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<< Rail News Home: Mechanical

2/1/2012    Rail-Car Market



Rail News: Mechanical

EPA: After a robust 2011, rail-car assemblies will total 58,000 in 2012



Despite a sluggish economy in 2011, rail-car builders received orders for 89,073 cars and intermodal platforms, the highest annual level since Economic Planning Associates Inc. (EPA) began keeping records in 1980, EPA officials wrote in their latest “Rail Car Overview” report.

“Even with a rapid acceleration in rail-car assemblies in the fourth quarter, backlogs of 64,575 units still represented 3.9 quarters of deliveries at current production rates. Thus, the car builders are beginning 2012 with formidable backlogs and the expectation of further growth in demand as we proceed through 2012 and into 2013,” they wrote.

Demand for new equipment is driven by the energy sectors. Drilling activities in oil and gas fields have induced a significant need for frac sand, which is transported by small-cube covered hoppers, the report states. At the same time, the lack of a pipeline from the Bakken Shale has prompted greater demand for tank cars to transport crude oil. The railroads will be hard pressed to move the ever-increasing amount of oil produced over the next few years, EPA officials believe.

Tank car demand also has been bolstered by continued strength in ethanol production. In addition, demand for hi-cube covered hoppers to transport the animal feed byproduct of dry distiller grains has benefited from ethanol growth, the report states.

Despite a relatively flat coal production year, the need to replace aged steel-bodied equipment drove up levels of coal car orders last year, EPA officials wrote, adding that based on reports from eastern railroads, significant replacements of existing coal-car fleets will continue through the foreseeable future. The report also notes a revival in demand for box cars, intermodal platforms, mill gondolas, and Class F cars, while orders for grain cars remained steady.

Meanwhile, the automotive market improved and light-vehicle sales advanced 10.2 percent last year. In response, a significant number of auto carriers were ordered in the fourth quarter, the report states.

“We expect this investment to be worthwhile since we anticipate auto sales growth of 4.8 percent this year and 3 percent next year,” EPA officials wrote.

Based on current backlogs and anticipated further gains in demand for various rail cars, EPA projects assemblies of 58,000 cars this year followed by 61,500 units in 2013.

“Longer term, far stronger economic activities will provide support for certain rail-car assemblies while an improvement in the financial environment, high gasoline prices and strong government backing stimulate greater demand for ethanol and DDG cars,” EPA officials wrote. “Replacement pressures and technological advances as well as legislative measures will also play a role in promoting the demand for a variety of rail cars.”

From 2014 through 2017, rail-car demand will stabilize and deliveries will range from 62,000 to 64,300 units annually, EPA predicts.


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