Freight cars: Backlog bolsters deliveries, but it won’t last

The most recent freight car forecast from Economic Planning Associates calls for deliveries of just under 62,000 units in 2016, as carbuilders work off significant backlogs, followed by a 21,000-car plummet in 2017, a slightly worse 2018, and the beginnings of a small rebound in 2019.

“Due to strength in boxcars, hi-cube covered hoppers, and mid-sized hoppers, our 2016 estimate of total railcar deliveries edged up from 60,300 cars to 61,800 cars,” said EPA principal Peter Toja. “However, weaknesses in tank cars, coal cars, flat cars, and mill gons will serve to lower 2017 assemblies to 41,000 thousand cars. After a further easing to 40,000 deliveries in 2018, demand for railcars will rebound on an annual basis, reaching 51,500 cars in 2021.”

“Railcar demand continues to be relatively weak,” said Toja. “Orders of 18,799 cars through the first three quarters of this year were far outpaced by assemblies of 47,519 cars, sending backlogs down from 111,000 at the beginning of the year to 77,600 units at the end of September. Still, backlogs represent 5.05 quarters of production at current assembly rates.

“However, we anticipate a general softening in deliveries for most car types during the next two years before we see a pickup in assemblies once again in 2019.

“Our weak economy continues to dampen rail traffic. The hardest hit sections of rail product movements were coal, petroleum, forest products, and metallic ores and metals. Due to a record harvest and strong export markets, grain haulings scored an impressive gain of 5.6% through September.

“Based on significant backlogs, we expect an acceleration in boxcar assemblies that will result in deliveries of 3,250 units this year and 3,500 cars in 2017. We look for deliveries of about 2,000 cars per year during the longer term. “Due to strength through September and current backlogs, we look for deliveries of 11,500 hi-cube covered hoppers this year and 7,500 units in 2017. From 2018 through 2021, deliveries will be in the range of 4,000-5,000 cars per year.

“Given the assemblies to date and the continuing growth in grain and soda ash demand, we have raised our mid-sized covered hopper deliveries forecast from 8,000 to 10,500 cars this year. Next year, we look for 7,000 cars to be delivered. From 2018 to 2021, deliveries will average 6,000 cars per year.

“Demand for coal carrying equipment has vanished. During the first three quarters of this year, there were no orders for aluminum-bodied hoppers and gondolas.

“The current energy environment is sluggish, at best, and we noted a slowing in orders and assemblies of tank cars. As a result, we are lowering our 2016 tank car deliveries estimate from 20,000 to 18,000 and then to 8,000 cars in 2017. From 2018 to 2021, demand for tank cars will gradually rise from 9,000 units to 15,000.”