Reaching New Northeast Markets
Diversifies and Balances NS' Traffic Mix

New business in new markets in the Northeast helps NS achieve a more diverse and balanced traffic mix. At year-end, general merchandise traffic accounted for 59% of total NS revenues, while coal accounted for 25% and intermodal 16%.

All commodity groups showed volume increases as a result of NS' June 1 commencement of operations in its new Northern Region.

General Merchandise

Automotive

The system expansion further boosted NS' position as the carrier with the highest automotive market share in the rail industry. NS attributes growth to increased vehicle production and its initiatives to provide automotive manufacturers and their customers with parts and finished vehicle supply chain services.

The outlook is favorable, as NS now serves 34 assembly plants and 38 auto distribution facilities in addition to four strategically placed Just-In-Time rail centers to support consolidation and supply chain management of auto parts to selected assembly plants.

Chemicals

Plastics and petroleum led growth as a result of NS' gaining access to large chemical plants, petroleum refineries and chemical coast storage tanks in New Jersey.

An NS locomotive pulls away from the Chicago skyline. Chicago is an important gateway linking West Coast interchange partners to NS' service territory in the East. NS offers the shortest rail route between Chicago and the Northeast. (Click image for larger version.)

NS has access to 152 bulk transfer facilities capable of handling a range of chemical products. Growth of integrated rail-to-truck delivery services is averaging 12% annually.

NS expects future increases in chemicals will be driven by value-added supply chain services, improved transit time, and higher production of synthetics, basic chemicals and agricultural chemicals.

Metals and Construction

Metals traffic benefited from marketing initiatives with the NS network of 72 steel mills and 82 metals distribution centers. NS now holds a 57% share of the eastern U.S. rail market for metals shipments, supported by a fleet of more than 20,000 gondolas.

Construction revenues are expected to continue growing as a result of highway expansion programs in the eastern U.S., primarily benefiting aggregates and cement.

Paper, Clay and Forest Products

NS now serves 94 paper distribution centers and 109 lumber reload facilities that are well positioned to supplement NS' direct carload service.

Initiatives in 2000 include a network approach to NS' enhanced distribution system, and improved car utilization through cycle time reduction programs.

Agriculture

NS' marketing strategies and anticipated increases in commodity prices are expected to improve fertilizer shipments. Continued growth in corn shipments for processing, increased animal feed demand and new feed mill projects should strengthen NS' agricultural market share.

A 75-car shuttle train program to begin in 2000 will contribute to feed mill growth and improve equipment utilization and service reliability.

Coal

Coal revenue increased due to growth in utility coal markets and the addition of service in the Northern Region. Export coal tonnage decreased 28% in 1999 and will continue to be affected by strong global competition from Australia, South Africa and South America.

Two utility coal market opportunities awarded in 1999 bring significant new business to NS. Beginning in January 2000, NS began hauling a significant portion of the coal consumed by the utility plant operated by Keystone-Conemaugh Projects at Shelocta, Pa. Future construction of a track connection will improve routing to the plant and allow heavier tonnage, enabling NS to compete for even greater market share.

At Homer City, Pa., NS is establishing a rail-to-truck transfer facility to supply CONSOL Energy, Inc., coal to a utility plant owned and operated by Edison Mission Energy. When the facility is operational in the second quarter 2000, NS will supply a significant portion of the plant's coal consumption.

Access to high-quality coal that complies with requirements of the Clean Air Act leaves NS well-positioned in utility coal markets.

The 2000 outlook calls for increasing volume in utility coal, domestic metallurgical coal and industrial coal, as well as coke and iron ores.

Intermodal

Operations in the Northern Region brought a 31% growth in intermodal traffic volume over 1998. NS invested in structures, yards and equipment to upgrade intermodal corridor capacity to serve the growing business.

Key locations for expansion of intermodal capacity included Atlanta, Chicago and North Jersey. Clearance of the Pattenburg, N.J., tunnel for double-stack handling gives NS the best double-stack routes in the East, with two cleared corridors connecting the Northeast with the Midwest and Southeast. NS has the only double-stack north-south route east of Cincinnati.

In 2000, intermodal growth is expected to come from the launch of several new or improved intermodal services.

A new intermodal facility at Rutherford, Pa., scheduled to be completed in the second quarter, will be a major intermodal center for distribution of traffic to and from the East Coast. Rutherford will be a primary classification point for traffic between New Jersey, Pennsylvania, Baltimore and New England in the North, and Memphis, Atlanta, Jacksonville and Texas in the South.

The Rutherford facility also will enhance intermodal service to the Atlantic Coast ports of New York/New Jersey, Baltimore and Norfolk. Additionally, it will serve as a staging area for traffic moving through the western gateway of Chicago to the East.

With the planned opening of another new hub terminal in Harrisburg, Pa., in April, NS will add expanded north-south services, as well as significantly improved Atlantic port services.

Intermodal container traffic continues to grow. In 1999, NS began taking delivery of more than 5,000 53-foot truck-competitive units to ensure that enough containers are available to support business growth and the industry's conversion from trailers.

The trailer business remains an important component of NS' intermodal traffic base, especially in the movement of less-than-truckload, parcel and postal shipments.

Industrial Development

NS assisted with the location of 89 new industries and the expansion of another 35 in 1999.

This represents an investment of $2.84 billion by NS customers and is expected to create nearly 8,000 jobs in the 19 states where the plants and expansions are located.

NS expects these industrial development efforts to generate 114,000 carloads annually.

Honda Motor Co. announced that it will construct a new assembly plant on NS lines near Lincoln, Ala. Honda will manufacture minivans and sport utility vehicles, as well as engines, at the plant.

Construction of the plant begins in mid-2000, with completion set for 2002.

The Honda facility is the ninth out of the last 12 assembly plants locating in the eastern United States to locate on NS lines.

Two of the year's largest projects involved other NS automotive customers, BMW and Mercedes-Benz. Each announced plant expansions at their respective facilities in Greer, S.C., and Vance, Ala.

Other key automotive projects were new General Motors auto parts distribution facilities at Dayton, Ohio; Chattanooga, Tenn.; and Charlotte, N.C.

Additional major projects include location of new steel processing facilities for Duferco at Farrell, Pa., and Chaparral Steel at Petersburg, Va., and expansion of a steel coating facility for Protec at Leipsic, Ohio.

Other projects include facilities involved in the production or handling of scrap metal, plastics, food products, chemicals, paper, cement, lumber and construction materials.