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Rail News: Mechanical

EPA: Tank-car demand will help propel deliveries to 66,300 cars in 2014, 72,000 cars in 2015

Rail-car builders capped off a strong first half with second-quarter orders totaling 33,912 units, far outpacing deliveries of 16,056 units and raising mid-year backlogs to a "formidable" 99,782 units, according to Economic Planning Associates Inc.'s (EPA) "Rail Car Overview" report for Q2.

Tank cars — the "star of the rail-car industry," especially oil-carrying cars — remained dominant in terms of backlog share, but demand for other car types have increased significantly so far in 2014, EPA officials said in the report.

"We are especially enthused by the strength in demand for all types of covered hoppers, mill gondolas, intermodal equipment and Class F flat cars," they said.

Yet, demand for tank cars escalated once again. After three "relatively modest quarters," tank-car orders surged to 10,629 units in the second quarter, taking backlogs to the mid-year level of 52,589 cars, the report states.

Based on the latest information on the continued expansion in U.S. oil production and the need to upgrade tank-car equipment, EPA anticipates further growth in rolling stock demand. The United States and Canada are expected to account for most of the world’s projected growth in the production of oil and other liquid fuels through 2015, while China and less developed countries drive most of the consumption growth, according to the Energy Information Administration’s July forecast.

Impending U.S. regulatory activities also should positively impact demand for oil-carrying tank cars, EPA officials said, noting the U.S. Department of Transportations recent proposed rulemaking involving a new, stricter set of rules for rail movements of crude and other flammable fuels.

Based on the strength of first-half orders and assemblies, and end-of-June backlogs, EPA raised its short-term deliveries estimate, and now expects deliveries of 66,300 cars this year and 72,000 cars in 2015. Some of the deliveries will be driven by higher demand for high-cube, mid-sized and small-cube covered hoppers, mill gondolas and intermodal platforms.

"Longer term, we are hopeful that 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 said. "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."

However, "the most dynamic element in the long-term rail-car environment" will be tank cars, they said.

Beginning in 2016, annual car assemblies will ease moderately, at historically high levels, from 63,300 units to 62,500 units in 2019, EPA predicts.


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