Tie Sector “Cautiously Optimistic” of Potential Mega Rail Merger
Tie Sector “Cautiously Optimistic” of Potential Mega Rail Merger
A sense of cautious optimism is tracking through the rail tie sector following the announcement of the proposed Union Pacific (UP)-Norfolk Southern (NS) rail mega merger late last month.
On July 29, it was announced that UP had reached an agreement to take over NS, in a deal worth $85 billion. The merger would create the first coast-to-coast rail network in United States history and put around 40% of all rail freight in the hands of one giant company.
The expanded rail network – which would come under the UP banner – would feature more than 50,000 miles of tracks in 43 states.
While the merger may travel a highly politicized route towards its resolution, early signals coming from the rail tie sector were encouraging.
“From an industry perspective, we are cautiously optimistic this will be a healthy long-term development for all involved with rail ties,” Nate Irby, executive director of the Railway Tie Association, said.
HMR spoke to several participants along the tie supply pipeline, all of whom expressed positivity about the impact it would have on their market.
One buyer pointed out that UP has a higher rate of tie installations per mile, meaning there could be a greater need if they extend that approach to an expanded network. Another suggested the enlarged network could raise tie consumption from East Coast mills for usage under UP’s western tracks.
“Theoretically, this will have a positive impact,” one Southern tie buyer, whose ties end up with UP, told HMR. “I can only see this as working out well for us,” a Southern green mill lumber buyer, who supplies ties to a major buyer, said.
The Surface Transportation Board (STB), which serves as the federal rail regulator, will review the proposal and will assess its impact on competition within the American rail sector. The STB website stated UP and NS plan to file their merger application in late January 2026, with the two companies expressing public confidence the deal would be green lit by 2027.
Political forces are likely to play a role in the merger’s trajectory. While the board has proven historically unsupportive of major sector mergers – there has not been a big merger involving Class I systems since tighter review regulations passed in 2001 – there is a perception that the Trump Administration may pressure this one to move through.
An independent agency, the five-person STB board is currently missing a member. At present, the board has a two-Democrat, two-Republican split, with President Donald J. Trump able to appoint the final member.
There has been bipartisan skepticism about the deal in Washington, D.C., with Senator Tammy Baldwin, a Democrat of Wisconsin, and Roger Marshall, a Republican of Kansas, writing a letter to the STB saying the merger would “increase costs, create more unreliable service for US shippers and reduce overall competition” in the American rail industry.
“It’s not good when there are few players in a market,” one buyer told HMR, despite his positivity regarding its impact on the tie sector. “It gives me pause in that regard.”
Railway labor unions have pushed back on the proposed merger; shipping associations have expressed concern it could raise prices and reduce shipping standards.
A green lit merger may lead to further rail network consolidation. Only a week before the UP-NS announcement, it was reported that BNSF had hired Goldman Sachs consultants to research their own merger plans.
While Warren Buffett, chief executive of BNSF parent company Berkshire Hathaway, poured cold water on suggestions of a separate merger, there has been speculation CSX could be a target.
Until any merger goes through, it will be business as usual. HMR was told UP called all major suppliers prior to the public announcement to inform them that the two rail companies would remain separate “fierce competitors” in the immediate future.