US railroads are rerouting ethanol shipments to avoid bottlenecks in Chicago, particularly for delivery to the East Coast, where supplies are running low, rail company officials said Thursday.
David Garin, BNSF's vice president of industrial products, said Chicago -- already congested as the US' busiest freight rail hub -- has been severely impacted by winter weather, leading to delays on routes using interchanges there for all commodities.
Though BNSF does not serve East Coast markets, Garin was speaking at a meeting of the US Surface Transportation Board's Rail Energy Transportation Advisory Committee as a representative of the rail industry.
"Chicago is a big challenge for us," Garin said. "We've looked at longer routing. It may not seem to make sense to [ship ethanol on rail] through Arkansas to the East Coast, but right now where we're trying to avoid interchanges in Chicago."
Ethanol inventories at New York Harbor are at less than a week's supply due to delayed deliveries, causing ethanol there to trade at a 95-cent premium to Chicago, said Mark Huston, director of North America Transportation at Louis Dreyfus Commodities. The typical benchmark for ethanol stocks is 21 days, he added.
East Coast stocks for the week ended February 28 stood at 4.859 million barrels, about a third lower than they were a year ago, US Energy Information Administration data showed.
Meanwhile, Midwest ethanol plants are having to shut in production because of a lack of tank car availability caused by rail delays, Huston said at the meeting.
"We have plants running at 75-80% because they can't get rid of the ethanol," he said.
Brad Hildebrand, global rail and barge lead at ethanol maker Cargill, said that with East Coast ethanol stocks so low, his company is considering importing ethanol from Brazil to make up for the lack of supply to customers.
About 70% of Cargill's production from its ethanol plants is transported by rail, he said.
"There's lots of concern about ethanol, getting it to the East Coast," Hildebrand said. "We're literally running on vapors at this time."
Beth Whited, vice president of chemicals with Union Pacific, said that in addition to rerouting shipments to avoid Chicago, railroads are "over-resourcing" by hiring additional crews and putting more locomotives into service to alleviate delays.
"There's a significant backlog that wants to go through Chicago that we are rerouting," she said. "There's a significant focus on understanding what the supplies are and what the priorities are for customers, to try to keep stocks up."
Garin added that as winter passes, rail delays for all types of shipments will hopefully be alleviated.
"As the weather improves, we expect steady service performance improvement," Garin said.
