Freight car market climbing toward 60K: EPA

Written by William C. Vantuono, Editor-in-Chief
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“After 9,000 tank cars are assembled this year, we look for 12,000 to be built in 2019. From 2020 to 2022, tank car demand will gradually rise from 13,500 to 16,000.”

Freight car deliveries will reach nearly 60,000 units by 2022, driven by strength in boxcars, covered hoppers, mill gondolas, intermodal equipment, and tank cars, according to the most recent forecast issued by Economic Planning Associates.

These car types “will offset continued weakness in coal car demand during the next few years,” says EPA principal Peter Toja. “We currently expect railcar deliveries to amount to 50,000 cars in 2018 and 50,500 cars in 2019. Longer term, a modest revival in coal equipment, combined with an expanding economy will serve to raise railcar deliveries from 52,500 in 2020 to 59,500 in 2022.

Tank car orders are once again climbing. “After a rebound in first-quarter orders, demand for tank cars surged in the second quarter,” notes Toja. “As a result, in spite of assemblies of 4,197 cars, orders for 12,392 units in the first half sent backlogs soaring to 24,154 cars at the end of June, the highest backlog level since first-quarter 2016. Due to the revitalization of demand, we are raising our intermediate and long-term deliveries estimates. After 9,000 tank cars are assembled this year, we look for 12,000 to be built in 2019. From 2020 to 2022, tank car demand will gradually rise from 13,500 to 16,000.”

Demand for hi-cube covered hoppers surged in the second quarter. After 2,200 cars were ordered in the first quarter, orders for an additional 5,021 cars were placed in the second quarter. “Based on the current strength in orders and the sizeable backlogs, we are increasing our deliveries estimates for 2019 and 2020,” says Toja. “After 8,000 cars are assembled this year, we now expect deliveries of 7,000 cars in 2019 and 6,000 cars in 2020. For 2021 and 2022, we anticipate deliveries of 5,000 hi-cube covered hoppers per year.”

After a “modest level” in this year’s opening quarter, demand for mid-sized covered hoppers rose sharply in the second quarter. Orders for 3,210 cars were placed as grain fleets looked to upgrade their rolling stock. “Most notable was Canadian Pacific, which is replacing approximately 5,900 grain service cars with shorter, higher-capacity units,” Toja notes.

For small-cube covered hoppers, “while incoming orders have moderated, carbuilders have stepped up production,” says Toja. “During the first half of this year, 7,962 cars were assembled. Nonetheless, backlogs at the end of June were 11,912, ensuring a healthy level of deliveries this year. As such, we are lifting our 2018 deliveries estimate from 9,000 to 11,000 cars.”

Overall, despite weakness in commodity loadings earlier this year, railcar demand registered a strong gain in the second quarter. New orders for rail equipment jumped from 10,348 in the first quarter to 23,788 in the second quarter. And, with assemblies in the first and second quarter relatively stable, backlogs rose sharply to 65,161 units, “which represents almost five quarters of production at the current rate of assemblies,” Toja points out.

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