International Shipholding Corp. (ISH) operates a rather unconventional railroad bridge, one that goes 900 miles across the Gulf of Mexico between Mobile, Ala., and Coatzacoalcos, Mexico.

Its CG Railway subsidiary ferries railroad cars full of forest and agricultural products, chemicals and minerals on two double-deck vessels with eight tracks on the top and seven on the bottom. Departures are every four days and transit is three days.

This past August the company said it completed its 1,000th voyage on the short line service that began operations in 2001 as a way to cut travel time and logistics hassles in the wake of the North American Free Trade Agreement (NAFTA).

In the first quarter of 2015, ISH plans to launch refrigerated freight service. Likely products include poultry and beef going south and beef and produce coming north, said Kevin Wild, senior vice president of CG Railway. They’ll build a refrigerated warehouse in Mexico and work through alliances and existing facilities in Mobile.

“In general, we’ve seen growth in both directions,” not only with longstanding customers but also through diversification into new markets, he said. They also see more opportunities in the geographic areas they already serve in southern Mexico, possibly handling automotive products or raw materials.

“Expanding into other ports in Mexico is definitely on the radar,” Wild said, but they haven’t pinpointed any yet. If they do add a port, then they would add a vessel to the fleet that now runs at 80% to 85% capacity overall, he said. They have no plans to add other U.S. ports.

Lázaro Cárdenas on the Pacific coast is the fastest growing port in Mexico and is served by railroads such as Kansas City Southern, said Mark Suarez, analyst with Euro Pacific Capital. “That is definitely a possibility.”

Rail is taking a lot of business away from trucks, he said, and “rail and marine transport are going to win over the long term.”

Customs broker Michael B. Lee, president and CEO of Page & Jones Inc., Mobile, said he’s been anticipating the refrigerator service “to see if this opens some markets for our customers.” 

In general, “we think it’s a real good solution to border congestion. And it’s competitive price-wise,” he said of the rail ferry service. Rates vary by commodity. “Some of our customers have saved 10 percent,” Lee said, but even more competitive is that fact that there’s “so much less congestion, damage and theft.” And some of Lee’s clients save 10 days of travel time.


 Georgia-Pacific Corp. finds the service useful as well. “The CG Railway offers a unique transportation alternative that we use regularly to serve our customers in Mexico,” said Christie Loucks, the company’s director of rail marketing and procurement. “The rail-barge interchange is efficient and provides reduced transit time when compared with surface route alternatives.” 

 Capacity on CG Railway’s Bali Sea and Banda Sea has grown with the service. With the addition of the second deck in 2007, each of the 595'×117', 21,000-dwt vessels can move 115 railcars at an average 12 to 14 knots.

“We are the only operator of rail ferries between the U.S. and the international market,” ISH chairman and CEO Niels Johnsen told a recent Euro-Pacific Capital Global Investment Conference. “Eighty percent of our customer base today has supported our service since the inception in 2001.” 

Case in point is Innophos Holdings Inc., a phosphate company based in Cranbury, N.J. “We were on the first sailing,” and they’ve been on just about every one ever since, said John Honsinger, director of logistics.

The short line is “much faster, especially to points east of the Mississippi,” he said, saving as much as two to three weeks transit time versus the alternative of rail only over the Texas border.

Innophos has a plant about three miles from the port of Coatzacoalcos. Most of what they ship with CG — tank cars of phosphoric acid and hopper cars of phosphates (used in products such as fire extinguishers and fertilizers) — goes to their plants in Chicago and Nashville, Tenn., and to customers in Alabama, Iowa and Texas.

One big advantage is being able to ship a group of cars on one bill of lading instead of separate bills for each car, Honsinger said.

For publicly traded ISH, its CG Railway subsidiary, which has a history of losses, has been profitable the past three years thanks to reduced capital costs and an increase in cargo, regulatory filings show. A 2% revenue increase to $9.7 million for the second quarter was attributed to more southbound cargo. (ISH’s total second quarter revenue was $76.8 million with a net loss of $664,000.) “We cannot assure that this service will be operated profitably in the future,” the company said. 

However, as James Kruse, director of the Center for Ports and Waterways of the Texas Transportation Institute, points out, “It’s one of those markets, if you’ve got it figured out, you’re probably going to keep it. I think it would be very difficult for somebody else to jump in.”

Manuel Estrada, ISH’s chief financial officer, told the Imperial Capital Global Opportunities Conference in September that a new vessel could cost from $60 million to $80 million. “It’s a high barrier to entry in that segment,” he said.

Other segments of the company — once based in New Orleans and now headquartered in Mobile — include U.S.- and foreign-flag vessels offering coastwise, RO/RO, breakbulk and pure car/truck carrier services. CG Railway itself has moved from Mobile to New Orleans and back to Mobile.

And while the rail ferry service and its railcar repair facility and rail terminal will stay in Alabama, ISH corporate headquarters will relocate back to New Orleans by the end of 2015. 

In making the announcement earlier this year, Johnsen described the Crescent City as a place “in which we have deep roots and a long history.” The company was founded as Central Gulf Steamship Corp. in 1947.