The rail freight market in the United States is dominated by six companies, the so-called Class I railroads. Two of them, Union Pacific (UP) and Norfolk Southern (NS), are now in talks to possibly merge and create a network stretching from the west to the east coast of the US.
First of all, this initiative is still in its very early stages, with no guarantee that a merger will actually happen, but the rumour is already stirring the debate. Would the union of two such large entities have an impact on competition? Would it fix the longstanding problems of the bottleneck in Chicago? How would shippers react? These questions will not be answered very soon, as the process to apply for a merger might take almost two years.
UP and NS
UP is the largest of the ‘big six’, with a revenue of 20,8 billion euros (24,3 billion USD). Its network runs from the west coast to the Mississippi River in the south and the Great Lakes in the north. NS, on the other hand, ranks fifth with a revenue of 10,4 billion euros (12,1 billion dollars) in 2024. Its network stretches across the eastern part of the US, reaching Louisiana in the south and Missouri and Iowa in the north. In other words, joining the networks would create the largest one in the country, covering most of the US from east to west.
Would not be the first Class I merger
The number of Class I railroads in the US went from over 100 in the 1950s to the current six. A couple of years ago there were seven, but Kansas City Southern and Canadian Pacific merged in March 2023 and created CPKC. This merger created the first network running from Canada to Mexico, improving north-south rail connectivity. However, a merger between UP and NS would have a bigger impact, as CPKC is still the smallest of the Class I companies. This one, on the other hand, would make the new entity the largest in the country by a solid margin, hence the many questions about possible competition disruptions.