases, while scrap rates tend to
stay higher. The decline in the contribution rate for long
haul scrap is so modest that the contribution rates for these
hauls are higher than those for the shortest ore movements.
Nevertheless, it should be remembered that the preponder-
ance of the ore and scrap moves are less than 200 miles in
length, and that in this distance range the two commodities were
found to be treated fairly equitably on the basis of the herein
applied costing procedures. The suspicion expressed that a
more concise costing procedure for the short scrap movements
might reveal a less equitable situation should also be borne
in mind.
-139-
-------
Contribution as a Percentage of Revenue, Study Commodities
Figure 30
Page 1 of 2
o
i
K7CC-- 101 Iran Ore
STCC.''-J02'< Iron and Steel Scrap -—
_ " ' ?s_a_ ^["cen^g« of Revenue
T:KC ~
! -Nr-
500
• i '
....i. i ..; .~i.._J.
b°° rules 90°
I2OG
isoo
STCC.-afofH U/ood _ r
iTCCmo&l Waste Paper
J • .. ..-;, J_ ,. , . , .. _ .. f f | J...
[_^_U ! ! ! I i I I
500
Miles "'5
-------
= £40>
o
u
STCC' 0343 3c 5
S'i'CC: £3? £..::O
STCC' 303//90
1 :
t\
Contribution as a Percentage c
icurrAi Rubber ^
u.-A-iki-tiC Rubber J
Redaimed Rubber
Contribution
1 l.T.
^
"~* _
- r~ -
i i ~*
i I
^^"~~* ;
-. "*"* - -I
• .^.-n^.r »^_
r---r^: ..—•
-^-.-"""";
- i-i
i
I
: j
.",:_!.'
_..
•
' i
. i .
) BOO
— i
_— «~
£3 a f^rcer^age or Revenue
•—
--
1
!
i
, i
\
^V*T^
>
- •—• -
r-r--|
jp
•^^*
"* . . ! !...:..._
i ..
I
.._!..
!
M«k
mi •-
1
"~^~^ — - : j
(
i
F ifc^ure
>f Revenue, Study Commodities &
jr3jJG ^
STCC- OS42325 Natural Rubber
STCC: 282/2£0 Sunthetic Rubber ,
•J *^
STCC 300U90 Scrap Rubber
9
c
I —
o
"^
-0
u
1c
CJ
1
/OOO '500 20CX? £500
Miles
-\
»
Cbr
— r-—
Ntr
—
ibu-tioo i?is a Ffercsr^fcags
'
/
• r
-.-j - - - -
] '
[^ ^j**1
1 ... i — «-• — r±^i — :• — r
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i i
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i
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°O 5OO /OOO '5OO
Miles
30
of 2
r-
.~_
sf Rev/Goue
i
. —
-—
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i
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lit 1 T
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.
i
!
£OOO .25OO
-------
The comparison for glass snnd and cullet is similar
except that the rate of contribution for cullet is significantly
higher than for sand at all lengths of haul. The average
contribution for all cullet moves was more than twice the
percentage of contribution derived from glass sand,,
The limited number of study moves for reclaimed rubber
show an average contribution rate which is considerably more
than for any other secondary commodity. For all lengths 'Of
haul combined, the average contribution per car for the
reclaimed rubber was $483 compared with $256 for the natural
and synthetic rubber, a ratio of almost two to one. The
contribution rates were 66.2 percent of revenue for the
secondary commodity and only 46.1 percent for the virgin
material.
The comparison of new and scrap rubber is limited by
the fact that only seven moves of the secondary commodity
were analyzed. These seven, though, show a progression which
would tend to discourage the longer hauls. While beginning
with a contribution rate that is lower than that for any study
commodity, the rate rises :sharply thereafter and is similar
to the rates for natural and synthetic rubber.
Aluminum scrap and waste paper contribute on average less
than their virgin .materials counterparts„ Thus, this measure
would suggest that these rates are relatively low. .For both
pairs, the rates reflect the typical decline in contribution
percentage as distance increases. Further, the contribution
rates at absolute levels-are at the lower end of the
contribution spectrum,,
Another useful overview, from the national standpoint,
is provided by the analyses of average rates by destination
-142-
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territory. Though these ignore rail cost considerations,
they provide an indication of the average price paid by the
consumer of the transport services. Simplifying further
and viewing the picture as a single national average for each
pair of commodities based on the 1969 traffic consist, as
contained in the One Percent Waybill Sample, it is possible
to illustrate the differences paid by consumers of the
competing commodities per ton of traffic hauled, regardless
of differences in length of haul. Expressed as a percentage
of the average rate per ton for the virgin counterpart
commodity, the following values were computed for the
secondary commodities:
Iron and Steel Scrap 196
Gullet 193
Reclaimed Rubber 127
Scrap Rubber 98
Aluminum Scrap 96
Waste Paper 64
It is particularly interesting to note that some
correspondence exists between the above results and the
contribution analyses. The three commodities for which
shippers pay more than the average rate of their virgin
material counterparts, are also the three secondary materials
for which higher contribution rates were calculated.
It will be remembered that our analyses were based on
1969 revenues and cost factors. Since that time, four general
rate increases have been authorized by the I.C.C. The last
two, in Ex Parte 267B and 281B, differentiated in the increase
percentages by rate territories and some commodities. The
aggregate increases authorized on average tend to maintain
about the same differences between the virgin and secondary
commodities as were shown for the 1969 rate levels. For example,
-143-
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the increases applicable on ii-on ore and scrap are as follows
Ex Parte 262 6 percent
Ex Parte 265 6 percent
Ex Parte 267 13 percent iron ore,— 11 percent scrap
Ex Parte 281 5 percent
Total 33 percent iron ore, 31 percent scrap
Applying these increases to the average base (the average
rate per ton paid by consumers ih 1969), results in average
ore and scrap rates with approximately the same difference
as was calculated for 1969. From this it can be concluded
that on average the relationship in rates for virgin and
secondary materials has not been materially changed by the
rate increases authorized by the I..C.C. since 1969.
— Weighted average for all territories; the increase
ranged from 6 to 14 percent, depending on territory.
-144-
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V. RATE STRUCTURE ANALYSIS
Principles
It is a well-established fact that the heavier the
lading per railcar, the lower the costs for transport per
ton. Railroads have long recognized this economic principle
and have reflected it in their so-called incentive rates.
These rates are intended to motivate shippers to load rail
cars more nearly to their full capacity. The incentive is
a reduced rate per ton for each increment of load above the
minimum.
This concept is similar to quantity discounts in the
pricing of most products and services„ The purchaser of a
large quantity of steel will usually pay less per ton than
the purchaser of a small quantity. The incentive price is
usually intended to benefit both the buyer and the seller.
This is brought about by the supplier passing on to the
consumer only a portion of the savings realized from
production at larger scale.
Suppliers of transportation services not only recognize
these principles, but use them effectively. Railroads in
particular have been increasingly conscious of the economies
of volume resulting from multiple heavily loaded car movements,
The increasingly popular unit train for bulk commodities is
the extreme example of the application of volume pricing.
Incentive pricing has been applied by the railroads to
the study commodities in varying degrees. How the benefits
are divided between the shipper and the carrier can readily
be measured. The most appropriate measure for this analysis,
in our judgment, is to compare, the cost saving to the railroad
of the heavier load with the rate saving to the shipper of
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the incremental traffic. These measures can then be related
to determine what share of the reduced cost the carrier is
passing on to its customer.
It is essential to recognize that the various rate
bureaus have different attitudes toward the sharing of
cost reduction. This study clearly indicates that greatly.
different results exist in the rate-cost relationships
applied in the various rate territories„
Methods of Analyses
Tables in the following industry sections show the
results of the calculations made. These analyses were
performed in the following manner: , ..
a. Increases in minimum weight levels were expressed
as percentages of the lowest minima. Example:
for a minimum weight structure of 50,000, incentive
loads of 75,000 and 100,000 pounds would be
described as 50 percent and 100 percent increases
over the minimum»
b!. Rates associated with successive minimum weight
levels were expressed as percentage reductions
from the rate for the least minimum. Example:
rate of $4 on a 75,000-pound minimum, compared with
$6 on a 50,000-pound minimum, is described as a 33.3
percent reduction.
c. Unit costs for moves loaded at the successive
minimum weight levels were expressed a's percentage
reductions from the unit- costs associated with the
move at the lowest minimum weight.,
d. Finally, the percentage of cost reduction was divided
by the percentage of rate reduction at each successive
-146-
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minimum weight level to obtain the ratio of cost
to rate reduction; put simply, where the resulting
figure is more than 1.0, the carrier is passing on
to the shipper less than the full amount saved due
to the heavier lading.
These computations were made for rates published by
three different Bureaus for each commodity, except in cases
of data insufficiency, or where the rate structure does not
provide for incentive ladings per car, as in the case of
iron ore.
These analyses show differences among the bureaus'
incentive pricing policies, and in the pricing treatment
accorded to competing commodities.
The limited number of rates studied herein indicate
that existing incentive rate structures are more advantageous
for some commodities than they are for others.
It is noteworthy that the I.C.C. in its recent order
in Ex Parte 281 (Environmental Matters) admonished the
railroads to give greater consideration to incentive rates
for secondary commodities.
Findings
Iron and Steel
Iron Ore
There are no incentive loading provisions for single
cars in iron ore tariffs, since ore is routinely loaded to
car capacity anyway. Tariffs merely specify that a car be
loaded full, or to 90 percent of the car's marked capacity,
or to some weight level that approximates a car's limit.
-147-
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However, the shipper is given a rate incentive to load
several cars instead of one. Tariffs commonly provide one
rate for single cars and another for 1,500 (or 5,0b6 or 10,000)
aggregate tons. Western Trunk Line railroads offer a
multiple-car rate with both a minimum and maximum; a single
shipment must weigh at least 6,000 gross tons (of 2,240
pounds), but must not exceed 7,500 gross tons to qualify for
the applicable rate. The Southern Freight Tariff Bureau
publishes a single-car rate with a 100,000 pound minimum
and a multiple-car rate (1,800 net ton aggregate minimum)
that is approximately 85 percent of the single-car rate.
The Pacific Southcoast Freight Bureau offers two multiple
car rates: one applicable to a 1,500 gross ton shipment,
which is 79 percent of the single-car rate; and another
applicable to a 5,000 gross ton shipment, at about 70
percent of the single-car rate.
Iron and Steel Scrap
As with ore, the rate structure for ferrous scrap
varies among territories. The Trunk Line-Central Territory
Railroads maintain rates at minimum weight levels of 44,800,
80,000, and 112,000 pounds, the latter being available in
some cases only for five-car shipments. Weight minimums for
five-car lots vary from 250 to 500 gross tons„ Also SFA,
SWL, and WTF have some multiple ca'r rates.
The Southern Freight Association publishes rates at-
minima of 50,000, 80,000, and 100,000 pounds, the latter
being applicable on five-car shipments.
In the west, some lower minima are available. The
Pacific Southcoast Freight Bureau publishes minima of 30,000,
60,000, 80,000, and in some cases, 100,000 pounds. Southwestern
Lines have a similar minimum weight structure, with minima of
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30,000, 50,000, 75,000, and 100,000 pounds. The 100,000-pound
rates are available in some cases if a car is loaded to full
visible capacity and weighs at least 80,000 pounds.
t
The Western Trunk Line Tariff Bureau has a similar rate
arrangement, offering 80,000-pound rates to those shippers
who fill a car to full visible capacity and a lading of at
least 60,000 pounds.
Accessorial charges for ferrous scrap include a turnover
charge, applicable when a loaded car is tendered to a carrier
without designation of final destination. This current charge
is $10.80 per car in Official Territory. Beginning with the
Southern Freight Association in 1969, railroads increasingly
have published charges for weighing. Those charges now range
from $12 to $20 per car.
Comparison Between Ore and Scrap
No comparison between iron ore and iron and steel scrap
was possible because ore, except in rare and insignificant
cases, moves under rates requiring fully loaded cars, and,
in most cases, multiple cars. However, an analysis of
selected incentive rates for iron and steel scrap was made.
Table 26 shows the appropriate figures. It can be seen
that for large increases in ladings, rate reducations were
sizable, but often less than half of the associated cost
reduction. A consistent cost-sharing principle was applied
by the Southwestern lines; at three successive incentive
rate levels, the bureau reduced the rate by two-thirds of the
amount saved. On average, a lesser share of the savings was
-149-
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Table 26
SELECTED RATE-COST RELATIONSHIPS FOR
LADING ABOVE CARLOAD MINIMA
Secondary Commodity: Iron & Steel Scrap
Lading °/,
above
minimum
Rate Reduction
% of minimum
Cost Reduction
% of minimum
Rate Bureau
Ratio
Cost Reduction/
Rate Reduction
80.0-/
150.0
13.3
48.4
T.L.C.T.R.
40.4
54.6
3.0
1.1
66.6
153.3
233.3
24.0
35.3
41.9
S.W.L.
35.9
53.3
62.9
1.5
1.5
1.5
100.0
166.6
233.3
18.5
25.3
35.4
P.S.F.B.
46.2
57.8
64.7
2.5
2.3
1.8
Calculated as follows: minimum car-load is 44,800
Ibs., next minimum is 80,000 Ibs., e.g., 35,200 inverse
? 44,800 * 78.6%, rounded to 80%.
Source: Official Tariffs on file with I.C.C. applicable
to selected study moves; and study cost calculations
Note: For description of rate bureau abbreviations, see
glossary at end of this chapter.
-150-
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passed on to shippers using TLCTR and PSFB rates. In only
one case was the rate reduced by almost as much as the costs
saved, resulting in a cost/rate reduction ratio of 1.1. By
contrast, the remaining observations had ratios ranging from
a low of 1.8 to a high of 3.0.
Paper
Woodpulp
Weight minima of 50,000, 100,000, and 120,000 pounds
apply to woodpulp in at least three territories: SFTB, SWL,
and TLCTR. In the two latter territories, the rates applicable
to the 120,000 pound minimum level are restricted to shipments
moving in cars that do not exceed 42 feet.
Some of the pulp shipments in the study moved under
individual carrier rates. The Maine Central maintains a
tariff of per-car charges, which again are applicable only
to shipments in cars not exceeding 42 feet. The Soo Line
has a scale of pulp rates with minima of 50,000, 80,000, and
90,000 pounds.
Waste Paper
The minimum weight levels are lower for waste paper
than for pulp, and they are fairly consistent among the
different territories.
TLCTR minima are 40,000, 50,000, and 80,000 pounds.
WTL and SWL offer identical minimum weight requirements—
40,000, 50,000, 60,000, and a higher minimum weight variable
with car size: 80,000 pounds if the car is 40 feet 7 inches
or less, and 100,000 pounds if the car is larger.
The Soo Line tariffs provide for minima of 30,000,
40,000, and 80,000 pounds.
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Comparison Between Woodpulp and Waste Paper
Table 27 shows that carriers offer minima for pulp that
have a greater weight range than the waste paper tariffs.
Pulp tariffs have minima that range up to 140 percent of the
lowest minimum weight per car, while waste paper tariffs
range from 25 to 100 percent of the lowest minima.
Without exception, the rates examined drop in relation
to cost reductions at least by as much for waste paper as
they do for pulp for the same percentage increases in lading.
In TLGTR territory the rates studied show that doubling
of the minimum lading in both commodities results in comparable
rate and cost reductions0 In SWL territory, however, a similar
comparison shows that waste paper .is accorded a greater rate
reduction: than woodpulp, with waste paper getting over hal-f
the costs saved, but pulp only 41 percent.
Railroads in the South appear to be keeping a
disproportionate share of cost savings on pulp movements
compared with carriers located elsewhere, with cost/rate
reduction ratios of 3.6 and 2.40
These data, show that waste paper is accorded a slight
advantage- in the incentive rate structure as compared with
woodpulp.
Glass
Glass Sand
Most rates for glass sand are published in individual
carrier tariffs, applicable only between two named points.
This makes any attempt at territorial analysis impractical.
Glass sand, like iron ore, almost always moves in cars
loaded to capacity, so that there are few incentive loading
-152-
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Table 27
on
w
SELECTED RATE-COST RELATIONSHIPS FOR LADING
ABOVE CARLOAD MINIMA
Virgin Commodity; Woodpulp
Secondary Commodity; Waste Paper
Lading %
above
minimum
Rate Re- Cost Re-
duction duction
% of min. % of min .
Ratio Lading %
Cost Reduc./ above
Rate Reduc. minimum
Rate Bureau
T.L.C.T.R.
100.0
140.0
100.0
140.0
80.0
140.0
21.3
28.8
16.6
24.3
10.0
19.5
41.6
49.0
S.W.L.
40.6
47.5
S.T.F0B0
36.3
47.7
1.9
1.7
2.4'
1.9
3.6
2,4
25.0
100.0
25.0
100.0
25.0
100,0
Rate Re- Cost Re-
duction duction
% of min. % of min.
Ra
te Bureau
Ratio
Cost Reduc./
Rate Reduc.
T.L.C.T.R.
9.2
23.0
9.5
23.3
9.9
23.6
17.3
43.2
S.W.L.
16.8
42.0
W.T.L.
17.4
43.6
1.9
1.9
1.8
1.8
1.8
1.8
Source: Official Tariffs on file with I.C.C. applicable to selected study moves;
and study cost calculations.
Note: For description of rate bureau abbreviations, see glossary at end of this
chapter.
-------
provisions for single cars. Most tariffs state one minimum
level, either a specific weight or a percentage of marked
capacity (90 or 95 percent). TLCTR tariffs, for example,
generally specify a minimum weight of. lQO,000 pounds or 95
percent of marked capacity of the car.
Gullet
Lower minimum levels are available for cullet than sand.
Most TLCTR tariffs provide rates at the 50,000 and 100,000
pound levels. Some specify a minimum lading of 90 percent
of marked capacity, but not less than 100,000 pounds.
.Likewise, SFTB tariffs specify minima of 50,000 and 100,000
pounds. IFA publishes cullet rates applicable to shipments
loaded to 90 percent of marked capacity.
Comparison Between Glass Sand And Cullet
As noted above, most glass sand tariffs specify only a
single minimum weight level for a car. The two glass sand
cases selected for analysis in Table 28, therefore, are
not representative for this virgin commodity; they are
shown merely as examples of a segment of the rate structure.
The SFTB case signifies that the carriers are keeping most
of the cost savings resulting from higher ladings of sand;
however, SFTB publishes numerous point-to-point rates,
designed for particular shippers, with only a single, but
• " ' ' \
high, minimum weight level and relatively low rate.
The rate structures for cullet show that the TLCTR and
IFA carriers are passing on to shippers more than half the
savings in unit costs attributable to heavier ladings. But
SFTB carriers are giving cullet shippers only about a quarter
-154-
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Table 28
SELECTED RATE-COST RELATIONSHIPS FOR LADING
ABOVE CARLOAD MINIMA
Virgin Commodity; Glass Sand
Secondary Commodity; Gullet
1
Ui
o^
1
AWBEF
rv
n
5
so
K
C
(J>
Lading % Rate Re- Cost Re-
above duction duction
minimum % of min. % of min
Rate Bureau
S.F.T.B.
90.0 6.4 36.1
C.N.J.^
40.0 32.7 25.4
I/ Central of New Jersey.
pound/2 car rate.
Ratio Lading %
Cost Reduc./ above
Rate Reduc. minimum
5.6 100.0
0.8 100.0
80.0
Comparison between a 50,000
Source: Official Tariffs on file with I.C.C. applicable
and study cost calculations.
Rate Re- Cost Re- Ratio
duction duction Cost Reduc./
% of min. % of min,, Rate Reduc.
Rate Bureau
S.F.T.B.
10.4 42.7 4.1
T.L.C.T.R.
26.3 43.9 1.7
I.F.A.
24.3 41.1 1.7
pound rate and a 70,000
to selected study moves;
Note: For description of rate bureau abbreviations, see glossary at end of this
r>hn n + oY*
F.
-------
of such savings. Once again, these wide differences confirm
that there is no ma.ster plan of ratemaking among the railroads.
Aluminum
Primary Aluminum Ingot
Minimum weight requirements for shippers of, primary
ingot vary widely from region to region. Some have rates
availa.ble at the 30,000 pound level, while others must meet
a 50,000 pound minimum to get a commodity rate. Some shippers
have a 140,000 pound rate and others have no incentive to
load over 100,000 pounds.
TLC.TR tariffs generally specify minima of 30,.000 and
5Q,.QOO pounds. SWL has minimum levels of 30,000, 50,000, and
100,000 pounds. SFTB publishes rates applicable to those
levels and for a 140,000 pounds minimum. In the Far ,W,estt,
PSFB maintains rates at minima of 50,000, 80,000, and 1,0,0,000
pounds, and NPCFB offers rates at minima of 50,000 and
140,000 pounds.
Aluminum Scrap
Aluminum scrap tariffs generally specify at .least minimum
weight of 40,000 pounds and anothe.r minimum of 60,000 pounds,
TEC1R .and IFA maintain rates .at 40,000, 60,000, and 80,0,0.0
pound minimum levels,, WTL has a ;similar structure. PSFB
and TGFB offer rates at a variety of minima, depending
variously on car size and destination.
-15.6-
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Comparison Between Primary Ingot And Scrap
Table 29 shows that shippers of primary ingot have a
very favorable incentive rate structure in PSFB territory.
At both incremental minimum levels, the rate reduction is
almost as large as the unit cost reduction.
The incentive to load heavier is not so great in TLCTR
territory, where the unit cost reduction is almost three
times the rate reduction, or in SFTB, where the cost reduction
is 506 and 1.7 times the rate reduction for the second and
third minimum weight levels, respectively.
Outside of TCFB territory, it appears that shippers
of aluminum scrap have relatively little incentive to load
cars beyond the least minimum level. In the cases shown
in Table 29, TLCTR railroads give shippers a 7.8 percent rate
reduction for a 50 percent increase in lading, and a 16.2
percent rate reduction for a 100 percent increase in lading.
IFA carriers maintain a very similar rate structure. In
both those territories, shippers receive only a small part
of the unit cost savings associated with larger ladings.
The ratio of cost/rate reductions in TLCTR territory is
3.8 and 2.7, while in IFA it is 3.3 and 2.5.
Overall, the examples analyzed show the rate structure
for aluminum ingot to be more advantageous than the
structure for aluminum scrap.
Rubber
Natural and Synthetic Rubber
Most railroad tariffs do not distinguish between synthetic
and dry natural rubber. TLCTR publishes incentive rates for
new rubber moving in domestic service. One rate applies to
-157-
^
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'00
29
SELECTED RATE^-COST -RE
FOR 'LADING
MINIMA
Virgin Commodity: ^Primary Aluminum ingot
Secondary Commodity : A i'umi num S c r a p
Lading % Rate Re- Cost Re- Ratio Lading % Rate Re- Cost Re- Ratio
above duction duction Cost -Reduc.-/ above duction ductioh Cost Reduc./
•.minimum % of min. % of min. Rate Reduc„ minimum % of min. % of miru Rate Reduc.
-Rate Bureau
Rate Bureau
66 o 6
66.6
233 . 3
166.6
233.3
i'2
6
35
46
51
.8
.1
.7
,,7
.5
T.L.C.T.-fc,
35.5
S.F.T.B.
34,1
61 . 2
P.S..F.B.
53.5
60 . 0
2
5
1
1
1
.8
.6
.7
.1
.2
50
100
50
100
50
.0
•0
.0
oO
oO
7.8
16 . 2
9.0
17.9
14.0
TiL.'G-.T.R...
29
44
I.F.A.
29
44
T.C.F..B.
22
.6
.4
.8
.6
06
308
2,7
303
2.5
1.6
Source: Official Tariffs on file with I.C.C. applicable to selected study moves;
and study cost calculations„
Note: For description of rate bureau abbreviations, see glossary at end of this
chapter.
-------
a 30,000 minimum weight and another lower rate applies to all
weights in excess of 30,000 pounds. The TLCTR import rates
are applicable only to shipments of 70,000 pounds, and no
incentive rates are published.
Rates published by TCFB and SWL from Texas points
(the primary origin for synthetic rubber) apply to minimum
weight levels of 80,000, 100,000, and 140,000 pounds. In
addition, some TCFB tariffs offer rates applicable to a 60,000
pound minimum.
Reclaimed and Scrap Rubber
Incentive rates-are also found in tariffs for reclaimed
rubber. TLCTR tariffs provide a rate for reclaim at a minimum
weight of 50,000 pounds and a lower rate for ladings in
excess of that minimum,, In some tariffs, a third rate applies
to shipments of 100,000 pounds or more„
Scrap rubber rates vary considerably from region to
region, and in most cases include only a single minimum
weight level, indicating that rates are "tailor made" to meet
the needs of a particular shipper. For example, the rate
search revealed at least three different rate structures for
scrap rubber in three areas of TLCTR territory.
Few incentive rates for scrap rubber were found to
exist in the bureau tariffs. Exceptions were SWL, which
publishes rates at weight minima of 50,000 and 75,000 pounds,
and Texas Lines (Texas intrastate), which has rates applicable
to shipments of 40,000 and 75,000 pounds.
-159-
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. Comparison Between New Rubber and Secondary Rubber
Table 30 shows an unusual rate structure for natural
arid synthetic rubber. In two rate territories, SWL and
TCFB, the carriers are actually reducing their rates by more
than the calculated savings. While these, territories thus
have structures very favorable to shippers of new rubber,
TLCTR tariffs indicate the opposite. In the case shown in
Table 30 ,, the rate reduction is only 5»2 percent, while the
cost reduction is 30.7 percent.
The rate structures for reclaimed rubber do appear to be
designed to encourage heavier la-ding. In the TLCTR rate
shown, the ratio of cost- to rate reduction is 2.7, and in
the TCFB case, the ratios are 1.5, 1,9, and 1.9 respectively
for successive increases in weight.
Da"tai on scrap rubber are too fragmentary to permit
sta'temefrt of any findings „ However, indications are" that
little^ incentive ratemaking has been applied to this- secondary
commbd:i'1Jyv;, possdbly, this is beca'use there is relatively
little recurring traffic, and' the commodity's density is such
that heavy ladings are not feasible".
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30
SELECTED RATE-COST RELATIONSHIPS FOR LADING
ABOVE CARLOAD MINIMA
Virgin Commodity: Natural & Synthetic Rubber Secondary Commodity; Reclaimed Rubber
Lading % Rate Re- Cost Re- Ratio Lading % Rate Re- Cost Re- Ratio
above duction duction Cost Reduc,/ above duction duction Cost Reduc./
minimum % of min. % of min. Rate Reduc„ minimum % of min. % of min. Rate Reduc.
1
a
i
133.3
25.0
75.0
33.3
RR R
DO . D
133.3
I
•j
5.2
9.2
32.2
24.5
*3fi ft
47.5
late Bureau
T.L.C.T.R.
30.7
S.W.L.
15.0
31.3
T.C.F.B.
18.8
•3n 1
«5U . -L
42.9
5.9
1.6
0.97
0.77
070
. / O
0.90
100.0
50.0
100.0
150.0
Secondary
48.0
Rate
T.L
15.1
T.
21.0
23.0
27.6
Commodity
s
9.7
Burea u
.C.T.R.
41.0
C.F.B.
30.8
44.0
52.0
: Scrap Rubber
W L
26.7
2.7
1.5
1.9
1.9
2.8
Source: Official Tariffs on file with I.C.C. applicable to selected study moves;
and study cost calculations.
Note: For description of rate bureau abbreviations, see glossary at end of this
chapter.
-------
GLOSSARY OF RATE BUREAU ABBREVIATIONS
I.F.A. Illinois Freight Association
N.P.C.F.B. North Pacific Coast Freight Bureau
P.S.F.B. Pacific Southcoast Freight Bureau
S..F.T.B-. Southern Freight Tariff Bureau
S.W.L.. Southwestern Lines
T.L.C.T.R. Trunk Line-Central Territory
Railroads Tariff Bureau
W'.T.L. Western Trunk Line Tariff Bureau
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VI. TRANSPORTATION CHARGES AND COMMODITY PRICES
Introduction
The previous sections of this report have been devoted
to the analysis of transportation rates and costs. Now a
broader question must be addressed, namely, what do these
transportation charges mean in terms of effect on delivered
product costs and as compared with the product value at its
average origin point. In order to answer these questions,
analyses were performed to determine the following:
a. Transportation price for equal units of competing
commodities.
b. Transportation price for equivalent units of
competing commodities.
c. Delivered cost of equivalent amounts of competing
commodities, and the transportation share of
those delivered costs.
d. Transportation prices paid by receivers in various
areas of the country relative to the national
average, and how these transportation prices relate
to regional output of the respective industries.
Methodology
Preliminary to making these analyses, technological
equivalency formulas were derived (or found in published
sources); data were obtained on values of the commodities,
including values of non-study commodities included in the
equivalency formulas; and average transportation rates were
computed for each of the commodities.
The methodology for computing equivalent units of
competing commodities is explained in Chapter III and the
formulas used are shown in Appendix E.
-163-
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Whenever possible, mid-1969 prices were used for commodity
values. In a few cases, more recent prices had to be used due
to a lack of historical data. Where "f.o.b. shipping point"
prices were used, mean rail transportation charges were added to
them to obtain delivered costs of the commodities. All prices
used in this study are shown in Appendix F.
Mean transportation prices for the study commodities were
computed by adding the rates per ton for the respective study
moves and dividing by the number of moves. These simple
averages thus, reflect the range of the moves as well as
territorial pricing differences. High and low prices were
obtained by averaging the two highest and two lowest rates
for the/study moves of each commodity.
Transportation prices for non-study movements were taken
from TD-1 wherever possible; the mean price selected was the
"average revenue per lOO pounds" for the U0S. to U.S. summary,
and the high and.low prices were the average of the two highest
and two,lowest territorial figures in the "average revenue per
lOO pounds" column. Where TD-1 data were not sufficient,
i^e.,. where the STCC aggregation was undesirably large*, da
-------
Table 31
Mean Delivered Costs and Transportation Charges for
Equivalent Units of Virgin and Secondary Commodities*
Secondary Commodity
Virgin Commodity
1
'35
1
Industry
Iron and
Steel!/
Paper
Glass
Aluminum
2/
Rubber-
Mean
Delivered
Cost
$ 25.12
19.17
20.00
285.80
224.00
Mean
Transp.
Price
$ 7.71
7.06
8.83
16.17
14.90
Trprt. Price
as % of
Delivered
Costs
30.7
3608
44.2
5.7
6.7
Mean
Delivered
Cost
$ 25.97
112.64
17.48
496.80
339.89
Mean
Transp.
Price
$ 5.76
7.56
7.22
16.99
15.67
Trprt .Price
as % of
Delivered
Costs
22.2
6.7
41.3
3.4
4.6
*Equivalent units reflect one ton of the secondary commodity and
2.097 tons of iron ore, limestone and coal
.880 ton of woodpulp
1.000 ton of glass sand, soda ash, limestone and feldspar
.920 ton of primary aluminum ingot
loOOO ton of natural or synthetic rubber, carbon black, sulphur, zinc oxide,
and other miscellaneous materials.
I/ Ex-Great Lakes ore is the primary virgin commodity; all line-haul transportation
. . costs from mine to plant are included in delivered cost figure; only the rail cost
from lake port to plant is reflected in the mean transportation price.
2/ Reclaimed rubber is the secondary commodity.
Sources: Commodity price data, Appendix F. Transportation price data, Appendix G.
Prices adjusted by equivalency factors in Appendix E.
-------
insignificant part of the delivered costs for both the virgin
and secondary commodities in the aluminum and rubber indus-
tries. Transportation, therefore, probably does not play an
important role in the decision process for choosing between
virgin and secondary materials in those industries.
In the paper industry, freight charges are a major part
"s
of the delivered costs of waste paper, though not of pulp.
Thus, in paper, glass, and iron and steel industries, trans-
portation costs are likely to have some influence on the
selection process of virgin versus secondary materials. The
relative rate levels in these industries must therefore be
examined.
The transport charges for equivalent amounts of virgin and
secondary commodities, as shown in Tables 31 through 34, indi-
cate that the secondary commodity has a slight transportation
advantage in the paper industry but not in glass or iron and
steel. .
Table 33 shows f.o.b. prices as well as mean transportation
charges for equivalent units, and Table 34 displays the same
data for equal units of the virgin and secondary materials.
While for none of the study commodities average transportation
charges amount to as much as or more than the f.o.b. value of .
the commodity—not an unusual situation when low valued materi-
als are transported over great distances— data in these tables
illustrate that for some of the secondary commodities the mean
transportation charges amount to 44 percent (I&S Scrap), 58
percent (Waste Paper), and. 79 percent (Gullet) respectively of
the secondary products' values prior to transportation.— Only
glass sand, a very low valued product, has a similar relationship,
I/ If these calculations were made using the average transporta-
tion charges shown in TD-1, a weighted average rather than a
mean value, the percentages would be 11.3 for iron ore and 25.8
for ferrous scrap, 10.8 for woodpulp, and 59.9 for waste paper;
no data are available in TD-1 for the other pairs.
-166-
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Table 32
Mean Delivered Costs and Transportation Charges Per Ton
of Virgin and Secondary Commodities
Secondary Commodity
Virgin Commodity
Trprt. Price
Trprt. Price
1
I-1
9.
•a
i
Industry
Iron and
Steel V
Paper
Glass
Aluminum
2/
Rubber-
Mean
Delivered
Cost
$ 25.12
19.17
20.00
285.80
224.00
Mean as % of
Transp. Delivered
Price Costs
$ 7.71
7.06
8.83
16.17
14.90
30.7
36.8
44.2
5.7
6.7
Mean
Delivered
Cost
$ 13.94
128.00
10.86
540.00
554 . 83
Mean
Transp.
Price
$ 2.39
8.59
6.86
18.47
18.83
as % of
Delivered
Costs
17.1
6.7
63.2
3.4
3.4
I/
2/
Ex-Great Lakes ore is the primary virgin commodity; all line-haul transportation
costs from mine to plant are included in delivered cost figure; only the rail
cost from lower lake port to plant is reflected in the mean transportation price.
— Reclaimed rubber is the secondary commodity.
-------
Table 33
Comparison of Equivalent Units of Virgin arid Secondary Materials
Average f.o.b. 1969 Prices and Transportation Charges^./
oo
I
Industry
Iron and
Steel
Paper
Glass
Aluminum
IRubber-
Secondary Commodity Virgin Commodity
Ratio Ratio
Value Trans p. Trjpfti Price/ .Value Trans p. 'f-rprt.-. Price/
f .o.b. Charges Value f.0o.b. f,.o.b0 Charg90
44.
58
79
5
•7
.3
.2
.0
.9
.1
$ 20
105
1-39
479
324
.21
.08
.''26
.Si
.22
$ 5
7
. '7
4S
15
.76
056
.^22
.99 .
.67
28
7
70
3
4
v5
.1
.3
*5
,8
I./..- Transportatioh charg.es reflect tne average rates for mean distance
of movemen-t for all study Commodities and average revenue per tori
as shown in TD-1 for all other commodities; iron ore figures apply
to Mesabi Range ore and ex~Great "Lakes movements. Prices for
aluminum scrap are 1971 average, and soda ashj rubber commodities
are 1972 average prices0
2/ Secondary commodity is reclaimed rubber.
Sources:: Commodity price data j Appendix F0 Transportation price data, Appendix -G0
Prices 'adjusted by equivaiericy factors iri Appendix E.
-------
Table 34
Average f.o.b. 1969 Prices and Transportation Charges
Per Ton of Virgin and Secondary Materials
Secondary Commodity
Virgin Commodity
Industry
Iron and .
Steel -7
Paper
Glass
Aluminum
Rubber-/
Value
f.o.b.
$ 17.41
12.11
11.17
269.63
209.10
Mean
Transp.
Charges
$ 7.71
7
8
16
14
006
.83
.17
.90
Ratio
Trprt. Price/ Value
Value f.o.b. f.o.b.
44
. 58
79
5
7
.3
.2
.0
.9
.1
$ 11
119
4
521
536
.55
.41
.00
.53
.00
Mean
Transp.
Charges
$ 2.39
8
6
18
18
.59
.86
.47
.83
Ratio
Trprt. Price/
Value f.o.b.
20
7
171
3
3
.7
.2
.5
.5
.5
JL/ Ex-Great Lakes ore is virgin commodity. Value shown is f.o.b. lower lake
port, at rail of vessel, and thus includes transportation charges to that
point.
2/ Reclaimed rubber is the secondary commodity.
-------
Table *35 shows the /range,,of delivered costs and
^transportation .-charges for the -.equivalent quantities of
.competing (cpmmo,di;t;ies,. .AS noted 'before, -this study has not
Ibeen concerned >w,lth the numerous factors which influence
.purchase -decisions for virgin as .contrasted -with-secondary
.-materials. It is realized that delivered costs for equivalent
.quantities of the competing materials are ;vbut ,one of the
Important considerations. .If indeed all other things were
oequal, >0which is not the ,*case) , glass .container
manufacturers., on average, would have to prefer-.using
virg.in< materials, -while all other study 'industries
...wouMd ihaye 'to prefer their secondary commodities.
The greatest i advantage would accrue to -pa-perboard
smanuf actu-rers; .on average, for •each' ton • of paper-;stock a
delivered price .advantage -of .$93.47 was :Shown, regardless
•.of -the-fact that for this ?secondary commodity the share of
transportation an the delivered price is .37 percent -and
f.or :shor,t .haul truck ^movements .it .is .even -more.
.'The-relatively ^favorable situation for four of :the
'fse.cQnda^Ky cO,Qmmodlt;ies, compared with itheir virgin counterparts,
tends -t;p-suggest that any inequities in the transportation
.•charges ide.ntifled ibef.ore jmay not be ..significant vto .the
economic viability of -these products. .S.uch a .conclusion-;w.ould
toe .-erroneous. First, ^individual .consumers• -are affected ,,ln
difftererit ways, of.te?n\in -opposite ..directions -f-or virg.in versus
'Secondary commodities, i.e., ••a. ^particular ;locat,ion could -have
a high delivered post .f^or .-a virgin .commodity'and the .opposite
fpr .'^a secondary :material; -averages provide a useful /overview,
,but, a.s noted previously, ;fa.il to deal -with-spec.ific 'Situations.
-------
Table 35
Range of Delivered Prices and Transportation Share,
Equivalent Units of Virgin and Secondary Commodities
LOWEST HIGHEST
Trprt. Trprt.
as % of as % of
1/ Delivered Transp, Delvd. Delivered Transp. Delvd.
Commodity— Price Price Price Price Price Price
Iron Ore,
Ex Great
Lakes $ 24.61 $ 4.40 17.9 $ 26.64 $ 6.43 24.1
Iron Ore,
Domestic
All-Rail 24.45 4.24 17.3 28.30 8.09 28.6
Iron Ore,
Tidewater
Origins 24.52 4.49 18.3 28.32 8.11 28.6
Iron and
Woodpulp
Waste Paper
Glass Sand
Cullet
Primary
25.12
112.64
19.17
14.18
20.00
496.80
285.80
3.89
2.06
5.20
3.92
3.06
2.20
5.60
15.5
1.8
27.1
27.6
15.3
0.4
2.0
25.12
112.64
19.17
22.08
20.00
496.80
285.80
16.45
18.83
17.60
11.82
16.84
28052
50 . 40
65.5
16.7
91.8
53.5
84.2
5.7
17.6
Nat.&Syn.
Rubber 331.69 7.03 2.1 359.92 35.69 9.9
Reclaimed
Rubber 224.00 10.09 4.5 224.00 22.45 10.0
I/ Virgin commodities are adjusted to equivalent units,
as per formulas in Appendix E.
Sources: Commodity price data, Appendix F. Transportation
price data, Appendix G. Prices adjusted by equivalency
factors in Appendix E,
-171-
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Second, if indeed shippers* of a secondary commodity are required
to pay higher freight rates than appear to be justified, a
reduction in such rates may have the effect of balancing what
might otherwise be an uneconomical total production cost.
So while the relatively favorable posture for four secondary
commodities was shown in the average figures computed, this
is not to suggest that the transportation charges applicable
cannot or do not inhibit greater utilization of these
commodities,, These thoughts are reinforced by the locational
analysis following.
Geographic Analyses
fable 36 provides a ready comparison between the installed
capacity or value of shipments in each of the five geographic
regions arid the relative average transportation price paid by
shippers of the study commodities in 1969. It is a fair
assumption to make that geographic industry concentrations
will normally be related to their sources of materials and/or
m'arkets for their products. Hence, if an .industry has mainly
located in proximity to its raw material supplies, it would
follow that it pays on average the lowest transportation price
for its raw material shipments compared with those members of
the sSme industry located farther away from their sources
of supply.
The data in Table 36 show a remarkable absence of
consistency in terms of the above theory, indicating that
in most cases the study industries have not based locational
decisions on their relative transportation costs for the
study virgin commodities. For example, almost 84 percent of
the integrated steel making capacity is located in Territory
One; its average transportation costs for iron ore are somewhat
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Table 36
Geographic Distribution of Study Industries and
Relative Rail Transportation Charges by Rate Territory for
Study Commodities
Industry/Commodity Region/Territory
123
Integrated Steeli/ 83.7 5.7 1.4 2.7 6.5
iron ore!/ 102.2 104.8 97.3 151.7 112.8
I&S Scrap-/ 94.6 110.5 114.5 149.7 97.1
Paperboard!/ 31.2 33.6 4.0 16.8 14.4
woodpulp!/ 117.0 73.7 113.1 55.3 112.4
waste paper-/ 100.7 81.4 121.7 99.3 109.1
Glass container—/ 69.5 16.1 — 6.9 7.5
glass sand-/ 103.6 80.0 50.0 89.7 138.8
cullet!/ 83.9 159.4 — 204.4 57.7
Aluminum !/ 24.3 21.6 1.5 22.0 30.6
al. ingot!/ 116.5 84.9 114.6 94.1 66.2
al. scrap!/ 96.7 124.2 112.9 87.9 81.0
Rubber Reclaimed!/ 71.0 29.0
Synth, rubber!/ 13202 74.3 108.1 48.3 239.3
Reel. Rubber!/ 68.3 101.1 126.7 126.8 214.3
I/ % of installed capacity or value of shipments
2_/ average transportation rate per ton for each territory
as a percent of the national average rate per ton.
Source: Industry data calculated from 1967 Census of Manufactures
and industry furnished data. Transportation data
calculated from 1969 One Percent Waybill Sample;
figures reflect territorial average rate per ton
divided by national average rate per ton; both
rates are weighted averages, e.g., total revenue
for territory divided by total tonnage for
territory, etc.
-173-
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higher than the national average. Steel scrap shipped to the
predominant territory enjoyed a five percent advantage, on
average, compared with the national average rate per ton of
scrap.
A similar situation was found to exist in the glass
container industry where almost 70 percent of capacity is
also in Territory One, incurs an above national average
transportation cost for glass sand but the average rate per
ton of cullet is 16 percent less than the national average.
For the secondary aluminum industry the situation is
reversed. Territory Five has the largest share of capacity
and lowest average rate per ton for aluminum ingot and
aluminum scrap.
Reclaimed rubber rates in Territory One are substantially
below the national average, while the average rate for synthetic
rubber is appreciably above the average, though this territory
contains over 71 percent of this industry's capacity.
In summary, the average destination territory transportation
prices per ton of secondary materials were found to be lower
than the national average for the same commodity in all
territories with the largest share of installed capacity; a
contrary finding was made for three of the virgin materials.
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VII. RAIL RATE MAKING PRINCIPLES
Introduction
Numerous factors enter the ratemaking process. Costs are
but one element, although they are basic in the sense that
rates should not go below the costs incurred in handling the
traffic. But once rates exceed the floor established by
costs, the question of what constitutes the ceiling is
exceedingly complex.
Transport pricing is more complex than pricing in other
industries, not only because of government regulation, but
also because common carriers must hold themselves out to
move every product required by the national economy—and
always at a predetermined, published price (or freight
rate). Electronic calculators and coal may move in the
same train.
To handle the pricing of this vast product mix, the
railroads (and then other carriers) developed the concept
of a freight classification system. Every commodity is
assigned a rating in relation to "first class" or class 100".
This rating is intended to reflect the judgment of experienced
traffic officers as to the relative transportation
characteristics of each commodity offered up for movement.
Knowing the rating, one can go to a first class rate scale
and calculate the rate for each movement. For example, if
the first class rate is $10.00 per ton for a haul of 300
miles and if an item is rated at 60% of first class, the
shipper knows that his rate will be $6.00.
Over the years, some fifteen elements have evolved as
determinants of the classification rating, as follows:
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1. Shipping weight per cubic, foot.
2. Liability to damage.
3. Liability to damage other commodities with which it
is transported.
' 4. Perishability.
5. Liability to spontaneous combustion or explosion.
, 6. Susceptibility to theft„
7. Value per pound in comparison with other articles.
8. Ease or difficulty in loading or unloading.
9. Stowability.
10. Excessive weight.
11. Excessive length.
12. Care or attention necessary in loading and transporting;
. 13. Trade conditions„
14. Value of service.
15. Competition with other commodities transported.
No formula is available for weighting each of these
elements. The composite rating is a matter of judgment by
experienced officers looking at each commodity in relation
to other commodities already rated.
It was not long, however^ before it was recognized that
individual movements of specific commodities might have
special characteristics which would justify a departure from
a general class rate scale and a general classification
rating. Today, by far the vast bulk of the traffic actually
moves under specific commodity rates, usually well below the
applicable class rates. When a new movement arises, the
railroads will automatically apply the class rates unless
the shipper requests and then negotiates a new commodity
or exception rate. In establishing commodity rates, carriers
take in consideration a number of additional factors. Most
prominent among these are:
1. volume of movement
2. regularity and duration of movement
3. direction and length of movement
40 intermodal competition
-176-
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The commodities under study here all move on
commodity rates. The present levels of these rates are
usually the result of negotiations between shippers and
carriers, occasionally influenced by I.C.C. decisions as a
result of complaints filed by interested parties. Each
group of rates is arrived at by weighing all of the factors
in each case, but it can be said that the amount of
contribution above variable cost is arrived at with special
regard to the "value of service" and "competition".
Analysis of the ratemaking factors described above well
demonstrate that many of them can be ultimately expressed
in cost terms. Elements like "value of service" or
"competition with other commodities" or "intermodal
competition" are all translatable into one concept: elasticity
of demand. In short, the ratemaker finally must look at
the variable cost of providing the service, and the effect
of various possible rates on the movement of the traffic.
From a private enterprise point of view, the ratemaker
seeks to maximize the net contribution from each type of
traffic subject to a number of legal restrictions. For
example, overall earnings cannot be in excess of a reasonable
return. Again, individual rates may not result in unjust
discrimination against other persons or places. Such
restrictions add complexity to the evaluation of individual
rates, but the practice is for shippers to match each other's
rates jealously and this practice helps to minimize the
number of rate cases actually filed.
It is beyond the scope of this report to undertake a
full investigation of how discrimination cases have been
handled by the I.C.C. However, we can approximate the extent
-177-
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to which non-cost factors affect the rate levels on different
movements. This will show that rate differences which are not
related to costs are not' necessarily sufficient grounds for
proving that a given rate is unduly discriminatory.
The 1969 Burden Study published by the Department of
Trail's por tat ion gives a general, guide to these variations.
In" that' study, broad average costs are applied to aggregate
territorial flows of traffic. The ratio of revenue to
variable costs for all traffic combined was 127.6; thus, the
non-cost factors for the aggregate traffic of the railroads
produced 27„67 more revenue than would have been received if
the rates were based solely on variable costs. One does not
have to accept the method of calculating costs or to accept:
the rate levels to accept this ratio as a base line to compare
the results for various commodities calculated on a uniform
basis.
Relative to this overall average, the study shows a
vast range of results-. Some commodities were moving at
rate levels well below the calculated variable costs, while
some others were moving at rates which were 3.6 times the
calculated costs. This means that non-cost factors can play
a major part in the determination of rates, Thus, mere
differences in the ratio of revenue to cost is not enough
to support a claim of unreasonable rates.
As mentioned above, the study commodities show varying
ratios of revenues to costs. Among the cost factors to be
considered are regularity and size of movement, and as to
these factors, the virgin materials would seem to have a cost
advantage„ Among non-cost factors, the matter of intermodal
competition often plays an important part. On this issue-,-
the secondary materials generally, especially on longer ha'u-lsi,
-178-
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are not attractive to the motor or water carriers; if they
were, railroad rates in the normal course of competition
might be set at lower levels in the competitive areas.
Reasonableness of Rates
Under Section 1 of the Interstate Commerce Act, railroads
are required to charge just and reasonable rates. The I.C.C.
is empowered to decide whether a specific rate meets that
criterion. Over the years, in a variety of cases, the
Commission has developed guidelines focusing on four issues:
a. Compensativeness: this is the "rate floor" discussed
in detail in Chapter III.
b. Comparative Standards: this embodies all of the
commodity transportation characteristics discussed
in this Chapter.
c. Demand: this is the "value of service" concept; put
simply, it says rates may not be designed to
discourage traffic; they cannot exceed what the
traffic will bear.
d. Public Policy: this caveat permits the setting of
rates for public interest reasons at levels designed
to encourage or discourage traffic to bring about
some desired social or economic result.
Rate Discrimination
Section 3 of the Act, while not referring to "discrimi-
nation," makes it unlawful for a railroad to give "any undue
or unreasonable preference or advantage to any particular
person, company, firm, corporation, association, locality,
port, port district, gateway, transit point, region, district,
territory, or any particular description of traffic," or to
subject any of the above to any "undue or unreasonable
prejudice or disadvantage."
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Rate controversies under Section 3 relate to rate
relationships, and not to the reasonableness of the rates
themse'lves. Rates may be reasonable, under Section 1, but
unduly^preferential or prejudicial under Section 3.
Whether a rate or set of rates is unlawfully discrimina-
tory is £• question of fact for the ICC to decide. It should
be emphasized that evidence of a mere rate disparity is not
sufficient to make a showing .of unlawfulness; rather, the
disparity must be shown to be excessive and preferential
to one person, place or commodity.
table 37, containing a summary of the average transport
characteristics, revenues-and contribution for the study
moves, is presented here to demonstrate the wide variations
in rates sanctioned by the ICC. The existence of these
wide differences does not prove a pri ori that they are
unduly divergent.
In order to demonstrate commodity rate discrimination,
i.e., that rates discriminate against one commodity in fa.vor1
of another, it must be shown that the two commodities are
quite similar and that they actually compete in the market
place. Again, it is the prerogative of the ICC to decide,
based on the facts in each case, whether a competitive
relationship exists between two or more commodities.
It has been held that competition must be real and
substantial; competing commodities must have the same use
and must be substitutable, one for the other. Finally, for
a finding of undue rate prejudice to be made, there must
be proof that the rate relationship has been the source of
actual injury to the complaining party in marketing his
product.
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Exceptions justifying rate differences between competing
commodities have been approved by the Commission when one or
more of the following apply: (a) differences in cost of
services, (b) value differences (remembering that a commodity's
value is considered to be a transportation characteristic
for ratemaking purposes), and (c) intermodal competition
(which may be significant for one commodity, but not for its
competing material).
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TABLE 37
Average Transportation Characteristics, Rates and Contribution Rates
for Study Moves
oo
INT
Iron Ore
Iron & Steel
Scrap
Woodpulp
Waste Paper
Glass Sand
Gullet
Primary Alum.
Ingot
Alum. Scrap
Nat. & Syn0
Rubber
Scrap Rubber
Reclaimed
Rubber
Avg. load
per car -
tons
81.2
55 o 5
Avg« Length
of Haul
mi.
206
328
Avg0 Rev.
Per Car
$
211
398
Avg0 Rate
Per Ton
$
2.60
7.17
Contrib.As
% of
Revenue
41 o 5
- 48 08
59.4
37.0
66..4
64.2
58.7
4.4 .3
49 . 0
28.6
582
374
625
450
1,275
591
962
435
535
275
465
550
1,004
443
845
310
9.00
7.43
7.00
8.57
17.10
14.04
17.23
I0o85
46.5
30.5
23 . 0
51.3
54 „ 7
37.5
52.5
39 . 8
51.4
606
730
14.20
66.2
Source: Master Tables, Appendix A
-------
VIII. CONCLUSIONS
Findings—Competing Commodities
Both revenues per car and ton in relation to cost of
service showed great variation within and between study
commodities. On average, rates for virgin and secondary
commodities were found to be in the zone of reasonableness,
but there are numerous individual situations with such large
differences that some inequities surely exist.
Three of the secondary commodities were found, on average,
to make substantially higher contributions than their
virgin counterparts. For two of these three (iron and steel
scrap and cullet), the progression of rail rates over
increased distances tends to discourage longer hauls; for
these commodities, the decline in revenue per ton-mile or
car-mile over distance is significantly less than for iron
ore and glass sand. While the third commodity with a very
high contribution rate, reclaimed rubber, shows a sharp
decline in the contribution rate over distance, the small
sample of scrap rubber portrays a reverse situation: its
contribution rate rises sharply with distance.
If the I.C.C. should find that indeed the pairs of
virgin and secondary commodities constitute genuine and
substantial competitors, the specific differences found in
common moves would raise serious questions of inequities.
However, even for the much discussed pair of iron ore and
steel scrap, no clear determination has been made by the
I.C.C. Whereas in Ex Parte Nos. 256 and 259, the Commission
held that these two commodities compete,— it expounded a
contradictory viewpoint in subsequent proceedings. In Ex
T/see 332 I.C.C. 280, at p. 331; 332 I.C.C. 714, at p. 743.
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-------
Parte 281, "...ferrous scrap and iron ore do not specifically
and directly compete to the extent that they require similar
rate treatment" (see 341 I.C.C. 287, at p. 411).
The secondary materials industries covered in this study
contend that their commodities compete with their virgin
counterparts. As noted previously, the ICC must make a
formal determination that such competition does in fact
exist between two commodities before a case of discrimination
can be made. On this point, the Commission has been quite
ambivalent with regard to ore and ferrous scrap, and silent
with regard to the other commodities studies herein. Whereas
the broad guidelines established in case law over the decades
of regulation may not be met in all situations or in all
territories, the large differences pointed out before suggest
that in numerous situations the effect of higher rates for
ferrous scrap, cullet, and reclaimed rubber, in particular,
may inhibit their increased utilization.
Since rates for these commodities stay relatively high
as distance increases, this may have an effect upon the
expansion of the market for them. This conclusion, however,
is limited by the fact that the effect of freight rates on
delivered prices of the secondary materials is relatively
small for two of the secondary commodities—scrap rubber and
aluminum scrap.
Incentive Rates
Another more general conclusion deals with the incentive.
rate structure for secondary commodities. The problem here
is cause and effect. It might be argued that the railroads
have not encouraged more incentive loading and multiple car
shipments for the secondary commodities because the density
of these commodities and their frequency of shipments do not
-184-
-------
lend themselves to the effective utilization of these rates.
However, it is also possible that the absence of these rates
discourages shippers from making the necessary investments
in machinery to obtain the requisite compactness for heavy
loads and to organize their markets so that multiple car
shipments could be made. Our research indicates that both
of the hypotheses apply. Shippers of steel scrap have
reported that carriers have increasingly acceded to granting
lower multiple car rates, but that their use has been inhibited
by shortages of car supply and insufficient rate reductions.
With the rate structure generally limited to incentives at
the 50 ton per car level and an average lading of over 55
tons per car observed in the study moves (with some cars
loaded above 70 tons), it is evident that shippers and
carriers might benefit from new incentives at a reduced rate
per ton.
For cullet, it will be remembered, the rate structure
is mostly limited at 50 tons per car. Though shippers
generally have not benefited from heavier lading in terms of
a lower rate per ton we have shown a fair proportion of the
study moves loaded at over 60 tons per car.
What is missing for both of these commodities is an incen-
tive rate structure which provides for substantially reduced
rates for ladings above the specified minima. Regardless of
the existing rate levels at the specified minima, carriers
by rail stand to gain and shippers would be seriously
encouraged to effectuate heavier ladings by relatively low
rates for that portion of a carload that exceeds the minimum
weight. This principle is reflected in some rates for reclaim-
ed rubber, as well as numerous other commodities. Its absence
for ferrous scrap and cullet can be seriously inhibiting in
the increased movement and utilization of these secondary
materials.
-185-
-------
Contract Carriage
As directed, our efforts were concentrated on movements
by rail. This focus was well-justified by the railroads'
predominant role in the transportation of the study commodities.
However, we should also mention the services provided
primarily by contract carriers hauling paper stock and
manufactured paper products. While> on average, these
carriers operate at variable cost deficits in the transport
of waste paper, though their rates are somewhat higher than
rail rates, their aggregate revenues from inbound and outbound
movements combined are reported to result in reasonable returns
on these carriers' investments. Railroads usually cannot
handle these waste paper movements, because collection and
processing plants have no railroad facilities; hence, these
contract carriers render an essential service in the public
interest at a relatively low price„
Practically all of the study industries, except the
integrated steel industry, make use of contract and private
carriage in the transport of secondary commodities. Shippers'
private equipment•, principally employed in the transport of
manufactured products, is utilized also for the movement of
secondary materials and other consumables to balance the
traffic, thereby spreading both fixed and variable costs
to increased tonnage.
This economic principle embodied in contract and private
motor carrier operations is not limited to these modes.
Railroads have applied it also; the movement of coal to ports
and iron ore on the backhaul is an apparent example. However, no
evidence has been uncovered in this study to suggest that
-186-
-------
railroads have, in fact, employed ratemaking principles
relying on reciprocal moves for any of the secondary commodities.
This concept, as noted above, so basic to contract motor carriage,
has not been permitted specifically in railroading; though tacit
agreements for rates tying together inbound and outbound
movements of virgin and manufactured commodities are in use.
Whether such round-trip ratemaking could be effectively employed by
railroads and shippers of secondary materials could be a
worthwhile subject for further study.
General
Finally, it seems important to reiterate a conclusion
suggested at various points in this report. Neither railroads
nor motor carriers have a master plan for ratemaking. There
is no single national formula for all rates and such a formula
is probably undesirable and likely to lead to too much
rigidity. Moreover, carriers normally do not consider in
their ratemaking processes the relative rate levels for virgin
and secondary commodities. Each is an entity in itself and
is considered in light of the many cost-related and other
variables applicable to the transport characteristics of
each. No other approach to ratemaking has been ordered by
the Federal regulators. Conceivably, such action is wanting.
The recent I.C.C. studies on environmental impacts have
tended to deal with broad averages, typically weighted by
the aggregate traffic pattern for the entire nation or an
entire rate region, with the result that individual inequities
are obscured.
Enlightened public policy development and enforcement
in this area requires the examination and removal of inequities
at the detailed, individual movement level,,
-187-
-------
REFERENCES
1. Ex< Parte-No. 281, Increased Freight Rates and Charges, 1972 (Environmental
Matters) ..Washington, DC, May 7, 1973, 100.p.
2. Barnes, T.M. Summary report on the impact of railroad freight rates on
the recycling of ferrous scrap. Battelle Columbus Laboratories ,
Columbus , Ohio. Jan. 14, 1972.. 13 p.
3. Iron and steel works directory. American Iron and Steel Institute.
New York.
4. U.S. Bureau of Census. Concentration ratios in manufacturing. MC 671,
(S)-2.1 and MC 67(S)-2.3.
5.. U.S. Department of Transportation. Waterbofne commerce of the United
States, calendar year 1970. Corps of Engineers, Washington, DC,
April 1972. 19 p.
6.. U.S. Department of Transportation. TD-1 , Carload waybill statistics ,,1969.
7. U.S. Department of Transportation. An estimate of the distributions of
the rail revenue contribution by commodity groups and type' of rail
car, 1969. Washington, DC. Sept. 1972.
£. Post's Pulp & Paper Directory. New York, 1972.
9.. 1967 Census of Manufactures, "Pulp, Paper and Board Mills," Report 26A,
U.S. Department of Commerce. Oct. 1970.
10. Mineral facts and problems. Bureau of Mines bulletin 650. U.S. Department
of the Interior, Washington, DC. 1970.
11. U.S. Bureau of Mines. Impact of technology on the commercial secondary
aluminum industry. Information circular 8445. Washington ,, DC,
U.S. Government Printing Office, 1970. 9 p.
12. 1967 Census of Manufactures, "Smelting and Refining of Nonferrous Metals
and Alloys," Report 33C, U.S. Department of Commerce, Sept. 1970.
13. 1967 Census of Manufactures , "Rubber and Miscellaneous Plastics Products,"
Report 30A, U.S. Department of Commerce, Oct. 1970.
14. Petti grew, R.O. , and F. Roninger. Rubber reuse and solid waste management.
Public Health Service Publication No. 2124. Washington, DC, U.S.
Government Printing Office, 1972.
15. Rubber Manufacturers Association. Rubber industry facts. New York, 1972.
16.. Rubber Manufacturers Association. Red book. 1972. 19-20 p.
-------
17. Darnay,A., and W.E. Franklin, Salvage markets for materials 1n solid
wastes. Midwest Research Institute, Kansas City, Mo., for the
U.S. Environmental Protection Agency, 1972. 81-82.p.
18. Extracted from various reports of the 1967 series, all previously
cited.
19. Interstate Commerce Commission. 332 ICC 280, Washington, DC, 1968.
331 p. and 332 ICC 714, Washington, DC, 1969. 743 p. Ex Parte
256 and 259.
20. Interstate Commerce Commission. Carload waybill statistics, one percent
waybill termination, 1969. Natpublished; data obtained by computer
tape.
21. Rail Carload Cost Scales by Territories for the Year 1969, Bureau of
Accounts, Interstate Commerce Commission, Washington, DC,
July ,1971.
22. Interstate Commerce Commission. Freight commodity statistics, class I
railroads. Bureau of Accounts, year ended Dec. 31, 1969.
23. Interstate Commerce Commission. Freight commodity statistics of class I
motor carriers of property operating in intercity service - common
and contract - in the United States. Bureau of Accounts, calendar
year 1969.
24. Minerals Yearbook. Preprint; 1970. Bureau of Mines, iron and Steel
Scrap. 10 p.
25. Iron Age. June 26, 1969. 99 p.
-------
APPENDIX A
MASTER TABLES
Common and Supplemental Study Moves
Contents
Iron Ore, Iron and Steel Scrap 4 pages
Woodpulp, Waste Paper 6 pages
Glass Sand, Gullet 3 pages
Aluminum Ingots, Aluminum Scrap 4 pages
Natural & Synthetic Rubber,
Reclaimed Rubber 4 pages
-------
APPENDIX A
MASTER TABLES OF COMMON AND SUPPLEMENTAL MOVES OF VIRGIN (V) AND SECONDARY (S) COMMODITIES SELECTED FOR STUDY
STCC NO. VIRGIN COMMODITIES
101 IRON ORE
1441320 GLASS SAND
26111 WOODPULP
33341 PRIMARY ALUMINUM INGOT
0842325) NATIRAL RUBBER
2821220 SYNTHETIC RUBBER
NO. OF MOVES
26
21
88
27
29
STCC NO. SECONDARY COMMODITIES
40211 IRON AND STEEL SCRAP
3229924 CULLET
40241 WASTE PAPER
4021430 ALUMINUM SCRAP
3031190 RECLAIMED RUBBER
4026160 SCRAP RUBBER
NO. OF MOVES
30
17
42
24
10
7
NOTE;
SOURCES:
Cost, revenue, and contribution per car figures have been rounded to the nearest dollar.
Carload Waybill Statistics, One Percent Waybill Terminations, 1969, Interstate Commerce Commission;
Tariffs on file with the Interstate Commerce Commission; Industry furnished data (supplemental moves,
rate and revenue verifications); Rail Carload Cost Scales by Territories for the year 1969, statement
1C1-69, issued but not adopted 6y the Interstate Commerce Commission (cost scales for iron ore adjusted
to reflect special studies of the ICC and selected railroads).
-------
APPENDIX A
Virgin Commodity (V) : Iron Ore
Secondary-Commodity (S): Iron and Steel Scrap
Page 1 of 4
V Length Type Tons
S Origin - Destination of Haul of Car Per Car
(miles)
V Phi la., Pa. -Bethlehem, Pa.
S Swede land, Pa. -Hamburg, Pa.
Ratio, S to V
V Phila . , Pa. -Swede land, Pa.
S Reading, Pa. -Chester, Pa.
Ratio, S to V
V Bucks Co. ,Pa.-Saxonburg,Pa .
S Indian. , Ind.-Farrell, Pa.
Ratio, S to V
V Phila. ,Pa.-Saxonburg,Pa.
S Sharonville,O.-Bulter,Pa.
Ratio, S to V
V Phila.,Pa.-Saxonburg,Pa.
S Marion, Ind. -Butler, Pa .
Ratio, S to V
V Conneaut,O. -Saxon burg, Pa.
S Columbus, O. -Canton, O.
Ratio, S to V
61
59
63
68
385
351
364
341
364
347
125
129
O . Hopper
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
0 . Hopper
Gondola
0. Hopper
Gondola
0. Hopper
Gondola
83
62
.75
69
49
.71
79
.72
.91
81
46
.57
84
56
.67
86
65
.76
Cost Cost
Per Car Per Ton
$ " $
70.00
115.00
1.64
69. .00
116.00
1.68
197.00
237.00
1.20
190. 00
212.00
1.12
190 . 00
223.00
1.17
96. 00
143.00
1.49
.84
1.85
2.20
1.00
2.37
2.37
2.50
3.29
1.32
2.35
4.61
1.96
2.27
3.98
1.75
1.12
2.20
1.96
Rate
Per Ton
$
1.96
4.08
2.08
1.65
3.80
2.30
3.62
8.19
2.26
3.62
6.66
1.84
3.62
6.88
1.90
2.42
5.65
2.33
Ratio of Contribution to Fixed
Revenue Rate To Cost and ROI
Per Car Cost Per Ton Per Car Per Ton % of
$ (times) $ $ Revenue
162.00
250.00
1.54
114.00
187.00
1.64
286.00
590.00
2.05
294.00
306.00
1.04
305.00
385.00
1.26
208.00
369.00
1.77
2.33
2.21
.95
1.65
1.60
.97
1.45
2.49
1.72
1.54
1.44
.94
1.59
1.73
1.09
2.16
2.57
1.19
92.00
135.00
1.47
45.00
71.00
1.58
89.00
353.00
3.97
104.00
94.00
.90
115.00
162.00
1.41
112.00
226.00
2.02
1.11
2.18
1.96
.65
1.45
2.23
1.13
4.90
4.34
1.28
2.04
1.59
1.37
2.89
2.11
1.30
3.48
2.68
57
54
39
38
31
60
1
35
31
38
42
1
54
61
1
.95
.97
.94
.89
.11
.13
V Ashtabula Co.,O.-Aliquippa,
Pa. 156
S Syracuse,N.Y.-Harriet,H.Y. 158
Ratio, S to V
V Ashtabula Co.,O-Aliquippa,
Pa. ' 156
S Newark,N.J.-Steelton,Pa. 170
Ratio, S to V
0.Hopper
Gondola
68
52
.76
0.Hopper 80
Gondola 67
.84
104.00
150.00
1.44
104.00
160.00
1.54
1.53
2.88
1.88
1.30
2.39
1.84
2.10
5.33
2.54
2.10
6.14
2.92
143.00
277.00
1.94
167.00
414.00
2.48
1.37
1.85
1.23
1.62
2.57
1.59
39.00
127.00
3.26
63.00
254.00
4.03
.57
2.44
4.28
.79
3.79
4.80
27
46
1.70
38
61
1.61
-------
Virgin Commodity (V): iron Ore
Secondary Commodity (S): Iron and Steel Scrap
APPENDIX A
Page 2 of 4
Ratio of
Contribution to Fixed
V Length Type
S Origin - Destination of Haul of Car
(miles)
V Ashtabula Co. ,O.-Aliquippa,
Pa.
156
O. Hopper
Tons
Per Car
79
Cost
Per Csr
$
104.00
Cost
Per Ton
$
1.32
Rate
Per Ton
$
2.10
Revenue
Per Car
$
165.00
Rate To
Cost Per Ton Per
(times) 5
1.59
61
Cost and ROI
Car Per Ton % of
1 $ Revenue
.00
.77
37
JS Cleveland, 0.,-Neville Island,
Pa.
Ratio, S to V
V Ashtabula Co. ,O.-Monessen,
Pa,
S Youngstown.O. , -S.Buffalo,
N.Y.
Ratio, S to V
V Bucks Co ., Pa . -Bessemer Int.
Pa.
S Grand Rapids, Mi.-Koppel,
Pa.
Ratio, S to V
V Conneaut.O. -N.Bessemer, Pa.
S McGrew,Mi.-Def iance,O.
Ratio, S to V
V Bucks Co ., Pa . -Bessemer , Pa .
S Pontiac,Mi.-Latrobe,Pa.
Ratio, S to V
V Conneaut,O.-McKeesport,Pa .
S Cleveland, 0. -Dearborn
Hi.
Ratio, S to V
V Ashtabula, 0. -Pittsburgh,
Pa.
S Toledo, O.-Canton,0.
Ratio, S to V
153
162
177
I
359
374
142
155
359
360
149
159
139
135
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
O. Hopper
Gondola
26
.33
67
72
1.07
83
61
.73
84
88
1.05
75
64
.85
100
30
.30
84
48
.57
139.00
1.34
loe.oo
165.00
1.56
igo.oo
237.00
1.25
104.00
162.00
1.55
1841.00
234.00
1.27
ilO.OO
142.00
1.29
102.00
140.00
1.38
5.35
4.05
1.58
2.29
1.45
2.28
3.89
1.71
1.24
1.84
1.48
2.46
3.66
1.49
1.10
4.73
4.30
1.21
2.96
2.45
7.38
3.51
2.54
5.67
2.23
3.62
9.04
2.50
2.42
5.45
2.25
3.62
8.47
2.34
2.42
7.63
3.15
2.42
5.93
2.45
195.00
1.18
170.00
407.00
2.39
298.00
552 .00
1.85
2.08
4.80
2.31
272.00
542 . 00
1.99
242.00
227.00
.94
203.00
282.00
1.39
1.38
.87
1.61
2.47
1.53
1.59
2.32
1.46
1.95
2.96
1.52
1.47
2.31
1.57
2.20
1.61
.73
2.00
2.00
1.00
56
64
242
3
108
315
2
104
318
3
87
308
3
132
85
101
142
1
.00
.92
.00
.00
.78
.00
.00
.92
.00
.00
.06
.00
.00
.54
.00
.00
.64
.00
.00
.41
2.15
2.79
.96
3.36
3.50
1.30
5.16
3.97
1.24
3.61
2.91
1.16
4.81
4.15
1.32
2.84
2.15
1.20
2.96
2.47
29
.78
38
59
1.55
36
57
1.58
50
66
1.32
32
57
1.78
55
37
.67
50
50
1.00
-------
APPENDIX A
Virgin Commodity (V): Iron Ore
Secondary Commodity (S): Iron and Steel Scrap
Page 3 of 4
V
S
Origin - Destination
V Cleveland,O.-P+OV Jet .,
Allegheny Co.,Pa.
3 Cleveland,0.-Neville
island. Pa .
Ratio, S to V
V Cleveland,0.-Warren,0.
S Cleveland,0;-Warren,0.
Ha tic, S to V
V C 1'e '.re i.a nd, 0. -Youngstown, 0.
S- C le v
-------
Virgin Commodity (V) : Iron ore
Secondary Commodity (S): Iron and Steel Scrap
APPENDIX A
Page 4 of 4
Ratio of
Contribution to Fixed
V Length Type Tons
S Origin Destination of Haul of Car Per Car
(miles)
V Kaiser, Cal. -Long Beach,
Cal.
S Rocktram, Cal. -Oakland,
Cal.
Ratio, S to V
V Conneaut, Oh. -N.Bessemer,
Pa,
S Kalamazoo.Mich.-Saginaw
Mich.
Ratio, S to V
V Mountain Iron, Mn. -S.Chicago
111.
S Gary, I nd. -Bessemer, Pa.
S Silvis,Ill.-El Paso, Tex.
S SanFrancisco.Cal.-Dalton,
Utah
S SanFrancisco,Cal.-Dalton,
Utah
S Pittsburg,Cal.-Dominguez,
Cal.
S Markham, I11.-E1 Paso, Tex.
64
65
142
133
t
513
443
1252
821
821
445
1369
O. Hopper
Gondola
Hopper
Gondola
O. Hopper
Gondola
Gondola
Gondola
Gondola
Gondola
Gondola
111
74
.67
91
58
.64
73
68
50
31
36
71
26
Cost
Per Csr
$
61.00
119.00
1.95
104.00
143.00
1.37
207.00
271.0Q
502.00
327.00
336.00
262.00
449.00
Cost
Per Ton
$
.55
1.61
2.93
1.15
2.47
2.15
2.84
3.98
10.04
10.54
9.34
3.68
17.28
Rate
Per Ton
$
1.64
3.98
2.43
2.42
4.89
2.02
3.86
6.88
18.10
14.80
14.80
7.68
22.90
Revenue Rate To Cost and ROI
Per Car Cost Per Ton Per Car Per TOD % of
$ (times) $ $ Revenue
182.00
295.00
1.62
221.00
285.00
1.29
282.00
446.00
830.00
379.00
422.00
651.00
775.00
2.98
2.47
.83
2.10
1.99
1.06
1.36
1.73
1.80
1.40
1.58
2.09
1.33
121.00
176.00
1.45
117.00
142.00
1.21
75.00
197.00
403.00
132.00
197.00
284.00
146.00
1.09
2.38
2.18
1.29
2.45
1.90
3.86
2.90
8.06
4.26
5.47
4.00
5.62
66
60
.91
53
50
.94
27
42
45
29
37
52
25
-------
Virgin Commodity (V): Woodpulp
Secondary Commodity (S): Waste Paper
APPENDIX A
Page 1 of 6
V Length
S Origin - Destination of Haul
(miles)
V Woodland, Me. -Bucksport,
Me.
S Willis, Mi. -Otsego, Mi.
Ratio, S to V
V Woodland, Me. -Lincoln, Me.
S Johnstown, Pa. -Steubenville,
Oh.
Ratio, S to V
V Wood land, Me. -Brewer Jet.,
Me.
S Will is, Mi. -Otsego, Mi.
Ratio, S to V
V Woodlawn, Me. -Brewer Jet.,
Me.
S Cook Co., 111. -Otsego, Mi.
Ratio, S to V
V Lincoln, Me. -Brewer Jet.,
Me.
S Ingham Co. , Ml. -Battle
Creek, Mi.
Ratio, S to V
V Woodland, Me. -S. Brewer, Me.
S Cook Co. , Ill.-Kalamazoo.Mi.
Ratio, S to V
V Woodland, Me. -S. Brewer, Me.
S Cook Co. ,Ill.-Kalamazoo,Mi.
Ratio, S to V
V Lincoln, Me. -S. Brewer, Me.
S Oshkosh.Wi. -Green Bay.Wi.
Ratio, S to V
155
144
118
121
137
144
137
150
45
45
139
135
139
135
47
45
Type
of Car
Box
Box
Box
Box
BOX
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
68
40
.58
63
26
.41
65
40
.62
52
47
.90
53
40
.75
65
44
.68
64
33
.52
42
32
•7,6
Cost
Per Car
$
179 . 00
139.00
• 78
155.00
125.00
.81
167.00
139 .00
.84
167.00
161.00
.97
111.00
109.00
.98
168.00
139.00
.83
168.00
139.00
.83
113.00
90.00
.80
Cost
Per Ton
$
2.63
3.49
1.33
2.46
4.81
1.96
2.56
3.49
1.36
3.20
3.42
1.07
2.10
2.73
1.30
2.58
3.16
1.22
2.62
4.21
1.61
2.69
2.84
1 .06
. Rate
Per Ton
$
2.70
4.80
1.78
3.72
5.60
1.51
2.75
4.80
1.75
3.43
5.40
1.57
1.33
3.60
2.71
2.75
5.40
1.96
2.81
5.40
1.92
1.65
3.00
1.82
Revenue
Per Car
$
184 . 00
192.00
1.04
233:00
144.00
.62
178.QO
192.00
1.08
178 . 00
253.00
1.42
70.00
144.00
2.06
178.00
238.00
1.34
178.00
178.00
1.00
64.00
96 . 00
1.50
Ratio of Contribution to Fixed
Rate To Cost and ROI
Cost Per Ton Per Car Per Ton % of
(tiaes) $ $ Revenue
1.03
1.38
1.34
1.51
1.16
.77
1.07
1.38
1.29
1.07
1.58
1.48
.63
1.32
2.10
1.07
1.71
1.60
1.07
1 .28
1.20
.61
1.06
1.74
5.00
53.00
10.60
78.00
19.00
.24
11.00
53.00
4.82
11.00
92.00
8.36
(41.00)
35.00
-
10.00
99.no
9.90
10.00
39.00
3.90
(47.00)
6.00
-
.07
1.33
1.90
1.24
.73
•6
.17
1.33
7.8
.21
1.96
9.33
-
.88
-
.15
2.25
15.00
.16
1.02
6.38
-
.19
-
3
28
9.33
33
13
.39
b
28
4.67
6
36
6.00
-
24
-
6
42
7.00
6
22
3.67
-
7.00
-
-------
Virgin Conaodity (V): Woodpulp
Secondary Commodity (S): waste Paper
APPENDIX A
Page 2 of 6
V Length
S Origin - Destination of Haul
(•lies)
V Lincoln, Me. -S. Brewer, Me.
S Oshkosh.Wi. -Green Bay,Wi.
Ratio, S to V
V Berlin ,N.H. -S. Brewer, Me.
S Chicago, 111. -Neenah Menash,
Wi.
Ratio, S to V
V Lincoln, Me. -Waterville, Me.
S Newark, N.Y.-N.Tonawanda ,N.Y
Ratio, S to V
V Madison, Me. -Winslow, Me.
S E. Buffalo, N.Y.-Lockport,N.Y
Ratio S to V
V Madison, Me. -Winslow, Me
S McKees Rocks, Pa . -Oakmont ,Pa
Ratio, S to V
V Madison, Me. -Winslow, Me.
S Zanesville,Oh.-Coshocton,Oh
Ratio S to V
V Madison, Me. -Li vermore Falls
Me.
S Mt.Wolf ,Pa.-Downingtown,Pa.
Ratio, S to V
V Berlin, N.H. -West brook Cum.
Me.
S Mt.Vernon.N.Y. -Burlington,
N.J.
Ratio S to V
47
45
183
167
99
.105
29
. 27
29
. 27
29
. 30
73
71
99
101
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
55
33
.60
61
42
.69
58
40
.69
54
35
.65
50
28
.56
45
25
.56
44
40
.91
61
27
.44
Cost
Per Car
$
113.00
91.00
.80
189.00
126.19
.67
142.00
127.00
.90
104.00
102.00
.98
104.00
100.00
.96
104.00
100.00
.96
122.00
117.00
.96
143 . 00
120.00
.84
Cost
Per Ton
$
2.06
2.76
1.34
2.33
3.00
1.29
2.44
3.19
1.31
1.92
2.91
1.52
2.07
3.56
1.72
2.30
3.98
1.73
2.77
2.92
1.05
2.35
4.44
1.89
Rate
Per Ton
*
1.28
5.00
3.91
6.60
5.00
.76
2.38
8.00
3.36
1.01
4.00
3.96
1.10
4.00
3.64
1.22
4.00
3.28
2.21
3.80
1.72
5.40
4.60
.85
Revenue
Per Car
$
70.00
165.00
2.36
399.00
210.00
.53
137.00
320.00
2.34
55.00
132.00
2.40
55.00
110.00
2.00
55.00
100.00
1.82
97.00
152.00
1.57
327.00
107 . 00
0.32
Ratio of Contribution to Fixed
Rate To Cost and ROI
Cost Per Ton Per Car Per Ton % of
(tines) $ $ Revenue
.62
1.81
2.92
2.83
1.60
.57
.98
2.51
2.56
.53
1.37
2.58
.53
1.12
2.11
.31
1.01
3.26
.80
1.30
1.63
2.30
1.04
.45
(43
75
210
84
(5
193
(49
30
.00)
.00 2.27
-
.00 3.44
.00 2.00
.40 .58
.00)
.00 4.83
-
.00)
.00 .86
-
45
-
53
40
.75
_
60
-
-
23
-
(49.00)
10
(48
(25
35
184
(13
.00 9.00
-
.00)
_ _
-
.00)
.00 .88
-
.00 3.02
.00)
^ _
.36
_
-
_
23
-
56
_
— m
-------
Virgin Commodity (V): Woodpulp
Secondary Commodity (S)1: waste Paper
APPENDIX A
Page 3 of 6
Ratio of
Contribution to Fixed
V Length
S Origin Destination of Haul
(miles)
V Great Works, Me. -Plattsburgh
N.Y.
S Ft. Edward, N.Y. -Niagara
Fa 11s, N.Y.
Ratio, S to V
V Rileys.Ms.-Ticonderoga.N.Y.
S. Spring Grove, Pa .-North
Tonawanda, N.Y.
Ratio, S to V
V Rileys,Me.-Ticonderaga,N.Y.
3 Richmond Byst.Va .-Williams-
burg, Pa.
Ratio, S to V
V;Erie,Pa .-Oswego, N.Y.
S Blue Island, .111. -Monroe
Me . , Mi .
Ratio, S to V
V Green Bay , Wise ,-Menominee .
.Mich.
S Pacific, Mo. -Alton, 111.
Ratio, S to V
V Rothschild,Wisc.-Menpminee,
Mich.
S Jefferson City , Mo. -Federal,
111.
Ratio, S to V
V Rothschild, Wise .-Menominee,
Mich.
S Jefferson City , Mo. -Federal,
111.
Ratio S to V
354
327
351
361
351
367
230
246
51
52
134
137
134
137
type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
63
40
.63
65
49
.75
65
27
.42
44
24
.55
53
21
.40
53
20
.38
?3
22
.42
Cost
Per Car
$
277.00
196 . 00
. 71
^283.00
216.00
.76
283.00
194.00
.68
169.00
158.00
.93
98.00
90.00
.92
_
122.00
108.00
.89
122.00
108.00
.89
Cost
Per Ton
$
4 . 40
4 . 89
1 . 11
4.35
4.40
1 . 01
4.35
7.17
1.65
3,84
6.57
1.71
1.85
4.27
2.31
"
2.31
5.41
2,34
2.31
4.92
2.13
Rate
Per Ton
$
9.40
7 . 00
.74
9.20
7.60
,83
9.20
7.60
.83
10.40
8.60
.83
2.60
4.60
2.31
2.60
6.20
2.38
2.60
6.20
2.38
Revenue
Per Car
$
591.00
280.00
.0.47
596.00
373.00
0.63
599,00
239.00
0.40
458.00
205.00
.45
137.00
97.00
1.77
137 . 00
125.00
.91
148.00
136.00
.92
Rate To Cost and ROI
Cost Per Ton Per Car Per Ton % of
(times) $ $' Revenue
2.14
1.43
.67
2.11
1.73
.82
2.11
1.06
.50
f
2.70
1.31
.49
1.41
1.08
.71
1.13
"
1.15
1.02
1.13
1.26
1.12
314.00
84.00
.27
313 . 00
157.00
.50
316.00
45.00
.14
289 . 00
47.00
.16
39.00
7.00
.18
15 . 00
17.00
1.13
26.00
28.00
1.08
4.98
2.10
.42
4 . 82
3.20
. 66
4.86
1.67
.34
6.57
1.96
.30
.74
.33
.45
.28
.85
3.04
.49
1.27
2.59
53
-
30
.20
53
42
.79
5?
19
.36
63
-23
.37
28
7
'-. ,-25
11
14
1.27
18
21
1.17
-------
APPENDIX A
Virgin Commodity (V): Woodpulp
Secondary Commodity (S) : Waste Paper
V
S Origin Destination
V Ashdown.Ark.-Peshtigo,
Wise.
S Da lias, Tex. -Green Bay,
Wise.
Ratio, S to V
V Me nominee, Mich,- Green
Bay, Wise.
S Pacific, Mo. -Alton.Ill.
Ratio, S to V
V Menominee, Mich. -Green
Bay, Wise.
S Pacific, Mo. -Alton, 111.
Ratio, S to V
V Rothschild, Wise. -Green
Bay, Wise.
S Green Bay, Wise. -Wise.
Rapids, Wise.
Ratio, S to V
V Appleton.Wi. -Stevens Pt.
Wise.
S Appleton.Wi. -Stevens Pt.
Wise.
Ratio, S to V
V Rothschild, Wi.-EauClaire,
Wise.
S Menasha.Wi. -Merrill, Wi.
Ratio, S to V
Length
of Haul
(miles)
971
1058
52
52
52
52
91
97
64
64
124
113
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
63
33
.52
64
25
.39
64
30
.47
53
25
.47
49 .
43
.88
53
38
.72
Cost.
Per Car
$
390.00
343.00
.88
117.00
90.00
.77
117.08
ao .00
.77
117.00
101 .00
.86
101.00
99.00
.98
119. 00
124.00
1.04
Cost
Per Ton
$
6.19
10.40
1.68
1.82
3.59
1.97
1.82
2.99
1.64
2.21
4.05
1.83
2.05
2.30
1.12
2.25
3.26
1.45
Rate
Per Ton
$
15.60
14.00
.90
2.60
4.00
1.54
2.60
3.60
1.38
2.60
3.00
1.15
2.60
3.00
1.15
7.00
4.40
.63
Revenue
Per Car
$
981.00
462.00
.47
165.00
105.00
.64
165.00
108.00
.65
137.00
75.00
.55
127.00
129.00
1.02
370.00
166.00
.45
Ratio of
Rate To
Cost Per Ton
(times)
2.52
1.35
.54
1.43
1.11
.78
1.43
1.20
.84
1.18
.74
.63
1.27
1.30
1.02
3.11
1.35
.43
Page 4 of 6
Contribution to
Cost
and ROI
Per Car Per Ton
$
591.00
119.00
.20
48.00
15.00
.31
48.00
18.00
.38
20.00
(26.00)
-'
26.00
30.00
1.15
251.00
42.00
.17
$
9.38
3.61
.38
.75
.60
.80
.75
.60
.80
.38
_
-
.53
.70
1.32
4.74
1.11
.23
Fixed
% of
Revenue
60
26
•43
29
14
.48
29
17
.59
15
_
-
20
23
1.15
68
25
.37
-------
Virgin Comno&ty (V) : Woodpuip
Secondary Commodity (S) : Waste Pamper
APPENDIX A
Pa"ge 5 of 6
Ratio of
Contribution id Fixed
V Length
S Origin Destination of Haul
(miles)
V kimberiy.Wii^Neenah
: ' Menash*, Wis.
S BlackRock.N'.Y.-N.
Tonawahda,-N.Y.
Ratio, £ to V
V Appleton.'Wi.-Neenah'
Menash, Wi.
S Apple ton, tVi.-Neenah
Menash, Wi.
Ratio, S to V
V Jacksoti, Ala". -Cincinnati ,6h
S Franklin, Va .-Middletown.Oh
Ratio S to V
V Lincoln, Me. -Potsdam, N.Y.
V Jackson, Ala. -Glens Falls
N.Y.
V. Mobile, Ala. -Ft. Edward
N.Y. ' ' • '
V Mobile, Ala. -Ft. Edward
N.-Y. .
V Selma,Ala.-Oswego,N.Y.
V. Fo ley, Flfi. -Front Royal
Va.
V Columbia Jet . ,Wa .-Plain-
well ;Mi.
V Birmingham', Ala .-Kalamazoo
M.C. ,-Micn!.
V E ve're 1 1 , Wa' . -Ma r i ne t te , W i .
10
10
5
5
. 687
. 654
420
1375
1409
1413
1139
840
2293
707
2036
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
tons
Per Car
60
34
.57
63
46
.73
60
50
.83
61
60
72
76
63
70
60
96
6i
Cost
Per Car
•i
$7.00
97.6'0
i.ii
86 . 00
83.00
.97
264. 6'0
289 . 00
i.io
285 .00
512.66
561.00
576.00
443 , oo
362 . 06
807 . 00
364 . oo'
727.00
Cost
Per Ton
$
1.45
2.84
1.96
1;36
i.8l
1.33
4.40
5.79
1.32
4.68
8.53'
7.79
7.57
i . 04
5.17
13.4"5
3'.80
11.91
Rate
Per Tori
$
4.80
4.00
.83
1^60
1.80
1.12
li.40
10.16
.89
11.20
19.20
19.40
19.20
17 . 40
13.60
21.40
12.80
19 .00
Revenue t. Rate To
Per Car Cost Per Ton
$ (timesj
' 288.00
136 . 66
.47
106.00
82.00
.82
686 . 00
503 .00
.74
683.00
lise.oo
1400.66
1475.66
1096.00
952.00
1288.00
1232.00
1163.66
3\31
i.4i
.43
1.18
.99
.84
2.59
1.74
.67
2.39
2.23
2.49
2.54
2.47
2.63
1.59
3 ; 3 7
1.60
Cost and ROI
Per Car Per Ton
$' . .<
201.00
39.66
.19
14.00
(1.00)
422 . 00
214.00
.51
.398.00
644.00
839.00
899.00
653.00
590.00
481.00
868.00
436 . 00
3.35
. t-
1.15
.34
.22
7.03
4.28
.61
6.52
10.73
il.65
11.83-
10.37
8.42
8.02
9.04
7.15
^ $ of
Revenue
70
29
.41
14
62
43
.69
58
56
60
61
60
62
37
70
37
-------
Virgin Commodity (V) : Woodpulp
Secondary CooBodity (S)i Waste Paper
APPENDIX A
Page 6 of 6
V
S Origin Destination
V Newberg, Ore. -Apple ton ,
Wise.
V. Brunswick, Ga . -Merrill ,Wi .
V Everett, Wa.-EauClare,Wi.
V Everett, Wa.,~Merrimac,Wi.
V Cosmopolis,Wa. -Toledo, Oh.
V Houston, Tex. -Hamilton, Oh.
V Memphis, Tn.-Kingsport ,Tn.
S Ft. Worth, Tex. -Ft. Edward
N.Y.
S E va dale, Tex. -Brown vi lie,
N.Y.
S.Hia lean ,Fla. -Big Island
Va.
S Eva dale, Tex. -Menominee,
Mich.
S Houston, Tex. -Monroe, H.C
Mich.
S Clinton, Iowa-Ashland,Wi.
S Maspeth, N.Y. -Green Bay
Wise.
S Phil. Ontario, Pa.- S.High
Pt. N.C.
S Denver, Col. -Pryor.Okla.
S Phoenix, Ariz. -Pryor,Okla.
Length
of Haul
(•lies)
2050
1268
1801
1989
2429
1050
528
1664
1595
960
1215
1190
426
955
441
703
1336
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons Cost
Per Car Per Car
$
60
60
61
64
61
76
30
47
46
42
44
30
41
41
48
50
65
726. oo
487.00
647.00
727.00
865.00
470.00
181.00
596.00
388.00
330.00
42 3 . 00
388.00
195.00
379. 00
205.00
284.00
518.00
Cost
Per Ton
$
12.10
8.12
10.60
11.35
14.18
6.19
6.03
12.68
8.43
7.85
9.61
12.92
4.75
9.25
4.27
5.67
7.97
Bate
Per Ton
$
19.00
18.60
19.00
18.80
21.40
10.00
13.00
17.60
17.60
9.80
13.80
17.00
8.20
12.80
8.00
10.00
9.80
Revenue
Per Car
$
1140.00
1116.00
1163.00
1213 .00
1305.00
776.00
390. OO
836.00
810.00
418.00
614.00
510.00
333.00
525.00
394.00
500.00
637.00
Ratio of Contribution to Fixed
Rate To Cost and ROI
Cost Per Ton Per Car Per Ton % of
X tines) $ $ Revenue
1.57
2.29
1.79
1.65
1.51
1.62
2.12
1.39
2.09
1.25
1.44
1.32
1.73
1.38
1.87
1.76
1.23
414.00
629.00
516.00
486.00
440.00
306.00
209.00
240.00
422 . 00
88.00
191.00
122.00
138.00
146.00
189.00
216.00
119.00
6.90
10.48
8.46
7.59
7.21
4.03
6.97
5.11
9.17
2.10
4.34
4.07
3.37
3.56
3.94
4.32
1.83
36
56
44
40
34
39
54
29
52
21
31
24
41
28
48
43
19
-------
Virgin Commodity (V) : Glass Sand
Secondary Commodity (S) : Gullet
APPENDIX A
Page 1 of 3
Ratio of
Contribution to Fixed
V • . Length Type - Tons
S Origin Destination Of Haul of Car Per Car
(miles)
V Newport, N:J. -Vine land,
N.J.
S CreightoniPa.-Ford City, Pa.
Ratio of S to V
V Wedron.lil. -Chicago/Ill.
S Milwaukee, Wi. -Chicago, 111.
Ratio of S to V
V Ottawa •, 111. -Chicago, 111.
S Milwaukee, Wi.^-Chicago, 111.
Ratio of S to V
V Glass Rock,Oh.-Crooksviiie,
Oh.
S E. St. Louis, ill. -Alton, 111.
Ratio of S to V
V Green Mtn. , N.C. -Harrison
N.J.
V Wedron.Ill.-Jersey City
N.J.
V Wedrbnjiii. -Jersey City
N.J.
V Ottawa, I Hi -Jersey City
N.J.
V Green Mtn, N.C. -High Bridge
N.J.
V Berkely Springs, W.V.-
. . Ford City, Pa.
V.Berkely Springs jiW.V. -
Vienna jW.V.
22
22
72
75
80
75
20
18
669
941
941
936
647
219
251
C. Hopper
0. Hopper
C. Hopper
0. Hopper
C. Hopper
0. Hopper
C. Hopper
0. Hopper
C. Hopper
C. Hopper
C . Hopper
C. Hopper
C. Hopper
C. Hopper
C. Hopper
74
73
.99
76
50
.66
72
50
.69
41
60
1.46
55
74
73
74
55
65
72
fcost.
Per C£r
$
102.00
ibi.bb
.99
111.00
120.00
1.08
114.00
120.00
1-.05
ibb.op
99.00
.99
338.00
541.00
539.00
539.00
332.00
i'94 . 00
2is.bb
Cost
Per Ton
• •$
1.38
1.39
i.bi
1.47
2.40
1.63
1.58
2.40
1.52 -
2.44
1.65
.68
6. 15
7.31
7.38
, 7i28
6.04
2.98
2.95
Ra te
Per Ton
$
1.39
3.78
2.72
2.82
4.00
1.42
2.85
4.00
1.42
2.12
2.33
.1.10
8.47
9.38
9.32
9.41
9.00
4.82
5.00
Revenue Rate To • Cost and ROI
Per Car Cost Per Ton Per Car Per T6n % of
$ (times) $ $ Revenue
103 . 00
276.00
2.68
214.00
200.00
.93
205.00
200.00
.98
87.00
140.00
1.61
466.00
694; 00
680.00
696.00
496.00
313:00
360; 00
1.01
2.72
2.69
1.92
1.67
.87
1.80
1.67
.87
.87
1.4l
1.62
1.38
1.28
1.26
.1.29
1.49
1.61
1.69
1.00
175.00
175.00
103.00
80.00
.78
91.00
80.00
.88
(13.00)
41.00
_
128.00
153.00
141.00
157,00
163.00
119.00
147.00
.bi
2.40
240.00
1.36
i.teo
i.is
1.26
1.60
1.27
-"
.68
-
2.33
2.07
1.93
2.12
r
2.96
1.83
2.04
1
63
63 . 00
48
40
.83
44
40
.91
• ' -
29
-
27
22
21
23
33
38
41
-------
APPENDIX A
Virgin Coraodity (V) : Glass Sand
Secondary Commodity (S): Gullet
Page 2 of 3
V Length Type Tons
S Origin Destination of Haul of Car Per Car
(miles)
V Goshen,Va.-Owens,W.V.
V Ottawa, I 11. -Cleveland, Oh.
V Wedron, I 11. -Columbus, Oh.
V Webb City, Mo. -Chicago, 111.
V. Pacific, Mo. -Nashville, Tn.
V Kosse, Tex. -Laredo, Tex.
V Mill Creek, Oh. -Berkeley,
Calif.
V Mill Creek, Oh. -Oakland
Calif.
V Mill Creek, Oh. -Oakland
Calif.
V Idyllwild,Ca. -Santa
Clara, Ca.
S Detroit, Mi. -Rutherford,
N.J.
S Detroit, Mi. -Rutherford,
N.J.
S Detroit, Mi. -Rutherford,
N.J.
S Crestline, Oh. -Rutherford,
N.J.
S Toledo,Oh.-Bridgeton,N. J.
S Glenn, 111. -Bremen, Oh. ,
201
391
358
563
349
355
1876
1875
1875
480
646
646
646
615
636
335
C. Hopper
C. Hopper
C. Hopper
C. Hopper
C. Hopper
C. Hopper
C . Hopper
C. Hopper
C. Hopper
C. Hopper
0. Hopper
0. Hopper
O . Hopper
O. Hopper
O. Hop per
0. Hopper
72
52
72
40
62
60
76
80
76
75
61
74
69
75
65
73
Cost
Per Car
$
189.00
251.00
256.00
299.00
204.00
232.00
886.00
903.00
886.00
297 . 00
354.00
374.00
366.00
361.00
356.00
237.00
Cost
Per Ton
$
2.62
4.83
3.56
7.48
3.30
3.86
11.66 X
11.28
11.65
3.95
5.81
5.05
5.31
4.82
5.48
3.25
Rate
Per Ton
$
3.61
6.25
4.81
7.55
5.53
5.88
13.13
13.93
13.14
5.61
9.43
9.42
9.35
9.02
11.80
8.18
Ratio of Contribution to Fixed
Revenue Rate To Cost and ROI
Per Car Cost Per Ton Per Car Per Ton % of
$ (times) $ $ Revenue
260.00
325.00
346.00
302.00
343.00
353.00
998.00
lll4.00
999.00
421.00
575.00
697.00
645.00
676.00
768.00
597.00
1.38
1.29
1.35
1.01
1.68
1.52
1.13
1.23
1.13
1.42
1.62
1.87
1.76
1.87
2.15
2.52
71.00
74.00
90.00
3.00
139.00
121.00
112.00
211.00
113.00
124.00
221.00
323.00
279.00
315.00
412.00
360.00
.99
1.42
1.25
.08
2.24
2.02
1.47
2.64
1.49
1.65
3.62
4.36
4.04
4.20
6.34
4.93
27
23
26
1
41
34
11
19
11
29
38
46
43
47
54
60
-------
APPENDIX A
Virgin Commodity (V): Glass Sand
Secondary Commodity (S) : Culle.t
Page 3 of 3
V
S
Origin
Destination
Length
of Haul
(miles)
Type
of Car
Tons
Per Car
Cost.
Per Cer
'$
Cost
Per Ton
$
Rate
Per ton
$
Revenue
Per Car
$
Ratio of
Rate To
Cost Per Ton
(times)
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
S Luzerne Co.,Pa.-Columbus,
Oh.
S Lemont,Pa.-Bluffton,Ind.
S Crestline,Oh.-Streator,111
S Detroit,Mi.rJackson,Miss
8 To3edo,Oh.rJacSkscc,Miss.
3 Lathrqp.Ca.-Workman,Ca.
S MiIwaukee.Wi.-Streator,111. 148
487
489
329
899
847
395
148
405
O. Hopper
O. Hopper
O. Hopper
Q. Hopper
O. Hopper
O. Hopper
O. Hop per
O .Hopper
61
56
58
30
73
93
50
70
290 . 00
285.00
223.00
342.00
405.00
272.00
133 . OO
265.00
4.75
5.09
3.85
11.40
5.54
2.93
2.67
3.78
10 ; 46
6.20
8.78
18.33
15.36
5.19
8.00
10.40
638.00
347.00
509.00
550 . 00
1121.60
483 .00
400 .00
728.00
2.20
i.22
2.34
1.61
2.77
1.77
3.00
2.75
348
62
286
268
716
211
267
463
.00
.00
.00
.00
.00
.00
.00
.00
5:70
1.11
4.93
6.93
9.81
2.27
5.34
6.61
55
18
56
38
64
44
67
64
.££.'-/
-------
Virgin Commodity (V):
Secondary Commodity (S):
Primary Aluminum Ingot
Aluminum Scrap
APPENDIX A
Page
of 4
V Length Type Tons
S Origin Destination of Haul of Car Per Car
(miles)
V Massena,N.Y. -Cleveland, Oh.
S Fairmont,W.V.-Oswego,N.Y.
Ratio, S to V
V Malaga, Wa. -Cleveland, Oh.
S Intalco.Wa. -Cleveland, Oh.
Ratio, S to V
V Intalco.Wa. -Warren, Oh.
S Intalco.Wa . -Cleveland, Oh .
Ratio, S to V
V Intalco,Wa .-Youngs town, Oh.
S Intalco.Wa. -Cleveland, Oh.
Ratio, S to V
V Intalco.Wa .-Youngstown, Oh.
S Intalco.Wa .-Cleveland, Oh.
Ratio, S to V
V Long view, Wa .-Omal, Oh.
S Intalco,Wa. -Cleveland, Oh.
Ratio, S to V
V Lafayette, Ind. -Cressona ,
Pa.
V Conalco,Tn.-Lancester,Pa .
V Conalco,Tn. -Greenville, Pa.
V Conalco.Tn.-Shelbyville,
Ky.
V Jones Mill, Ark. -Louisville,
Ky.
487
466
2310
2430
2483
2430
2494
2430
2494
2430
2661
2430
722
963
685
312
551
Box
0. Hopper
Box
O. Hopper
Box
O. Hop per
Box
O. Hopper
Box
O. Hopper
Box
O. Hopper
Box
Box
Box
Box
Box
42
40
.95
50
20
.40
76
20
.26
52
20
.38
50
20
.40
63
20
.32
46
51
59
51
51
Cost.
Per Csr
$
260.00
253.00
.98
764.00
786.00
1.03
969.00
786.00
.81
834.00
786.00
.94
834.00
786.00
.94
944.00
786.00
.83
328. 00
379.QO
300. 00
146.QO
242.00
Cost
Per Ton
$
6.18
6.23
1.02
15.28
39.30
2.57
12.76
39.30
3.08
16.03
39.30
2.45
16.67
39.30
2.36
14.98
39.30
2.62
7.14
7.44
5.09
2.87
4.74
Bate
Per Ton
$
12.80
14.00
1.09
31.00
50.40
1.63
31.00
50.40
1.63
31.00
50.40
1.63
31.00
50.40
1.63
31.00
50.40
1.63
18.20
19.60
15.60
12.20
11.00
Ratio of
Revenue Rate To
Per Car Cost Per Ton
- $ (times)
538.00
560 . 00
1.04
1559.00
1008.00
.65
2349.00
1008.00
.43
1612.00
1008.00
.63
1550.00
1008.00
.65
1953.00
1008.00
.52
838.00
1000.00
920.00
622.00
561.00
2.07
2.21
1.07
2.02
1.28
.63
2.42
1.28
.53
1.93
1.28
.66
1.86
1.28
.69
2.07
1.28
.62
2.55
2.63
3.06
4.25
2.32
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
278.00
287.00
1.03
795.00
222.00
.28
1380.00
222.00
.16
778.00
222.00
.29
716.00
222.00
•31
1009.00
222.00
.22
510.00
621.00
620.00
476.00
319.00
6.62
7.67
1.16
15.90
11.10
.70
18.16
11.10
.61
14.97
11.10
.74
14.33
11.10
.77
16.02
11.10
.69
11.09
12.16
10.51
9.33
6.26
52
51
.98
51
22
.43
59
22
.37
48
22
.46
46
22
.48
52
22
.40
61
62
67
77
57
T
-------
Virgin Commodity (V) : Primary Aluminum Ingot
Secondary Commodity (S) : Aluminum Scrap
APPENDIX A
Page 2 of 4
V Length
S Origin Destination of Haul
(miles)
V Mead, Wash. -Cleveland, Oh.
V Chalmette, La. -Campbell,
Oh.
V Sandow, Tex.-Warrick, Ind.
V Mead, Wash. -Chicago, 111.
V Intalco, Wash. -Beven, 111.
V Cona lco,Tenn. -Columbia ,
Tenn.
V Cona lco,Tenn-Jackson, Tenn.
V Malaga , Wash. -Water loo, la ,
V Malaga , Wash. -Riverdale, la.
V Pt. Comfort, Tex.- Davenport,
Iowa
V Conkelly, Mont. -Seattle ,
Wash.
V Mead, Wash. -Seattle, Wash.
V Malaga, Wash. -Seat tie,
Wash.
V Intalco, Wash. -Merced, Calif .
V Mead, Wash. -Los Angeles,
Calif.
V Intalco, Wash. -Los Angeles,
Calif.
2148
1128
866
1818
2109
200
61
1728
1860
1127
587
318
162
938
1341
1271
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons Cost.
Per Car Per Cz r
$
52
53
42
50
59
91
94
41
57
69
74
73
54
50
43
50
730.00
413.00
283.00
611. 00
741.00
13 5.00
8 5.00
52 9.00
65 1.00
441.00
301.00
209.00
145.00
363 .00
453.00
457.00
Cost
Per Ton
$
14.04
7.79
6.73
12.22
12.56
1.48
.90
12.90
11.42
6.39
4.06
2.86
2.69
7.25
10.54
9.13
Rate
Per Ton
$
31.00
17.00
20.80
23.40
23.40
2.57
2.20
23.40
23.20
11.60
10.80
8.80
6.20
16.60
16.60
16.60
Ratio of
Revenue Rate To
Per Car Cost Per Ton
$ (times)
1612.00
901.00
874.00
1170.00
1380.00
234.00
207.00
959.00
1319.00
798.00
799.00
642.00
335.00
830.00
715.00
831.00
2.20
2.18
3.09
1.91
1.86
1.74
2.44
1.81
2.03
1.81
2.66
3.08
2.30
2.29
1.57
1.82
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
882.00
488.00
591.00
559.00
639.00
99.00
122.00
330.00
668.00
357.00
498.00
433.00
190.00
467.00
262.00
374.00
16.96
9.21
14.07
11.18
10.84
1.09
1.30
10.50
11.78
5.21
6.74
5.93
3.51
9.34
6.09
7.48
55
54
68
48
46
42
59
34
51
45
62
67
57
56
37
45
-------
Virgin Commodity (V): Primary Aluminum Ingot
Secondary Commodity (S): Aluminum Scrap
APPENDIX A
Page 3 of 4
V Length Type Tons
S Origin Destination of Haul of Car Per Car
(miles)
S Cleveland, Oh. -Roosevel town
N.Y.
S Toledo Olive, Oh. -Oswego,
N.T.
S Flint, Mich. -Cleveland, Oh.
S Cableton, Mi. -Cleveland, Oh.
S Luzerne Co, , Pa .-Cleveland
Davenport , Oh.
5 Corliss , Pa . -Sandusky, Oh.
S Akron, Oh. -Sandusky, Oh.
'3 A ima. Mich. -Toledo, Oh.
S Toledo Olive, Oh. -Butler-,
Ind.
S Burns City , In. -Chicago,
111.
S Evansville, In. -Chicago f
111.
S N. Chattanooga.Tn. -Chicago f
111.
S Minnea polis, Minn. -Chicago ,
111.
S Danbury, Conn. -Chicago TVT ,
111.
501
428
206
293
428
192
78
144
70
240
280
592
401
900
0. Hopper
O. Hopper
0. Hopper
O. Hopper
O. Hopper
0. Hopper
O. Hopper
0. Hopper
O. Hopper
O. Hopper
O. Hopper
O. Hopper
O. Hopper
O. Hopper
16
48
20
40
43
33
20
36
54
62
20
27
21
11
Cos t.
Per Czr
$
243.00
253.00
156.00
197.00
248.00
157.00
116.00
142.00
119.00
185 . 00
179.00
254.00
198.00
354.00
Cost
Per Ton
$
15.22
5.27
7.80
4.92
5.77
4.77
5.80
3.94
2.20
2.98
8.95
9.40
9.45
32.20
Rate
Per Ton
$
15.40
12.40
10.80 '
10.20
12.40
9.60
7.60
8.80
6.40
10.60
12.40
18.00
11.00
23.40
Ratio of
Revenue Rate To
Per Car Cost Per Ton
$ (times)
244.00
597.00
216.00
408.00
528.00
317.00
152.00
315.00
347.00
652.00
248.00
486 . 00
228.00
263.00
1.01
2.35
1.38
2.07
2.15
2.01
1.31
2.23
2.91
3.56
1.35
1.91
2.07
_
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
1.00
344.00
60.00
211.00
280.00
160.00
36.00
173.00
228.00
467.00
69.00
232.00
30.00
(91.00)
.18
7.13
3.00
5.28
6.63
4.83
1.80
4.86
4.20
7.62
3.45
8.60
1.55
(8.80)
0
58
28
52
53
50
24
55
66
72
28
48
13
-
-------
APPENDIX A
Virgin Commodity (V): ' Primary Aluminum Ingot
Secondary Commodity (S): Aluminum Scrap
Page 4 of 4
Ratio of
V Length Type Tons Cost Cost Rate Revenue Rate To
S Origin Destination of Haul of Car Per Car Per Car Per Ton Per Ton Per Car Cost Per Ton
(miles) $ $ $ $ (times)
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
S New Haven, Conn. -Chicago
U.S. Yd., 111.
S Danbury, Conn. -Chicago
U.S. Yd., 111.
S New Haven, Conn. -E.Alton,
111,
S Sacramento .Calif .-Oakland
Calif.
S Los Angeles.Calif .-Mira-
Loma , Calif.
S Pittsburg .Calif .-River-
side, Calif.
S Oakland, Calif .-Norco, cal
945
900
1116
/
88
43
488
520
O. Hopper
0. Hooper
O . Hopper
O. Hopper
0. Hopper
O. Hopper
O. Hopper
23
11
56
50
19
27
49
393 . 00
354.00
532.00
125.00
106.00
239.00
264.00
17.10
32.20
9.51
2.49
5.55
8.85
6.61
22.80
29,90
21.40
4.80
4.00
12.40
9.00
524
329
1198
240
75
332
355
.00 1.33
.00
.00 2.25
.00 1.93
.00
.00 1.40
.00 1.36
131
(25
666
115
(31
93
91
.00
.00)
.00
.00
.00)
.00
.00
5.70
(2.30)
11.89
2.31
(1.55)
3.55
2.39
25
-
56
"48
28
26
-------
Virgin Commodity (V): Natural & Synthetic Rubber
Secondary Commodity (S): Scrap Rubber
APPENDIX A
Page 1 of 4
V Length
S Origin Destination of Haul
(miles)
V Hudson Co. ,N.J. -Barber ton,
Oh.
S Medford, N.J. -Akron, Oh.
Ratio, S to V
V Hudson Co., N.J. -Akron, Oh.
S Hedford, N.J. -Akron, Oh.
Ratio S to V
V Moraine, Oh. -Akron, Oh.
S Corry,Pa.-Norwalk,Oh.
Ratio S to V
V Hudson Co. »N.J. -Akron, Oh.
S Ited ford, N.J. -Akron, Oh.
Ratio S to V
V Jersey City ,N. J .-Akron, Oh.
S Medford, N.J. -Akron, Oh.
Ratio S to V
V N.Y..N.Y.-E. St. Louis, 111.
S Chester, Pa. -E. St. Louis, 111.
Ratio S to V
V Phi la. Pa. -Barber ton, Ob.
S Akron, Oh. -Free port, I 11.
Ratio S to V
V Akron, Oh. -Pepperell, Ala.
S Akron, Oh. -Tuscaloosa, Ala .
Ratio S to V
544
501
537
501
184
186
537
501
537
501
1027
945
472
450
807
776
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
29
30
1.03
20
30
1.50
29
15
.52
28
30
1.07
24
30
1.25
28
31
1.11
28
65
2.32
43
35
.81
Cost .
Per Car
$
246.00
235.00
.96
230.00
235.00
1.02
144.00
135.00
.94
242.00
235.00
.97
242.00
235.00
.97
379.00
360.00
.95
224.00
237.00
1.06
301.00
278.00
.92
Cost
Per Ton
$
8.47
7.83
.92
11.52
7.83
.68
4.98
9.02
1.81
8.65
7.83
.91
10.09
7.83
.78
13.54
11.63
.86
3.00
3.65
.46
7.00
7.94
1.13
Rate
Per Ton
$
14.50
14.00
.97
14.60
14.00
.96
9.83
11.40
1.16
14.60
14.00
.96
17.60
14.00
.79
20.60
24.50
1.19
14.80
12.60
.85
20.84
20.40
.98
Revenue
Per Car
$
418.00
426.00
1.02
297.00
426.00
1.48
285.00
171.00
.60
413.00
426.00
1.03
429.00
426.00
.87
570.00
751.00
1.32
418.00
815.00
1.95
896.00
724.00
.81
Ratio of
Rate To
Cost Per Too
(times)
1.71
1.78
1.04
1.27
1.78
1.40
1.97
1.26
.64
1.69
1.78
1.05
1.74
1.78
1.02
1.52
2.11
1.39
1.85
3.45
1.86
2.98
2.57
.86
Contribution to Fixed
Cost and ROI
Per Car Per Ton % of
$ $ Revenue
172.00
191.00
.90
67.00
191.00
2.85
141.00
36.00
.26
171.00
191.00
1.12
187.00
191.00
1.02
191.00
391.00
2.05
194.00
578.00
2.98
595.00
446.00
.75
5.93
6.37
1.07
3.35
6.37
1.90
4.86
2.38
.49
6.11
6.37
1.04
7.51
6.37
.85
7.06
12.87
1.82
6.80
8.95
1.32
13.84
12.46
.90
41
45
1.10
23
45
1.96
49
21
.43
41
45
1.10
44
45
1.02
34
52
1.53
46
71
1.54
66
62
.94
-------
Virgin Commodity (V): Natural & Synthetic Rubber
Secondary Coimodity (S): Reclaimed Rubber
APPENDIX A
Page 2 of 4
V Length
S Origin Destination of Haul
(miles)
V Moraine, Oh. -Akron, Oh.
S Akron, Oh. -Jackson He., Mich.
Ratio S to V
V Hudson Co., N.J. -St. Marys, Oh
S Nauga tuck, Ct. -Detroit Me,
Mich.
Ratio S to V
V HudsonCo. , N.J. -Chicago, 111.
S Chester, Pa. -E. St. Louis, 111.
Ratio S to V
V HudsonCo., N. J . -Freeport , 111
S Chester, Pa. -E. St. Louis, 111.
Ratio S to V
V Hudson Co., N.J. -Morris, I 11.
S Chester, Pa. -E. St. Louis, I 11.
Ratio S to V
V Hudson Co. , N.J. -Detroit,
Mich.
S Naugatuck,Ct. -Detroit,
Mich.
Ratio S to V
V Mamaroneck,N.Y. -Chicago,
in.
S Chester, Pa-. -E. St. Louis, 111.
Ratio S to V
V N.Y.,N..Y:.-E.S.t-. Louis, 111 .
S Chester ,aPa . -E.S t . Louis , 111.
Ratio. S to V
184
202
. 704
673
878
945
. 985
945
913
945
652
673
920
945
1027
945
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
29
71
2.45
24
50
2.08
26
31
1.19
22
31
1.41
37
31
,84
54
50
.93
32
3.1
.97*
28
31
1.11
Cost.
Per CE r
$
144.00
179.00
1.24
281.00
320.00
1.14
333.00
360.00
1.08
327.00
360 . 00
1.10
3 59 . 00
360.00
1.01
322 . 00
320.00
.99
359.00
360.00-
1.01'
379.00
360.00
.95
Cost
Per Ton
$
4.98
2.53
.51
11.73
6.39
.54
12.81
11.63
.91
14.86
11.63
.78
9.69
11.63
1.20
5.96
6.39
1.07
11.21
11.63
1.04
13.54
11.63
.86
Rate
Per ton
$
9.83
7.58
.77
16.75
15.98
.95
18.92
24.50
1.29
19.00
24.50
1.29
18.68
24.50
1.31
15.90
15.98
1.00
23.36
24 . 50
1.05
20'. 60
24.. 50
1.19
Revenue
Per Car
$
285.00
538.00
1.89
402.00
#
799.00
1.99
492.00
751.00
1.53
418.00
751.00
1.80
691.00
751.00
1.09
895.00
799.00
.89
743 . 00
751.00
1.01
570.00
751.00
1.32
Ratio of Contribution to Fixed
Rate To Cost and ROI
Cost Per Ton Per Car Per ton % of
(tines) $ $ Revenue
1.97
3.00
1.52
1.43
2.50
1.74
1.48
2.11
1.43
1.28
2.11
1.65
1.93
2.11
1.09
2.67
2.50
.94
2.08
2.11
1.01
U.52
2.11
1.39
141.00
359.00
2.55
121.00
479.00
3.96
159.00
391.00
2.46
91.00
391.00
4.30
332.00
391.00
1.18
573.00
479.00
.84
384.00
391.00
1.02
191.00'
391.00
2.05
4.86
5.06
1.04
5.02
9.59
1.91
6.11
12.87
2.11
4.14
12.87
3.11
8.99
12.87
1.43
10:61
9.59
.90
12.15
12.87
1.06
7.06
12.87
1.82
49
67
1.37
30
60
2.00
32
52
1.63
22
52
2.36
48
52
1 .08
64
60
.94
52
52
1.00
34
52
1 . 53
-------
Virgin Connodity (V): Natural & Synthetic Rubber
Secondary Coamodity (S) : Reclaimed Rubber
APPENDIX A
3 of 4
Ratio of
Contribution to Fixed
V Length
S Origin Destination of Haul
(miles)
V Tacoma,Wa.-Decatur,Ill.
V Bay town, Tex. -Detroit, Mich.
V Odessa , Tex. -Akron, Oh.
V Amarillo.Tex.-Brittain.Oh.
V Odessa , Tex. -Waco, Tex.
V Borger, Tex. -Oakland, Calif .
V Orange,Tex.-L.A. , Calif ;
V Louisville, Ky. -Watson, Cal .
V Louisville, Ky. -L. A. Co., Cal.
V Port Heches, Tx.-Torrance,
Calif.
V Port Heches, Tx.-Texarkana,
Tx.
V Orange, Tx.-Shumaker, Ark.
V N. Baton Rouge , La .-Shumaker ,
Ark.
V Orange ,Tx.-Camden,Ark.
S Na uga tuck, Ct. -Detroit, Mi.
S Akron , Oh . -Woodburn Good,
Ind.
S Akron, Oh. -Gadsden, Ala .
S Bucyrus,Oh.-Lineville,Ala.
S Akron , Oh . -Topeka , Ks .
2161
1250
1502
1285
365
1540
1739
2216
2186
1741
287
314
290
308
673
186
667
666
824
Type
of Car
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Box
Tons
Per Car
62
72
86
82
85
44
71
43
40
50
67
47
41
71
49
40
56
51
66
Cost
Per Car
$
750.00
535.00
670.00
576.00
220.00
510.00
677.00
656 .00
633.00
583.00
178.00
170 . 00
181.00
188.00
318.00
152.00
282.00
272.00
378.00
Cost
Per Ton
$
12.09
7.43
7.79
7.02
2.59
11.59
9.54
15.25
15.83
11.66
2.66
3.61
4.42
2.65
6.49
3.81
5.04
5.33
5.73
Rate
Per Ton
$
33.20
14.80
14.80
10.20
7.00
32.40
28.40
40.20
39.20
30.00
5.20
11.62
10.90
7.60
16.92
6.00
15.40
14.20
15.40
Revenue Rate To Cost and ROI
Per Car Cost Per Ton Per Car Per Ton - % of
$ (times) $ $ Revenue
2050.00
1065.00
1271.00
836.00
598.00
1426.00
2018.00
1749.00
1568.00
1500.00
348.00
551.00
447.00
542.00
829.00
240.00
858.00
720.00
1016.00
2.75
1.99
1.90
1.45
2.70
2.80
2.98
2.63
2.48
2.57
1.95
3.22
2.47
2.87
2.61
1.57
3.05
2.66
2.69
1300.00
530.00
601.00
260.00
378.00
916.00
1341.00
1093.00
935.00
917.00
170.00
381.00
266.00
354.00
511.00
88.00
576.00
448.00
638.00
21.11
7.36
6.99
3.18
4.45
20.82
18.89
24.95
23.37
18.34
2.54
8.01
6.49
4.99
10.43
2.20
10.29
8.78
9.67
63
50
47
31
63
64
66
62
60
61
49
69
60
65
62
37
67
62
63
.'J. //
-------
Virgin Commodity (V): Natural & Synthetic Rubber
Secondary Commodity (S): Scrap Rubber
APPENDIX A
Page 4 of 4
Ratio of
V Length Type Tons Cost Cost Rate Revenue Rate To.
S Origin Destination of Haul of Car Per Car Per Cir Per Ton Per Ton Per Car Cost Per Ton
(miles) $ $ $ $ (times)
S Ft.Wayne.Tx.-E.St.Louis,
111. 711
S Beaumont,Tx.-E.St.Louis,
111.
S Chicago,111.-E.St.Louis,
111.
831
Box
Box
284 Box
S Corry,Pa.-Chicago Polk,I11. 464 Box
S Houston.Tx.-Brenhan.Tx. 70 Box
40
40
40
15
20
210.00 5.25
231.00 5.78
10.40 416.00
11.80 472.00
182.00 4.55 6.20 248-00
205.00 13.65 18.40 276.00
107.00 5.33 8.00 160.00
1.98
2.04
1.36
1.35
1.50
Contribution to Fixed
Cost snd BOJ
Per Car Per. Ton % of.
$ $ Revenue
206.00 5.15 49
241.00 6.92 51
66.00 1.65 27
71.00 4.73 ?JS
53.00 2.65 33
-------
Appendix B
REGRESSION ANALYSIS, CONTRIBUTION AS A PERCENTAGE OF REVENUE
An equation of the form
Y = a + bx
was assumed to fit percent contribution to revenue (Y) as a
linear function of mileage (x) for each of eleven commodities.
The data were plotted prior to any curve fitting in
order to visualize the nature of the functional relationships.
It was immediately evident that in each case these were vary-
ing numbers of aberrant points which made difficult the
employment of any regression analysis.
Further investigation revealed that there existed a
mixture of populations such as the inclusion of intrastate
as well as interstate shipments or multiple moves to the
same plant. Each move was reexamined and a "pure" population
of interstate moves was obtained.
The possibility of fitting curves in segments defined
by mileage breaks was considered, but discarded as a practical
expression of the relationships because of the large discon-
tinuities that appeared at the boundaries. Forcing continuity,
which was possible, would have resulted in unrepresentative
fits with a high degree of artificiality.
Finally, the use of a transformation of one or both
variables was attempted as a means of securing better fits
between both variables. No transformation, common to all
sets of data, was found that contributed significantly to
linearizing or otherwise smoothing the relationship.
The functional form finally adopted was linear. Non-
linear terms were found to be without statistical significance
in several of the sets of data. It is believed that a single
functional form of relationship should be used for all data
-------
: to ^facilitate comparisons of the coefficient 'showing the
.(.change >i:n ^percent -contribution for -a unit change in mileage ;
sjsuch;;a comparison -would not be feasible -if different func-
tional ..'Eela'taonships ,wer.e :used for different commodities .
r.The -number .of ^observations available ranged from seven
;f or scrap "rubber to 48 for woodpulp. Of the original total
.number ,:of: available observations, a varying number of moves
>;were omitted .from .the 'calculations in the fitting process
.for reasons .discussed in Chapter III. Let n
refer to the > net number of observations retained arid used.
.As*may be inferred ufrom -Appendix Table *1, the net 'number 'of
observations .ranged from 'seven for -scrap rubber 5to 27 for
aluminum ingots and natural and synthetic rubber. The 'mean
^sample size was .319 ;6 observations.
iFor ^each commodity the regression coef f'ic'ieritfs were
•res:t:lmat:ed .;f-rom -it-he formulas
2
•
'a
N,Sx -
£ N£x'Y;-.:
- (.Ex)'2
-------
Appendix B
TABLE 1
REGRESSION ANALYSIS BY COMMODITY
Commodity
Reclaimed
Rubber
Number of
Observations
Regression
Equation
t Correlation
Value Coefficient
Std. Error
of Estimate
Iron Ore
I&S Scrap
Woodpulp
Waste Paper
Glass Sand
Gullet
Aluminum
Ingot
Aluminum
Scrap
Nat. & Synth.
Rubber
Scrap Rubber
Total
26
30
48
42
21
17
27
24
29
7
Retained
24
26
26
16
17
17
27
20
27
7
Y=53.22-.0532x
Y=55.l7-,0141x
Y=64.28-.Ol06x
Y=48019-.0172x
Y=37.57-.0136x
Y=50.59-.0045x
Y=60.51-.0052x
Y=47.16-.0l00x
Y=47.85-.0037x
Y=20.7l-.0351x
-3.70**
-2.08*
-5.25**
-4.43**
-5.84**
- .35
-2 . 44*
-1.83*
.94
2.93
-.6186
-.3903
-.7288
-.7641
-.8360
-.0448
-.4387
-.3972
.1881
.7944
8.77
9.59
7.51
7.38
5.62
13.99
9.06
16.21
12.63
8.10
10
Y=74.25-.0176x
-2.90* -.7334
3.71
* Significant at .05 level of significance.
** Significant at .01 level of significance.
-------
Appendix C
METHODOLOGY USED TO EVALUATE COMPATIBILITY OF
STUDY MOVES WITH RANDOMLY SELECTED MOVES
A second degree curve of the form
y = bo + blX+b2x2
was used to fit revenue per ton (y) to mileage (x) for the
"study moves" for each of eleven commodities. To investigate-
whether the study moves which were subjectively chosen were
consistent with a population of all moves for that commodity, a
random sample of additional moves was selected. In each
case 'a sample of about size twenty was desired; the actual
range of sample sizes ran from nine to twenty-two with an
average of about eighteen.
Given the fitted curve of the form.displayed above, an
estimate of the variance is '
A A A Q ^
2 z(y-b -b x-b x )
A = O 3. A. ..
s ri -3
s
where the summation is taken over all n study moves, and
b , b,, and b^ represent the estimates derived from the set
01 2
of study moves.
For the random sample we computed
0
2
based on the n moves in the random sample
r .
-------
The coefficients are those that were estimated from
the study moves; hence no degrees of freedom are lost in
2
computing $• •
If both sets of moves belong to the same population of
moves in terms of the relationship between revenue per ton
2 2
and mileage, the § and &" are independent estimates of the
S JL
2
same unknown variance. Alternatively a would be expected to
2
be larger than & if they were derived from different popula-
S
tions.
A test of the hypothesis that both variance estimates
are equivalent may be constructed by calculating
.2
ov
which, under the null hypothesis, has the F distribution
with n and (n -3) degrees of freedom.
JL O
The accompanying table displays these calculations for
each of the eleven commodities. It may be seen that only
one of the eleven commodities showed a significant difference
at the 5% level, and that was only marginally greater than the
5% value. That commodity was iron ore.
It is well within the bounds of chance to encounter one
F ratio out of eleven to be significant at the 5% level,
when in fact, the null hypothesis is true. We must conclude
therefore that the statistical evidence is constant with the
hypothesis that the study moves are compatible with the entire
population of moves for each commodity.
-------
COMPARISON OF RANDOMLY SELECTED. MOVES;
WITH STtlDY MOVES BY COMMODITY
Append JL;K C
Commodity
Study Mpyes Random Moveg
"3
2
n
.2
* 3 ^ 2
n
n r.3
Aluminum Ingots
Aluminum Scrap
Nati & Synth. Rubber
Reclaimed Rubber
•Scrap .Rubber
Glass Sand
Gullet
Iron Ore
Iron & Steel Scrap
Woodpulp
Wastepaper
27
24
29
10
7
21
17
26
30
48
42
10.61
7.35
25.29
4.35
15.82
.34
4.27
.076
3.13
3.40
8.04
22
18
20
17
9
20
18
17
15
20
20
9.88
10.95
29.02
3.93
4.21
.62
4.50
.162
4.34
5.04
1.21
= 931
1.490
1.147
.903
. 266
1.823
1.054
2.13:2*
1.387
1.482
.150
2.01
2.13
1.99
3.48
6.00
2.19
2.42
2.10
2 .06
1.86
1.84
* Significant at 5% level.
-------
is a dimensionless quantity representing a measure of how
\ .
well the linear relationship fits the data. The quantity,
r, varies in magnitude between 0, representing a complete
absence of a linear relationship, and 1, indicating a perfect
linear relationship.
The other measure of goodness of fit is the standard
error of estimate , :
s
y If n-2
which is a root-mean-square estimate of deviations of actual
observations from the fitted line. The standard error of
estimate has the same dimensions as Y, i.e. percent contribution,
Finally, one can calculate
* / o o
i / _^ ^ * ^ &
= \l£x ~ (EX)
s If n
y
to assess the statistical significance of the difference of
the slope of the fitted lines from zero. High negative
values are indicative of large negative slopes showing a
diminishing percent contribution with increasing mileage.
The quantity t is known as Student's t with (n-2) degrees
of freedom. A one-sided test of significance is used since
only large negative values of 6 are of interest. A significance
level of .01, say, should be interpreted in the sense that
the probability is .01 or less that as large or larger a
negative value for b would be obtained by chance if the
"true" slope were zero. The significance level varies with
the number of degrees of freedom.
The accompanying table displays the number of observations,
the linear regression equation, r, t, and s for each commodity0
-------
of ^sigfl^i^ainfie :>pf rrt., misting -a-oners^ded test, ,are
-------
APPENDIX D
Appendix (Table) D illustrates the traffic
carried by regulated landborne carriers for the
year 1969 for nine of the twelve study commodities;
for three commodities, aluminum scrap, cullet and
glass sand comparable data are not available.
-------
Appendix D
RAIL AND REGULATED TRUCK TRAFFIC
BY COMMODITY, 1969
STCC No
Rail Freight Terminated
Truck Freight Terminated
Carloads
08423
101
26111
28212
303
3334
40211
4024
4026
*Totals
Sources
Crude Natural Rubber 16,
Iron Ores
Woodpulp
Synthetic Rubber
Reclaimed Rubber
Primary Aluminum
Iron Si Steel Scrap
986,
144,
41,
2,
54,
532,
Paper Waste & Scrap 122,
Rubber, Plastic
Scrap and Waste
for Iron Ore Originated
: Freight Commodity Sta
arid Freight Commodity
in Intercity Service
1-9,6.9, both published
12,
are 1,
tistics
846
045*
358
856
459
773
168
576
335
358,838
, Class
Statistics, of
Tons
681,
79,682,
8,400,
2,418,
102,
3 , 096 ,
29,133,
4,173,
292,
carloads
146
920*
976
243
177
830
716
637
306
and
I Railroads,
Class I
-„ Common and Contract -
by Bureau of Accounts,
Truckloads Tons of Total
9
10
44
2
18
7
1
,138
723
,337
,257
,984
,238
,395
,156
154,
10,
190,
758,
48,
303,
149,
17,
2,284 30,
104,700,694 tons.
Year
Ended
Motor Carriers
in
the United
Interstate
December 31 ?
149
431
729
415
643
368
654
358
908
1969,
81
9?
97
76
67
91
99
99
90
.5
.9
.7
.1
.7
.0
.4
.5
.4
of Property Operating
States, Calendar Year
Commerce Commission.
-------
Appendix E
EQUIVALENCY FORMULAS
Equivalency formulas are applicable to the computation of
transportation price and delivered cost effects of the alternate
use of virgin or secondary materials.
The comparative computations reflect equivalent quantities
of virgin and secondary materials needed to produce either the
same unit of manufactured product or pure material.
I. To produce an equivalent quantity of steel ingot, the
requirements are:_'
Virgin materials, pounds Secondary material, pounds
Iron ore 3,167
60% Fe content
Limestone 425
Coal 602 Steel scrap,
Total 4,194 OR 95% Fe content 2,000
II. To produce an equivalent quantity of paperboard production,
the requirements are:
Woodpulp 88 OR Waste Paper 100
Ibs. Ibs.
III. To produce an equivalent quantity of glass-making batch,
the requirements are:
Glass sand 56.3
Soda ash 18.7
Limestone 16.5
Feldspar 8.5
Total , ±00.0 OR Gullet 100
Ibs. Ibs.
IV. To produce an equivalent quantity of secondary aluminum
ingot, the requirements are:
Primary Aluminum Ingot OR Scrap 100
92 Ibs.
Ibs.
I/ Ignores heating coal or substitute source of heating
energy.
-------
,;V. To produce .a rubber batch for tire manufacturing,
virgin and .secondary are substitutable as -follows:
Dry natural or
synthetic rubber ,47.0 pounds
Carbon black 20.0 pounds
Zinc oxide 3.5 pounds
Sulphur 3.0 pounds
Miscellaneous
materials 26.5 pounds
Total lOOoO OR Reclaimed 100
Ibs.
-------
Appendix F
Commodity Prices Used in Report Analyses
IRON AND STEEL
Iron Ore - Domestic
Price per net ton, Mesabi Range,
at rail of vessel, lower lake
port, adjusted to 60% iron content
(see computation on page 6 of
this appendix). $ 11.55
Iron Ore - Imported
Price per net ton, pellets,
loaded in cars at East Coast
ports, adjusted to 60% iron
content (see computation on
page 6 of this appendix). $ 14.02
Metallurgical Coal
Average delivered price of
bituminous coking coal at
consumers' plants, 1969,
per net ton $ 10.36
Source: Minerals Yearbook, U.S.
Bureau of Mines, 1969
Limestone (for fluxing in steel making)
Average price of fluxing limestone
and dolomite, 1970, f.o.b. quarry,
per net ton $ 1.53
Source: Minerals Yearbook, U.S.
Bureau of Mines, 1970.
Iron and Steel Scrap
Delivered price per net ton,
weighted average of four grades
delivered to two cities in June,
1969 (see computation on page
7 of this appendix). $ 25.12
-------
PAPER
Woodpulp
Average U.S.. delivered price
for all grades woodpulp, per
net air-dry ton $128.00
Source: "Paper Trade Journal,"
June 30, 1969
Waste Paper
Price per net ton, f.o.b.
truck shipping point (in-
cluding brokerage), weighted
average of prices for six
grades at two cities, as of
June 13, 1969 $ 19.17
Source of prices: "Paper Trade Journal,"
June 30, 1969.
Source of consumption data: Table 21,
Salvage Markers for
Materials in Solid
.Waste, Midwest Research
Institute, 1972.
GLASS
Glass Sand
Average price per net ton,
f,o.b0 shipping .point $ 4.00
Source: Glass Container Manufacturers
Institute, Inc.
Gullet
Average delivered price ;-per
net ton . $ 20.00
'Source: Glass Container Manufacturers
Institute, Inc.
-------
Limestone (for fluxing in glass making)
Average price per net ton,
f.o.b. shipping point $ 3.16
Source: Final report of Interstate
Commerce Commission in Ex
Parte 281, p. 414.
Soda Ash
Average price per net ton,
f.o.b. shipping point $ 35.00
Source: Glass Container Manufacturers
Institute, Inc.
Feldspar
Average price for all qualities
of crude feldspar in 1968, per
net ton $ 11.07
Source: Mineral Facts and Problems,
U.S. Bureau of Mines, 1970.
ALUMINUM
Primary Aluminum Ingot
Delivered price of unalloyed
ingot, per net ton $540.00
Source: "Metals Week," June 23, 1969.
Aluminum Scrap
Simple average of wholesale buying
prices for several grades of
aluminum clips, mixed aluminum
clips, old aluminum sheet,
aluminum cast, and clean aluminum
borings and turnings, delivered
to smelters, March, 1971, per
net ton $285.80
Source: "American Metal Market,"
March 10, 1971.
-------
RUBBER
New Rubber
Weighted average price of natural
and synthetic rubber, f.o.b. plant,
1972, per net ton (see computation
on page 8 of this appendix). $536.00
Carbon Black
Average, all grades, July, 1969,
per net ton $160.00
Source: "Oil, Paint and Drug Reporter,"
July 20, 1969.
Sulphur
Average price, rubber -makers'
sulphur, in bags, at mines,
July, 1969, per net ton . $ 76,00
Source: "Oil, Paint and Drug Reporter,"
July 20, 1969.
Zinc Oxide
Average for French and
American processes, per net
ton, freight allowed $3.50.00
Source: "Oil, Paint and Drug Reporter,"
July 20, 1969o
Miscellaneous Rubber Batch Ingredients
Price of miscellaneous inputs to
the rubber b?tch, including
plasticizers and anti-oxidants,
per net ton $100.00
Source: Introduction to Rubber
.Technology, Chapter 17,
"Reclaimed Rubber," by
J.M. Ball. Reinhold, 2nd
Edition, 1966.
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Reclaimed Rubber
Average price for whole tire
reclaim, f.o.b. shipping point,
freight allowed, November, 1972,
per net ton $224.00
Scrap Rubber
Average price per net ton,
delivered to reclaimers $ 14.00
Source: Estimate supplied by Office
of Solid Waste Management,
Environmental Protection Agency.
1-vf
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Computation of Prices for Iron Ore
Iron Ore - Domestic
Price per gross ton of 51.5% iron
natural, bessemer, Mesabi Range,
at rail of vessel, lower lake port $ 10.70
Adjustment to expected analysis
of 60% iron contentV(60 T 51.5) 1.16 .times
$ 12.41
Handling charge, rail of vessel
to car, per gross ton $ .27
Total price per gross ton, loaded
in cars $ 12.68
Total price per net ton (T 1.12) $ 11.55
Iron Ore - Imported (East Coast)
Approximate price per .Fe unit of
pellets $ .252
Required Fe units = 60
Price per gross ton, 60% iron content,
at rail of vessel $ 15.12
Handling charge, rail of vessel
to car, :per gross ton .$ .27
Total price per gross ton, loaded
in cars $ 15.39
Total price per net ton (4- 1.12) $ 14.02
Source: Iron Ore Analysis and Data, 1969, The Hanna
.Mining Co., Cleveland, Ohio.
I/ Equivalency formula assumes the use of ore with
a 60% iron content.
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Computation of Price For Iron and Steel Scrap
k
,i«.
X
Scrap Type
No. 1 heavy
melting
No. 2 heavy
melting
No. 1 electric
& furnace
bundles
No0 2 & all
other bushels
Totals
Average
delivered
price, net
ton (4 1.12)
% of Total
Consumption
1970I/
20.6
5.7
13.6
ci Q 1_
Calculated cons. June, 1969 Avg. Price, Average
integrated ind. long ton, delivered at Price 0 ,
O / O / *J /
(col. l-s-49 x 100) Pittsburgh.!/ Chicago!/ long ton—
42.0 $28«50 $29.50 $12.18
11 06 26.50 25.50 3.02
27.8 30.50 30.50 8048
18 06 24.50 23.50 4.46
49.0
100.0
$28.14
$25.12
I/ "Iron and Steel Scrap," Preprint 1970, Minerals Yearbook, p. 10, Bureau of Mines
2/ Iron Age, June 26, 1969, p. 99.
3/ Col. 2 x Col. 3 T 100, plus Col. 2 x Col. 4 f 100 4 2.
Note: Cast iron borings (cupola) and other types and grades were omitted; those
types and grades are reported as inapplicable to the integrated industry.
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Computation of Price for New -Rubber
-Na-tura 1 Rubber
Average price No, 1 ribbed
smoked sheets, November, 1972, . .
per net ton $410.00
iSo.jar.ee: "Wholesale Prices and Prices
for Commodity Groupings,"
Bureau of Labor Statistics,
U.S. Dept. of Commerce,
November, 1972
-Synthetic Rubber
Average price for four sele.cted
grades (regular staining butyl,
GN type neoprene, hot styrene
butadiene, and non-staining
polybutadiene), November, 1972,
pe.r net ton $',57,0-. 00.
Source: "Wholesale Prices and Prices
for Commodity Groupings,"
Bureau of Labor Statistics,
U.S. Dept,. of Commer.ce:,
.November, 1972.
Prices weighted according to proportional amount of
consumption^/ as follows:
$570 x .'785 = $447.45
$410 x .21b = $ 88.17
Weighted Avg, $535.62
!_/ Rubber Industry Facts, Rubber Manufacturers Association,
New York, New York, 1972.
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MEAN MILEAGE AND RATE/TON FOR STUDY MOVES BY COMMODITY
Commodity No. of Moves
Mean Mileage—
Appendix G
2/
Low Rate/Ton, $ Mean Rate/Ton, $— High Rate/Ton,
Iron Ore 26
I&S Scrap 30
Glass Sand 21
Gullet 17
Woodpulp 48
Waste Paper 42
Aluminum Ingot 27
Aluminum Scrap 24
206
328
625
450
582
374
1275
591
1.65
3.89
2.48
3.06
2,34
5.20
2039
5.60
2.63-/
7.71
6.86
8.83
8.59
7.06
18.47
16.17
3.74
16.45
13.54
16.84
21.40
17.60
31.00
50.40
Natural &
\. Synthetic
;^ Rubber 29
"^ Reclaimed
Rubber 10
Scrap Rubber 7
Iron Ore,
Tidewater
origins
Iron Ore,
Ex-Great
Lakes
Iron Ore,
Domestic
All Rail
8
13
962
606
435
263
161
232
6.10
10.09
10.90
1.81
1.75
1.65
I/ Simple average, i.e., £Miles/# of moves
2/ Simple average, i.e., £ (Rate/Ton)/# of moves
3_/ All study ore moves
Source: Master Tables
18.83
14.90
11.46
3.02
2.39
2.62
39.70
22.45
16.20
3.62
2.56
3.61
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Appendix H
MEAN TRANSPORTATION PRICES, PER TON AND ADJUSTED BY
EQUIVALENCY FACTORS, FOR VIRGIN COMMODITIES
USED IN ANALYSIS OF EFFECTS OF TRANSPORTATION
Iron and Steel
Iron Ore, Ex-Lake
Iron Ore, Domestic
All-Rail
Iron Ore, Tidewater
Origins
Metallurgical Coal
Limestone
Paper
Woodpulp
Glass
Glass Sa.nd
Soda Ash
Limestone
Feldspar
Aluminum
Primary Ingot
Rubber
New Rubber
Ca»rbon Black
Zinc Oxide
Sulphur
Misc. Batch
Ingredients
(1)
Mean Freight
Rate Per
Ton, .$
2.39
2.62
3.02
4.90
2.42
8.59
18.47
18.83
13.46
14.41
2.04
13.46
(2)
Equiv.
Factor
(3)
Mean
Freight Rate,
As Adjusted, $
Col. 1 x Col. 2
1.58
1.58
1.58
.30
.21
,88
,92
,470
,200
,035
,030
,265
3.78
4.14
4.77
1,47
.51
7.56
6.86
10 . 80
2.42
11.00
.563
.187
.165
. 085
3.86
2.02
.40
.94
16.99
8.85
2.69
.50
.06
3057
6PO 883-868
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