Friday, September 01, 2017

Freight car market looking better and better

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Freight car market looking better and better The Greenbrier Cos.

The outlook for railcars “has brightened considerably,” according to the most recent market analysis from Peter Toja of Economic Planning Associates. Second-quarter 2017 deliveries of 10,625 cars and orders for 17,665 raised industry backlogs from 60,471 at the end of March 2017 to 66,561 units at midyear, or 6.3 quarters of production at current assembly rates.

Based on strength in boxcars, hi cube, mid -sized, and small cube covered hoppers, EPA raised its 2017 deliveries estimate to 43,250 cars, followed by a modest gain to 45,500 deliveries in 2018. Longer term, EPA expects railcar deliveries to expand from 49,000 in 2019 to 60,000 in 2022.

“Freight traffic through the first half of this year is significantly higher than last year,” Toja said. “Among the major commodity groups, strong gains have been recorded in [export] coal, grain, aggregate, and primary metal products.”

“The railroads’ financial performances are reflecting the growth in commodity haulings and intermodal movements,” Toja noted. “Union Pacific reported that second-quarter net income jumped 19% to nearly $1.1 billion. UP attributed the growth to volume increases in coal, industrial products, agricultural products and intermodal. Norfolk Southern’s net income surged 23% in the second quarter, while Kansas City Southern stated that a 6% increase in carload volume led to record second-quarter revenue.”

The resurgence in railroad traffic “is certain to facilitate increased investment plans, including rolling stock,” Toja said. “Recent multiyear orders for 6,000 cars to be delivered to Mitsubishi UFJ Lease and Finance by Greenbrier beginning in the fourth quarter of this year will also boost the short- and long-term outlook for railcar deliveries.”

On the downside, “there are still underutilized cars in some fleets, especially coal cars,” Toja noted. “In spite of a major improvement in the coal environment and a sharp increase in rail movements of coal, demand for new coal equipment is dormant. After no orders were placed for gondolas and hoppers in the first quarter, only 130 steel-bodied hoppers were ordered in the second quarter. In spite of an optimistic coal environment, we do not envision any strength in short-term demand for coal carrying equipment as industry sources are indicating that there is still a sufficient amount of coal cars in storage.”

 

 

 

 

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