Wednesday, August 13, 2014

DOT NPRM helps bump up freight car builder stocks

Written by  William C. Vantuono, Editor-in-Chief
The U.S. Department of Transportation’s Notice of Proposed Rulemaking on DOT 111 tank cars for crude oil and HHFTs (High-Hazard Flammable Trains), specifically the NPRM’s proposal for phasing out older, pre-CPC-1232 tank cars, could worsen the crude oil tank car shortage, the Wall Street Journal reported on Aug. 13, 2014. Following the WSJ’s report, the stock prices of three tank car builders—Trinity, The Greenbrier Companies, and American Railcar Industries—increased by nearly 3% each.

At the August 13 closing bell, Trinity’s share price stood at $43.73, up 2.89%. Greenbrier’s stock stood at $64.60, up 2.77%. ARI was at $74.82, up 2.51%.

“Proposed U.S. regulations on hauling flammable liquids threaten to aggravate a shortage of railcars for transporting oil, as thousands of tank cars are likely to be scrapped or redeployed, according to a WSJ report,” said the investor website Seeking Alpha. “With production capacity for new tank cars at approximately 35,000 cars/year and cars ordered today unable to be filled until 2016 at current production rates, industry analysts say the railcar industry could have difficulty expanding production fast enough to accommodate the short time frames proposed by regulators for ushering out older tank cars for transporting flammable liquids. Questions remain about whether there is enough production capacity available to retrofit existing cars or replace them in time to comply with the government’s schedule to phase out the older cars.”

For additional analysis, see these stories on the Railway Age website:

“DOT issues open-ended NPRM on CBR, other flammable fuels”

“DOT crude oil NPRM: Will cooler heads prevail?”

“Analysts, legal and financial experts weigh in on DOT’s HHFT NPRM”

“The changing freight car landscape”