Friday, May 08, 2009

EPA: “Difficult years” through 2010

Written by 
  • Print
  • Email
The latest freight car report from Economic Planning Associates doesn’t have a whole lot of good things to say, but those who can ride the storm out should begin to see improvements by early next year.

Following is EPA President Peter Toja’s (pictured) analysis:

peter-toja-epa-color.jpg“The recession rides the rails. The continued contraction of economic activities through the first quarter of this year has served to slam railroad revenues. Not only was the drop in first quarter haulings severe, but it was also widespread.

“Against this backdrop, it is not surprising to note that railcar orders in the first quarter amounted to only 2,374 cars, the lowest quarterly level since the recession-impacted period of 1982-83. And, with assemblies amounting to 7,657 units, first-quarter backlogs dropped to 26,171 cars, the lowest level since the first quarter of 2003.

“At the same time, we are leery of the Greenbrier portion of the backlogs, which is destined for GE as part of a multi-year agreement. Much has appeared in the media regarding GE’s desire to delay, postpone, or change existing orders for covered hoppers and tank cars. And, given the weak economy, extremely low traffic levels, and the financial hardships suffered by GE Capital, we are doubtful that any meaningful number of these cars will be assembled in the near term.

“With some 20% of the various fleets on the sidelines, the recession in full force, a sharp decline in railcar loadings, and the constrained financial environment, the outlook for railcar deliveries this year and next continues to dim.

“Given the economic and financial environments as well as our analyses of customer market activities, both 2009 and 2010 will be difficult years for the railcar industry. It now appears that carbuilders will survive primarily on backlogs this year. 2010 will also be weak in terms of assemblies, but improvements in new orders throughout the year will lead to a pickup in future rail car deliveries.

“Based on first quarter assemblies and the solid backlogs in coal cars, tank cars, and covered hoppers, we anticipate deliveries of 25,600 railcars in 2009. While orders will begin to pick up next year, extremely low backlogs will serve to keep assemblies at 16,500 units in 2010. Nonetheless, the pickup in orders will lead to an upturn in deliveries beginning in 2011 and extending through 2014.

“Beginning in 2011, far stronger economic activities will provide support for certain railcar assemblies while an improvement in the financial environment and higher equipment utilization rates stimulate replacements of aged railcars. Technological advances as well as legislative measures will also play a role in promoting the demand for a variety of railcars.

“After two dismal years, we look for railcar deliveries to rebound moderately to  29,000 cars in 2011 and then expand annually to the level of 58,000 units in 2014.”

Get the latest rail news

Rail news and analysis from Railway Age, IRJ and RT&S by email