Railcar demand “relatively stable’: Toja

Written by William C. Vantuono, Editor-in-Chief
Worker painting railcar

Photo credit: William C. Vantuono

Despite a significant slowing in commodity traffic during the second half of last year, demand for railcars was relatively stable in the fourth quarter, according to the most recent report from Economic Planning Associates. After 8,671 cars were ordered in the third quarter, orders for 8,501 cars were placed in the fourth quarter.

“However, deliveries accelerated in the fourth quarter, and with about 1,000 cars dropped from the backlogs, carbuilders are entering 2018 with only 4.3 quarters of assemblies at current production rates,” noted EPA principal Peter Toja. “Nonetheless, we anticipate an expansion in demand for a number of railcars this year and next that will bolster backlogs once again, especially as the economic environment strengthens and regulatory restrictions ease.”

After a strong first half, railroad commodity traffic slowed significantly in the second half of last year. While commodity movements were up 6.4% through July, total-year haulings were up only 2.9 %. “Disappointing second-half rail movements were reported for grain, grain mill products, nonmetallic minerals, and light vehicles,” Toja noted. “At the same time, after a robust first half, coal traffic moderated in the second half. Nonetheless, the 2017 gain in loadings was a pleasant experience, compared to the declines registered in 2015 and 2016”

“We anticipate that continued strength in coal, aggregates, metallic minerals and primary metal products will offset the weakening environment of grain, motor vehicles and petroleum coming into 2018,” Toja said. “We now look for 2.9% growth in commodity haulings this year and an expansion of 2.6%% in 2019. From 2020 through 2022, commodity haulings will advance 2.0-2.5% per year.”

In 2017, intermodal developments advanced 3.9% as container traffic grew 3.5% and truck intermodal volume jumped 7.6%. “This year, we expect intermodal haulings to increase 4.5% as our economy and foreign trade strengthen, followed by another 4.5% expansion next year,” Toja pointed out. “From 2020 through 2022, we look for average annual growth between 4.0-4.3% per year.”

“Strength in covered hoppers, intermodal equipment, tank cars and mill gondolas will offset weaknesses in coal cars and boxcars,” said Toja. “Accordingly, we are raising our 2018 deliveries estimate from 46,250 to 49,750 cars. We are also increasing our 2019 deliveries from 49,500 to 51,000 cars next year. Longer term, we anticipate steady annual growth to 59,500 cars in 2022.”

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