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March 2010

Rail News: Rail Industry Trends

Industry Trends from Progressive Railroading March 2010


Rail-car demand to edge up ever so slightly in 2010

Freight-car builders had a difficult year in 2009 as rail traffic plunged 16.1 percent, dragging down car orders and deliveries in the process. Car assemblies, which totaled 21,682, "far outpaced the dismal level" of car orders that totaled 8,336 units, according to Economic Planning Associates Inc.'s (EPA) "Railcar Overview" report released Jan. 31.

Rail-car builders will continue to face strong headwinds in 2010 because rail traffic levels will remain at low ebb and railroads still have a "substantial excess supply" of rolling stock, the report states.

"Nonetheless, we expect good gains in both commodity and intermodal traffic this year and next, which could stimulate new equipment demand later this year and lead to a pick-up in rail-car demand in 2011," EPA officials said in the report.

Based on backlogs as of Jan. 1 and the anticipation of "some modest orders" for covered hoppers, tank cars and coal cars, EPA projects 2010 assemblies totaling 16,000 units.

In November, Rail Theory Forecasts L.L.C. also had projected 2010 deliveries at 16,000 units, "if there is strong economic performance from the start" of the year, wrote President Toby Kolstad in his Progressive Railroading column published in the December issue. If the economy falters — perhaps after the Federal Reserve stops buying Treasury Notes and Federal Housing Administration mortgages in March — deliveries could tumble to as low as 8,000 cars, he wrote. But Kolstad pegged 15,000 cars as a more likely scenario for 2010.

Case for More Solid 'Business Base'

Count FreightCar America Inc. among the car builders that believe demand will at least edge up this year, because it already has. The firm ended 2009 with fourth-quarter deliveries of 697 units and a backlog of 265 units vs. 3,624 units and 2,424 units, respectively, at 2008's end.

But as of Feb. 18, FreightCar America had obtained additional 2010 orders for more than 3,000 cars to be delivered this year and in 2011. And since 2009's end, the company received an order for more than 500 cars to be filled from existing inventory.

"While we do not expect market conditions to materially improve in 2010, we are very pleased by the orders we have already received this year," said President and Chief Executive Officer Ed Whalen in a prepared statement. "These orders will provide an excellent base of business for us over the course of the year."




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