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<< Rail News Home: Mechanical

11/5/2008    Freight-Car Market

Rail News: Mechanical

Rail-car delivery outlook rosy for rest of year, not very promising for next two years, EPA says

The good news: Demand for coal, grain and tank cars escalated in the third quarter, along with rail-car assemblies, raising the year-end projection for car deliveries. The bad news: Railroads’ coal, grain, chemical, ethanol and metals traffic still is increasing, but at a far more subdued pace than the first half — a moderation that will continue into 2009 and eventually decrease car orders and deliveries because demand for all other car types is soft.

That’s the yin and the yang of Economic Planning Associates Inc.’s (EPA) latest quarterly “Outlook for Rail Cars” report. The company expects deliveries to total 57,900 units by year’s end primarily because of the acceleration in third-quarter assemblies. But EPA has reduced its delivery projections for 2009 and 2010.

“Next year, a weak economic scenario will not support much demand for any cars other than coal cars, grain cars, DDG cars and tank cars,” the report states. “Based on beginning-year backlogs and moderate demand for these cars, we look for deliveries of 41,000 cars in 2009, followed by a further easing to 39,000 deliveries in 2010.”

By the end of 2010, the economy likely will pick up steam, inducing higher demand for various cars, including center beams, intermodal equipment, high-cube covered hoppers, and tank and coal cars, EPA believes. In addition, replacement pressures will mount for box and multi-level flat cars, and mid-sized and small-cube covered hoppers. A pick up in orders will lead to an upturn in deliveries in 2011 that will extend through 2013, EPA said.

“Beginning in 2011, we look for a pick up in assemblies of coal cars, Class F flat cars, intermodal platforms and box cars, which will boost overall deliveries to 45,000 units,” the report states. “Deliveries will then move up to 52,800 units in 2012, and 57,500 cars and platforms in 2013.”

In its review of the third quarter, the company also noted that backlogs eased from 61,600 units at the beginning of the quarter to 52,200 units at quarter’s end.

“This level of backlogs still represents 3.2 quarters of production even at the accelerated pace of the last quarter,” the report states. “At the same time, we continue to be impressed by the lack of significant cancellations of existing orders. By our calculations, only 670 cars, or 1.1 percent, of the beginning third-quarter backlogs were cancelled.”

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