Cowen 2Q Shipper Surveys Say …

Written by Jason Seidl, Matt Elkott and Elliot Alper, Cowen and Company
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Opinions from shippers have stayed largely unchanged throughout the CN/Kansas City Southern merger transaction.

Cowen and Company transportation analysts Jason Seidl (Managing Director and Wall Street Contributing Editor), Matt Elkott and Elliott Alper recently conducted their second-quarter 2021 rail equipment and shipper surveys. Following are the results.


Order expectations by the shipper subgroup of railcar buyers declined slightly. The minor decline, within the margin of error, may otherwise be partly attributable to elevated steel prices and could create pent-up demand for manufacturing orders in out quarters. 

When it comes to order activity, we consider four key metrics: (1) The percentage of “all participating shippers” who will or may order railcars. (2) The conviction level about ordering (the split between “yes” and “maybe”) within this “all participating shippers” group. (3) The percentage of “same shippers” who will or may order railcars. (4) The conviction level about ordering (the split between “yes” and “maybe”) within this “same shippers” group. In our 2Q21 survey, the first metric was unchanged, while the remaining three deteriorated slightly. 

The percentage of total shippers planning orders is unchanged: Roughly 48% of all shippers surveyed said they will or may order railcars in the next 12 months, in line with our 1Q21 survey but below the 51% in our 4Q20 survey. Within the 48% of total shippers who are contemplating orders in the next 12 months, 48% said “yes,” they plan to place orders, vs. 50% in 1Q21, and 52% said “maybe,” compared with 50% in 1Q21. This points to a slight decrease in the level of certainty about ordering within the total shipper group relative to the prior quarter. We believe this could be more a function of pandemic uncertainty and elevated steel prices than a reflection of underlying demand conditions. 

The percentage of same shippers planning orders dropped slightly: On a same-shipper basis, about 43% of same shippers in 2Q21 said they will or may order railcars, compared to 46% in our 1Q21 survey and 48% in 4Q20. Roughly 57% do not plan to order railcars, compared to 55% in our 1Q21 survey and 52% in 4Q20. The results of this question are another slight incremental negative for railcar demand in the near term and could be in part a function of elevated steel prices affecting manufacturing orders.


Shippers expect rail price increases of 4.2%, up 80bps sequentially and above the survey’s five-year average. Business trends in 2Q ticked up nicely, while 71% of shippers cited having challenges hiring employees. Economic confidence ticked up slightly sequentially, while business growth expectations ticked down. Overall, we see this as positive for the rail group. 

Pricing expectations, again, are sequentially higher, above the five-year average: Shippers anticipate rail prices to increase by 4.2% over the next 6-12 months, up from the 3.4% in the prior quarter’s survey and well above the 1.9% in our 1Q20 survey, where we saw a bottom. The 4.2% result is above rail cost inflation, above the survey’s five-year average of 3.2% and above the survey’s long-term ten-year average of 3.6%. The strong sequential move is an indication of the tight supply chain conditions that continue to exist in North America. 

The rail outlook stepped down sequentially, but is above the five-year average: Business growth expectations declined 0.6% sequentially to 3.1%, while above the five-year average of 2.5%. The percentage of shippers expecting their employee counts to increase over the next 12 months improved 10% from last quarter’s response, a large increase compared to last quarter and an indication that companies are looking to hire. For the first time, we asked shippers if they are having trouble hiring employees; 71% of participants said they were having trouble. Of the 71% t having trouble hiring employees, 35% believe that it is hindering growth. Nearly two-thirds (63%) of shippers answered that they are more confident in the direction of the economy today than they were three months ago, up from 58% last quarter, while still above the survey’s 49% average. 

Opinions from shippers have stayed largely unchanged throughout the CN/Kansas City Southern merger transaction: In an effort to gauge shipper sentiment on the proposed CN/KCS merger, we asked shippers if their opinion has changed since CN’s original announcement of its intention to merge with KCS. Nearly three-quarters (72%) of shippers stated that their opinion has not changed on the CN transaction announcement, which may indicate that the Surface Transportation Board comment period for stakeholders on the voting trust did not have a significant effect on shippers’ perspectives of the potential deal. Of the 28% that have changed their opinion on the transaction since its announcement, half changed their opinion in a positive way (like the deal more), and half changed their opinion in a negative way (like the deal less). 

Shippers’ businesses continue to improve to pre-COVID-19 levels: More than three-quarters (78%) of shippers who answered our 2Q survey indicated that their business is back to running at pre-COVID-19 levels, while 22% answered that it isn’t. This is a sequential improvement compared to 1Q, where 70% of shippers indicated business is back to pre-COVID-19 levels. 

Railroad share price thoughts ahead of 2Q21 earnings: We recently adjusted our rail models ahead of Q2 earnings to reflect carloads in the quarter, mix, fuel, foreign exchange and cost implications, as the supply chain remains tight. On our recent State of the Ports call, a bullish consensus continues on supply chain tightness for the remainder of 2021, with panelists expressing the belief that more freight will find its way back to the intermodal market as congestion subsides. 

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