In letter to President Trump, chemical industry leaders warn UP-NS rail merger threatens U.S. manufacturing competitiveness
The Breakdown
At a critical moment for U.S. manufacturing and the broader chemicals sector, forty CEOs—represented by the American Chemistry Council—have voiced strong concern to policymakers about the proposed Union Pacific (UP)-Norfolk Southern (NS) freight rail merger. The central issue: further rail industry consolidation threatens already limited transportation options for chemical manufacturers, which could undermine competitiveness across the U.S. supply chain. Such a merger would reportedly create the nation’s largest railroad, intensifying worries about reduced service quality, heightened rail captive status, diminished competition, rising transportation costs, and increased risk to the resilience of American manufacturing and export growth. The Surface Transportation Board (STB) stands at the center, tasked with evaluating the competitive and public interest implications of the deal. The debate now turns on the balance between efficiency promises and competition risks.
Analyst View
The proposed merger between UP and NS, if realized, directly impacts the foundational dynamics governing market access and competitiveness for specialty chemical and polymer producers. With over 90% of U.S. rail traffic already controlled by four major carriers, further consolidation raises the specter of a duopoly and increases the vulnerability of manufacturing operations dependent on rail for inbound feedstocks and outbound distribution. The sector is already grappling with service disruptions, supply chain fragility, and uncompetitive rate escalations for facilities reliant on single-rail access—some reporting non-competitive rate increases of 240% over the past 15 years, a tenfold premium above competitive equivalents.
U.S. chemical executives signal that additional consolidation could erode reliability, raise costs, and encumber their ability to outcompete foreign producers—all while threatening the progress made in domestic industrial revitalization. For business leaders weighing capital deployment, regional expansion, or strategic partnerships, the deal adds another layer of uncertainty to an already complex logistics ecosystem. The regulatory posture of STB and government intervention will play a pivotal role in shaping near-term investment cases and the long-term evolution of industry value chains.
Conversely, labor unions and railroad leadership cite job security guarantees, supply chain strengthening, and network growth among the benefits of the merger. However, experience from prior mergers strongly suggests that industry participants must scrutinize not just immediate cost or efficiency benefits, but also assess the downstream reverberations for market access, supply assurance, and flexibility in a landscape where strategic options could narrow further.
Navigating the Signals
Business leaders face a critical juncture: preparing for potential shocks to logistics reliability, price competitiveness, and domestic supply chain agility. The most immediate challenge is securing robust, reliable transportation alternatives in a market that may soon offer fewer choices. Leaders should interrogate how increased transportation concentration could impact their ability to serve growth markets, maintain cost leadership, and respond to infrastructure disruptions.
Internally, firms should re-examine their exposure to rail network concentration: Which facilities are captive to single rail service? How resilient are our supplier and customer chains if rail choices decrease? What contractual or operational levers are available to mitigate potential rate hikes or service risks? As competitive alternatives shrink, integrating transportation strategy into core business planning will be key for safeguarding future growth and profitability.
What’s Next?
Breakthrough Marketing Technology empowers specialty chemicals and polymers leaders to proactively address the emerging uncertainties facing their markets:
- Map and quantify exposure across freight, channel, and value chain partners to pinpoint risk hotspots.
- Model strategic impacts of infrastructure shifts and transportation pricing scenarios on margin and growth priorities.
- Facilitate cross-functional alignment between operations, procurement, and commercial teams as decision timelines compress.
With analytical clarity and adaptive insight, organizations can align resources against market risks while positioning for resilient, differentiated growth as the external environment evolves.
Source
Understand Your Risk. Seize Your Opportunity.
Take the Breakthrough Market Uncertainty Assessment Guide to pinpoint what’s holding your growth back, and what can accelerate it.
