Railcar orders, backlog soar: KeyBanc

Written by William C. Vantuono, Editor-in-Chief
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Covered hopper under construction at Greenbrier’s Concarrill plant in Mexico. William C. Vantuono photo.

Freight car order, delivery and backlog statistics for 2Q18 show that orders increased sequentially to 23,788 cars from 10,348 in 1Q18, the largest quarterly figure since 4Q14. Carbuilders delivered 13,071 units in the quarter, nearly identical to 1Q18’s 13,098. The backlog stands at 65,161 railcars, up 18% from 1Q18’s 55,216 cars; this implies “a net cancellation of 772 railcars, consisting primarily of gondolas and medium-cube covered hoppers,” according to analysis conducted by KeyBanc Capital Markets.

Industry book-to-bill came in at 1.8x, more than double 1Q18’s 0.8x, and slightly higher than 2Q17’s 1.7x. Respective book-to-bill for tank and non-tank activity was 4.5x and 1.3x, vs. 1.1x and 0.7x, respectively, in 1Q18.

2Q18’s orders for 23,788 cars were more than double 1Q18’s, and about 35% higher than 2Q17’s 17,665.

Non-tank-car orders totaled 13,626 in the quarter vs. 8,119 in 1Q18. Covered hoppers totaled 8,779, or 37% of total orders (6% below 1Q18’s 43%), with large-cube covered hoppers representing the majority at 5,021 cars, vs. 2,211 in 1Q18. Orders for mid-cube and small-cube covered hoppers were 3,210 and 548, respectively, vs. 845 and 1,416 cars, respectively, in 1Q18. Orders for tank cars totaled 10,162 vs. 1Q18’s 2,229.

“We think improved tank car orders could reflect stronger CBR (crude by rail) economics due to higher crude prices and limited domestic takeaway capacity,” observes KeyBanc  analyst Steve Barger. Together, tank and covered hoppers accounted for about 80% of total orders in the quarter vs. about 65% last quarter.”

2Q18 tank car deliveries increased about 15% sequentially, and were up about 2% year-over-year. “Current deliveries imply the industry has roughly 10.7 quarters of tank car backlog visibility at current production levels,” notes Barger.

The tank car backlog increased to 24,154 cars vs. 16,506 in 1Q18; the non-tank-car backlog increased about 6% to 41,007, vs. 1Q18’s 38,710. “On current deliveries, we think the backlog implies about five quarters of theoretical production visibility,” says Barger. “The industry backlog continues to trend toward a more ‘normalized’ concentration of car types, consisting of 37% tank, 18% small-cube covered hopper, 11% medium-cube covered hopper, and 16% large-cube covered hopper. The implied cancellation of 772 cars could be cars from multi-year orders converting from low-demand to high-demand railcar types.”

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