Union Pacific charging extra for delayed freight pickup as ports face logjam

Union Pacific Corp (UNP.N) is charging customers for delayed pickup of freight from trains, its chief executive officer said on Thursday, as U.S. railroad operators come under pressure to quickly clear containers from clogged up West Coast ports.

Union Pacific – which connects West Coast ports to key terminals such as Chicago – said it was accelerating hiring of critical staff and boosting the frequency of trains by increasing their speed in an effort to clear port backlogs that are worsening supply-chain disruptions and stoking inflation.

American railroads are having a bumpy ride due to an acute labor shortage from pandemic-induced job cuts and a move to slim down operations in their pursuit of Precision Scheduled Railroading – a service model adopted by many Class I operators.

“We’re using accessorial charges to encourage the right behavior of our customers,” CEO Lance Fritz told Reuters.

Fritz added the railroad is moving boxes only when customers signal they are ready to pick them up at destinations.

Last week, the nation’s busiest seaport in Los Angeles warned that railroads and importers had to remove stacked up cargo.

“Most of the rails almost certainly cut too deep on labor so that there wasn’t any buffer for demand shocks or service disruptions when they did happen,” Stifel analyst Ben Nolan said.

Shares of Union Pacific were down 1.7% in afternoon trade after the company cut its full-year forecast for a key profitability metric, partly due to inflationary pressures, though fuel surcharges should ease some of that impact.

Fritz – who heads the largest U.S. railroad by market value – said inflation is “going to calm down a bit” in the second half of the year.

Union Pacific on Thursday reported adjusted earnings of $2.93 per share, beating estimates of $2.86, according to Refinitiv data.