RSI joins the “Boxcar Blues” chorus

Written by E. Michael O’Malley, President, Railway Supply Institute
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Railway Age Contributing Editor Jim Blaze is not the only one singing the boxcar blues (“I’m singin’ the boxcar blues” article, March 26). Members of the Railway Supply Institute Equipment Leasing Committee (ELC) have also identified the looming boxcar shortage as a significant issue that needs to be addressed.

The boxcar fleet has shrunk by 33% in the past 10 years, and thousands more cars are projected to fall out within the next five. As the Surface Transportation Board Railroad-Shipper Advisory Council (RSTAC) was informed last August, we could start to see boxcar shortages as early as 2022.

We believe that a significant constraint on investment in newly built boxcars by leasing companies is the current car-hire system which does not adequately compensate private railcar owners for use of these assets. That system sets a “default rate” for new railcars in the absence of a negotiated rate, but it is set at the lowest negotiated rate from the previous quarter. The consequence of low default rates is an environment in which there is little incentive for a railroad to negotiate a higher, compensatory rate. The result is that there is little to no investment in newly built boxcars by leasing companies.

That is why members of the ELC are working with The Association of American Railroads to explore changes to the current car-hire system that would incentivize investment in new boxcars. We want to avoid a shortage that would adversely impact everyone, particularly those shippers who rely heavily on boxcars to get their products to market. Private investment has been a key driver of the rail industry’s success since passage of the Staggers Act in 1980, and we want to continue building on that success.

See: I’m singin’ the boxcar blues

Categories: Class I, Finance/Leasing, Freight, Freight Cars, Mechanical, Short Lines & Regionals, Switching & Terminal Tags: , , , , ,