Tuesday, September 07, 2010

New crosstie forecast reduces 2010 demand

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The Railway Tie Association, which in January estimated wood crosstie demand for 2010 at 19.4 million ties, has taken a new look at the market and its economic model now forecasts the sale of 19 million ties. And that may be high.

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“Unfortunately, the data through June 2010 shows the 12-month rolling total of annual purchases at only 18 million ties,” says RTA Executive Director James C. Gauntt. “While a rebound may be under way, there are reasons that this recovery will likely be slower and weaker than desired.”

One reason, says Gauntt, is the unfunded federal mandate for installation of Positive Train Control. He quotes industry sources as saying the tab for PTC was $70 million in 2009 and will exceed $1 billion in 2010, and “the railroads have to re-align their budgets” to pay for it.

Another reason for pessimism, said Gauntt, is the lack of certainty that the short line tax credit will be extended. (Short lines accounted for 3,821,000 of the 20 million wood ties installed in 2009.)