A regulatory ruling that said CSX Corp. was charging "unreasonably high rail rates" to ship chemicals for DuPont Co. could hurt historically strong railroad pricing, a JPMorgan analyst said Tuesday.
The Surface Transportation Board, an economic regulatory agency affiliated with the U.S. Department of Transportation, on Monday ordered CSX to reduce its rates and pay fines to DuPont. The STB said the reduced rates and fines could reach $3 million over the next five years.
Analyst Thomas R. Wadewitz said that while the financial effect for CSX is minimal, the ruling leaves the door open for other challenges to small shipment pricing across all North American railroads. It might also lead to more companies filing rate disputes against the railroads.
The analyst noted CSX and Union Pacific Corp. will likely be hurt the most by any similar rate cases in the future, because the two railroads have the biggest concentration of small "captive" shipments. Captive shippers are those that only have one method of transport to ship their goods.
Wadewitz estimates that small, captive shipments make up about 8 percent to 16 percent of total carloads for U.S. rails.
Rail stocks fell in midday trading as the broader market slumped and oil chugged past $143 per barrel.
CSX slipped $3.45, or 5.5 percent, to $59.36, while Union Pacific lost $3.33, or 4.4 percent, to $72.17.
Elsewhere in the sector, Burlington Northern Santa Fe Corp. gave up $4.26, or 4.3 percent, to $95.63, and Norfolk Southern lost $1.55, or 2.5 percent, to $61.12.
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