In its quarterly freight car building forecast the Economic Planning Associates, Inc. (EPA) stated that with the exception of tank cars 2013 will be a difficult year for carbuilders. The EPA says, “Beginning in 2015, annual railcar assemblies will stay in the narrow range of 65,000-67,000 cars and platforms out to the year 2018.”
The analysis of the freight car market released by the EPA indicates overall production figures skewed by the “explosive growth” in tank car building due to the transporting of the ever increasing volumes of oil and petroleum products and a sluggish economy. Freight car orders in the first quarter of 2013 were more than double the previous quarter’s level, and 91.6 percent higher than the first quarter of 2012. The increase is significant, however the data indicated that the tank car orders continue to dominate the railcar market. Tank cars accounted for 61.8 percent of total orders in fourth quarter 2012, then jumped to 80.6 percent in first quarter 2013. The EPA expects tank car demand to remain high for the foreseeable future due to the significant investments railroads are making in facilities and equipment to accommodate the rapid expansion of oil production.
The EPA anticipates there will be a relatively modest stabilization in demand for most types of cars with the exception of small-cube covered hoppers, grain cars, mill gondolas, and coal cars as long as there are no further jolts to the economy from The United States Environmental Protection Agency (USEPA) regulations, or the Administration or external developments involving the financial environments abroad. Recent order patterns indicate that small-cube covered hoppers are entering a digestive phase before rebound again, subsequently assemblies of small cube equipment went from 13,781 units last year to 3,000 cars this year.
Coal cars are expected to experience a weak 2013, according to the EPA, before showing signs of modest improvement in 2014 because they continue to be affected by stringent USEPA standards. Last year 6,492 coal cars were assembled, however the EPA estimates there will only be 2,500 units delivered in 2013.
In 2012 the US assemblies of light vehicles were 19.0 percent above the previous year, Canadian production increased 15.3 percent, and Mexican assemblies increased 12.3 percent. In the first quarter of 2013 US auto production only increased 2.7 percent, Canadian production dropped 9.3 percent, and Mexican production was up 1.3 percent. Rail movements of motor vehicles and parts were only up 2.1 percent in first quart 2013, because of this the growth of auto carriers and auto service boxcars will be low. The EPA estimates only moderate quarterly advances in factory output through 2013 and into 2014.
Due to the severe drought that took its toll on grain production, grain loadings were down 9.5 percent in 2012. Based on data from the USDA the EPA expects grain haulings will continue to be weak in 2013. In first quarter 2013 carloadings of grain were running 15.9 percent below 2012. While the EPA is hopeful more moderate weather during the remainder of 2013 will help minimize the decline in haulings and lead to a rebound in 2014, they expect a 9.0 percent decline in rail grain movements in 2013 and only a 1.6 percent rebound in 2014. This increase would result in a moderate demand for mid-sized covered hoppers, however the demand for small-cubed covered hoppers will decline as strong deliveries of this equipment in the past two years is digested.
The EPA estimates that there will be 50,500 railcars delivered this year based on the current backlog and first quarter assemblies; a 14.2 percent decline from 2012. In 2014 they are expecting a rebound to 62,300 deliveries as the economy shows stronger growth and some of the aging equipment is replaced.
Long term, replacement pressures, technological advances, and legislative measures will play a role in promoting demand for a variety of railcars. According to the EPA construction activities are expected to continue to progress, which should lead to the movement of aggregate and structural steel products. The continued growth in demand for crude oil, petroleum products, chemicals, and food and beverages will boost the haulings of a variety of liquid products and in turn increase the demand for tank cars. The use of lower sulfur western coal will increase due to stricter air emission standards, which the EPA believes will lead to some limited replacement of older, smaller, steel bodied coal cars with larger volume aluminum gondolas and hoppers.
The EPA believes the eastern coal fleet requirements will stimulate demand for technologically advanced steel and hybrid coal cars. They also expect that growing worldwide nutritional needs and expanding ports will pressure the current grain service cars, while long neglected segments such as equipment to haul waste, aggregates, and limestone show signs of recovery and should add to the railcar delivery mix in the future.
Freight car forecast: Wait till 2015. (2013, April 29). Retrieved from http://www.railwayage.com/index.php/mechanical/freight-cars/freight-car-forecast-wait-till-2015.html?channel=59&utm_source=WhatCounts+Publicaster+Edition&utm_medium=email&utm_campaign=RGN+4.30.13&utm_content=Full+Article