On the whole, 2005 was good to the tie market, with demand high in spite of a lagging supply. Both Class 1 and shortline railroads increased maintenance and tie manufacturers stepped up efforts to meet the railroads' requirements.

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RTA

Jim Gauntt, executive director of the Railway Tie Association, notes that 2005 was a good year overall, but provided its share of head-scratching moments.

"This year was somewhat of an enigma for the crosstie industry. On the one hand, demand was strong from all sectors, as we have been forecasting. Class 1 railroads continued to grow their traffic and their maintenance needs in the ways that the RTA models predicted and the shortlines are increasing their demand due to the tax credit legislation now in place.

"On the other hand, weather and then softness in some areas of the country for low-grade hardwood lumber (a by-product of cutting ties) have worked together to limit production of ties. In other words, even though demand is heavy, factors not in anyone's control have limited tie producers' ability to completely satisfy the market," said Gauntt.

"Another thing that had some producers perplexed is the strong demand that paper companies placed on the market for pulp in 2005. We saw some situations where large hardwood tie logs have been chipped for paper mill use, rather than go to a log deck to await sawing into ties.

"One thing is for certain from our vantage point--the U.S. economy is in very good shape," said Gauntt.

Gauntt noted that the key issue tie producers face is how to balance the situations mentioned above with customer needs.

"I predicted early in 2005 that we would likely face the same kind of ramp-up problems that have been experienced in past healthy markets. In the past, when markets have given us similar conditions, it has taken several months for equilibrium to be reached between supply and demand. We have quantified this to some degree to the extent that we see the situation being with us through mid-year 2006, at the very least," said Gauntt.

RTA's econometric modeling predicted that the 2005 demand for all the markets its members serve would be 18.5 to 19 million wood ties. Gauntt says that prediction appears to be right on the money.

"Interestingly, even though we experienced some lag in supply on a calendar year basis, production was also about five percent above the five-year average. This means that tie producers over the long term are meeting the needs of their customers and that the impacts on supply, what we are experiencing now, are only short-term issues," said Gauntt.

Wood continues to dominate the market. According to the RTA, Class 1 railroads' wood tie overall market share for maintenance ties grew from 94.9 percent in 2003 to 95.5 percent in 2004 and new construction wood's market share grew by 4.5 percent in 2004.

Research and new products

Much of the long-term research the RTA has reported on over the past few years has come to a conclusion, with the exception of the FRA research project into optimizing tie maintenance methodologies. In conjunction with the RTA's research contractor, ZETA-TECH Associates, Inc., and CSX Transportation, RTA has been working for the FRA on trying to quantify the economics of various tie replacement practices for high-speed passenger rail applications. The project remains in the data-collection phase and the RTA hopes to complete all the analytical data by Fall 2006.

"Also, through our research and development committee, we hope to embark on new long-term tests for comparing not only various preservative technologies, but also species performance in high-decay and Formosan termite areas. With what we now know about how the use of borate compounds dual treated with creosote can allow wood to perform for decades in even the worst-case decay and insect areas, it is time to begin to fine tune preservative and species application," said Gauntt.

"At least two Class 1 railroads, Norfolk Southern and Canadian National, are investing in dual-treated ties for wet locations. The research proved that borate technology combined with creosote dual treatments can go a long way to eliminate decay as a primary failure mechanism in high-decay/insect areas. Now, literally, thousands of dual ties are being installed in track, with more to come in the ensuing years," said Gauntt.

Earlier in 2005, American Wood Preservers' Association added copper naphthenate (CuN8) to the approved preservative list for hardwood ties.

"This change in the standards is new and adds one more option for railroads. The other thing that it does is allow those wood treaters that already manufacture CuN8 wood products, such as utility poles, to find a niche in the railroad markets, as well," said Gauntt.