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<< Rail News Home: Mechanical

1/29/2008    Freight-Car Market

Rail News: Mechanical

Rail-car orders up in fourth quarter, but expect decline in '08, EPA says

Rail-car orders reached their highest quarterly level in almost two years in the fourth quarter, but the weakening economy will slow car demand in the coming years, according to Economic Planning Associates Inc.'s (EPA) latest quarterly “Outlook for Rail Cars” report.

Fourth-quarter orders totaled 23,722 cars, including a multi-year deal for covered hoppers and tank cars. Meanwhile, the backlog — which had declined for four consecutive quarters — expanded to 75,860 cars at 2007’s end. However, the soft economy likely will affect backlogs of certain rail cars in 2008 and 2009, EPA said.

“While we remain extremely constructive on the long-term outlook for rail cars, we are wary of the short-term implications of our deteriorating economy,” the report states. “Accordingly, we have examined various backlogs looking for potential cancellations or postponements in delivery dates, which could affect our current rail-car deliveries projections this year and next.”

The current backlog of hi-cube covered hoppers, and tank and coal cars are “relatively solid,” and demand for those types is not as economically sensitive as most capital equipment. EPA also notes a strong pick up in grain movements, which could spur more orders for medium-sized covered hoppers this year and next.

But, the box car, mill gondola, non-intermodal flat car and small-cube covered hopper segments have low backlogs and EPA doesn’t anticipate any meaningful production levels for those cars in the next two years. In addition, demand will decrease for intermodal rolling stock as import growth decline in 2008 and early 2009, which could affect the 6,000 intermodal unit deliveries projected for this year and 5,000 deliveries projected for next year, EPA said.

Overall, rail-car deliveries will total 56,500 in 2008 and 54,500 in 2009, the firm projects. Beginning in 2010, a stronger economy will boost rail-car demand and increase overall deliveries to 57,000, followed by 58,300 in 2011 and upwards of 60,000 in 2012 and 2013, EPA said.

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