A recent boom in the shortline rail sector presents strategic opportunities for industry stakeholders — provided they maintain the infrastructure that has made this run of success possible.
Even though they’re smaller than their Class I counterparts, shortline railroads make up a key part of the modern supply chain. By serving focused geographic regions and building substantive relationships with each and every client, these smaller rail systems help make the country’s larger logistics operations possible.
While shortline railroads have always had an important role to play, the current strength of the logistics sector has led to greater activity in this part of the wider rail industry. In fact, a number of larger regional players are emerging as shortline railroads consolidate in order to better serve the needs of their customers. One such operator based out of Colorado — OmniTRAX — is well on its way to becoming one of the nation’s largest and most successful shortline railroads.
For industry stakeholders, the growth of OmniTRAX hints at the potential of the shortline sector. However, investors and operators looking to get in on the shortline rail boom should also be considering what they’ll need to do and what products they’ll need to invest in — such as switch lubrication — to maintain the infrastructure that has made the recent success possible.
The OmniTRAX Shortline Model
Currently, OmniTRAX owns and operates 22 shortline railroads with 2,300 miles of track. The company focuses on transporting steel, petroleum, chemicals, fracking sand, and wind turbine blades — among other cargo. Interestingly, OmniTRAX also has a burgeoning real estate arm that owns, develops, and leases 10,000 acres of land in five industrial parks with more than 400 customers.
This unique combination of assets has facilitated the company’s remarkable growth. In the past five years, OmniTRAX’s earnings have grown more than 20% per year at a compounded rate. A large part of this growth is due in part to a slew of recent acquisitions stretching from the Mid-Atlantic to the Deep South.
A Growing Shortline Market
With OmniTRAX’s recent acquisitions, the company now operates 22 shortline railroads. This positions the company near the top of a roster of increasingly consolidated regional players in the shortline sector. For comparison, Genesee & Wyoming owns or leases 121 shortline railroads in North America, Europe, and Australia and Watco Transportation Services owns 43 different lines.
While the OmniTRAX model is slightly unique due to its real estate holdings in land and office space, its growth reflects the broader strength of shortline railroads. As the logistics landscape heats up and railroad operators strive to offer a cost-effective and safe mode of transporting goods, regional railroads will be a critical part of any future supply chain.
Building on Recent Investments
For shortline railroad operators like OmniTRAX, the potential for future growth is high. However, these companies need to be sure that they’re investing in the longevity of the infrastructure that makes their success possible. Switch lubrication, for instance, can help industry stakeholders deliver reliable service and ensure all freight arrives at its destination safely and on time.
The Glidex family of rail switch lubricants from Midwest Industrial Supply, Inc. offers shortline railroad companies long-lasting performance — even in the harshest conditions. Applied as a liquid, our lubricants can withstand all weather conditions, and they last longer than graphite and petroleum products. Environmentally friendly and biodegradable, the Glidex product line is a wise investment for shortline railroads looking to protect and maintain their infrastructure.