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5/26/2010


Rail News: Rail Industry Trends
Rail-car deliveries won't crack 14,000 in 2010, Kolstad says



What’s the latest projection for rail-car deliveries in 2010? About 13,800 units, as long as the Gross Domestic Product “doesn’t fall down,” according to Rail Theory Forecasts L.L.C. President Toby Kolstad. That’s substantially below 2009’s final delivery count of 21,150 units.

As the featured speaker for Progressive Railroading’s “Rail Car Counts: The New Reality” webcast held yesterday, Kolstad laid out the reasons for his firm’s current car delivery forecast, which “we’re comfortable with,” he said, adding that deliveries totaled 2,550 units in the first quarter.

Rail carloads will increase about 5 percent and intermodal loads will rise about 10 percent this year vs. 2009 levels. However, intermodal traffic was down 22 percent from peak levels at the worst of the recession and this year’s 10 percent gain won’t make up a lot of that ground, said Kolstad, a Progressive Railroading columnist since 2003. In addition, the coal and intermodal sectors usually drive about half of new car deliveries and both show very soft demand for new cars — in intermodal’s case, there won’t be any well cars delivered in 2010.

Coal and intermodal “will need to participate” if the car industry will ever get back to the 50,000-to-60,000-unit range for deliveries, which appears a “long way off,” said Kolstad.

Many cars still remain in storage, as well. About 240,000 cars were stored at the end of the first quarter, but that figure currently has dropped to less than 200,000 and will fall closer to 100,000 by year’s end, said Kolstad.

“There’s a surplus of cars to work out,” he said.

While providing summaries of demand for each car type, Kolstad referred to intermodal cars as the “saddest story.” The projected zero deliveries for wells in 2010 would follow 2009’s zero deliveries.

“We didn’t miss them, there just weren’t any,” said Kolstad.

Although there’s been some growth in retail sales of late, there hasn’t been enough to bring up intermodal traffic to levels reached in previous years, he said.

The projection for coal-car deliveries — in the 3,500-to-4,000-unit range — isn’t quite as dim, but not all that encouraging. Alternatives to coal, such as natural gas and wind power, are economically viable now, said Kolstad. Coal production will edge up slightly in 2010, perhaps by 1 percent, but won’t return to pre-recession levels anytime soon, he said.

As for tank cars, perhaps 5,000 units will be delivered this year — a “depressed level,” said Kolstad. The big delivery peaks of the past few years reflected a build-up of ethanol-carrying cars, but U.S. ethanol production mostly has leveled out and there are enough tank cars available to handle demand.

In terms of covered hoppers, for which deliveries will total less than 5,000 units this year, most demand will be for large hoppers given the growth of grain exports, said Kolstad. There isn’t much demand for small hoppers.

A shortage of jumbo hoppers could develop this year, "but we haven’t seen that yet,” said Kolstad.

Jeff Stagl

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