By Dale K. DuPont, Correspondent
Its vessels haul carloads of Corona beer, forest products
and chemicals every four days across the Gulf of Mexico.
CG Railway Inc.'s unique rail-ferry operation is selling
faster transport times and fewer hassles via an approximately
900-mile ocean highway between Mobile, Ala., and Coatzacoalcos,
But much more than suds and boards are riding on the
International Shipholding Corp. (ISC) formed the short-line
railroad in March 2000 and began service in early 2001 with two
single-deck ships to handle the crush of commerce created by
the North American Free Trade Agreement (NAFTA). CGR connects
major railways serving the U.S. and Canada with the railways of
central and southern Mexico.
This summer, CGR reached its goal of double-decking the
vessels and upgrading terminals on both ends, a move geared
toward moving the operation into the black. Start-up costs,
terminal construction, Hurricane Katrina and down time for
installation of second decks all contributed to the red
Now CGR will test the market with the Bali Sea and Banda Sea
. Each 595' × 117', 21,000 DWT roll-on/roll-off vessel has
eight tracks on the top and seven on the bottom totaling about
7,000 linear feet. Adding the second deck increased capacity on
each ship from 58 to 115 railcars. The ships' average speed is
10.5 to 12 knots.
The second deck essentially doubles CGR SSRq s capacity,
"which in theory would double sales without increasing
operating and fixed costs," said Grant Hopkins, an analyst with
Ferris, Baker Watts Inc., in Baltimore. "The company has
started to see the demand is there."
The rates are cost effective and competitive, and Hopkins
said he expects 70 to 80 percent capacity for the fourth
quarter and into the early part of 2008. And at 70 percent, the
company should be in a position to post an operating
"We're pretty optimistic," he said.
International Shipholding has a positive outlook, too. "We
have to gradually build up to 100 percent [capacity]," said
president Erik Johnsen. "We're well on the way to a successful
Once based in New Orleans and now headquartered in Mobile,
the publicly traded company has several businesses, including
liner services. In 2006, ISC earned $17 million on $274.9
million in revenue. CGR accounted for $18.4 million of the
"The whole idea of this was to try to find a solution to the
congestion at the Texas-Mexico border," Johnsen said. They
considered various alternatives, trying to decide if it was a
Texas solution or an eastern Gulf solution. "We came to the
conclusion our market was going to be east of the Mississippi
When ISC launched the business, "we always felt we needed
more capacity than we actually had. We went in knowing we were
going to be double decking these vessels," Johnsen said. "We
were always hoping we were going to do better than we did. But
with start-up costs, you always have a growing period."
CGR can deliver cargo 50 or 60 percent more quickly than by
rail via the border, he said. So customers get their railcars
back faster and get more use out of the equipment. And with the
new terminals, ISC can load and discharge each ship within
eight hours. Before, it took four to five hours for just one
CGR upgraded the terminals to handle the newly configured
vessels, whose second decks cost about $23 million. Work on
both the Mobile and Coatzacoalcos terminals was completed in
July. Snnb The $27 million Mobile terminal was funded by $17
million from the Alabama State Docks, to be repaid over the
10-year terminal lease, and another $10 million from the state,
ISC regulatory filings said. Upgrades in Mexico, where ISC has
a 49 percent interest in the company that owns the terminal,
cost ISC about $5.8 million. Snnb
"This is really the icing on the cake," said Judith Adams,
spokesman for the Alabama State Port Authority. "We connect
with five Class 1 railroads. It gives shippers more options and
expands our transportation base."
In its short life, CGR has moved from Mobile to New Orleans
and back to Mobile.
With incentives from both the state of Louisiana and New
Orleans, ISC decided in late 2004 to relocate the service from
Mobile to New Orleans and also agreed to stay at the Port of
New Orleans for at least 10 years.
"We knew they made the best decision then from a business
standpoint," Adams said.
But Katrina changed everything, putting a halt to operations
in New Orleans in August 2005 not long after CGR SSRq s launch.
Katrina flooded CGR's facility and it was closed for three
months. CGR resumed limited service that November, but the
storm's closure of the Mississippi River Gulf Outlet to
deep-draft shipping sent them back to Mobile. The MRGO had been
a short cut for ships to and from the Gulf of Mexico, and its
closure essentially cut off access to the CGR facility.
Despite the challenges, "CG has done pretty well," said
James Kruse, director of the Center for Ports and Waterways of
the Texas Transportation Institute. They've been in business
long enough to say they're viable, he said. "It's a niche
"The number of points where you can actually have rail
service in Mexico aren't that many," said Kruse, whose center
several years ago did an analysis of start-up, cross-Gulf
shipping with Mexico, focusing mainly on short-sea
The study noted several container services operating to
Mexico and a number that were planned but never started or were
short-lived. A few were rail/barge proposals.
One rail/barge that actually ran in the early '90s was a
joint venture between Burlington Northern railroad and Grupo
Protexa of Mexico.
Protexa Burlington International ran four, seven-track
barges with room for 53 hoppers between Galveston, Texas, and
Coatzacoalcos. They moved grain, chemicals and industrial
products on the three-day trips. The company did not say
whether the service was profitable.
A spokesman said it stopped because of "strategy change and
merger focus." Burlington Northern and Santa Fe Pacific Corp.
merged in 1995, giving Burlington Northern land routes to
From Mike Lee Sr.'s perspective, CG Railway "was a great
thing to come along at a time when congestion at the border was
"Our hope is that it will continue to grow," said Lee,
president and CEO of Page & Jones Inc., a Mobile customs
broker and freight forwarder that works with CGR.
Importers and exporters are pleased with the service, he
said, "and very happy to hear about the expansion. They're here
Wes Bunkley, a logistics manager with Georgia-Pacific
Corp.'s building products group, figures the rail/ferry saves
them about a week's travel time.
They ship one carload a month of plywood into southern
Mexico, about 15 percent of the total business for that
commodity. The rest goes mainly by rail direct. The destination
usually governs the type of transportation used, and CG Railway
is quicker than land transport to southern Mexico.
"We really like the service they provide," he said. CGR
takes care of everything so shippers have just a single bill of
ISC is betting on survival. "Anything that can go on a
railroad, we can carry," Johnsen said. "We would not have done
the double decks if we didn't think we could get the