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Rail News: Rail Industry Trends

Longbow survey: Freight-car demand, lease rates remain flat


Conditions in the rail-car market aren’t getting worse, but they’re not improving, either, according to a survey of about 20 rail-car lessors conducted by Longbow Research in early January. Year-over-year demand and lease rates essentially are flat, the survey shows.

Leasing inquiry levels have increased, “but that has yet to translate into closed transactions,” Longbow officials said in a survey summary. The average utilization rate in December was flat at 82 percent vs. 83 percent in November and 86 percent in September.

“There is little interest in new cars and we do not expect demand to begin increasing until late in 2010,” Longbow officials said. “We expect covered hoppers and tank cars to recover first, with intermodal and housing-related cars, flat cars largely, recovering last. High stockpiles of coal and below-normal industrial and steel capacity utilization will likely delay a recovery in coal-car orders further into 2011.”

Last year, car owners scrapped older idle cars — perhaps as many as 70,000 — in lieu of paying storage fees, the second consecutive year with a high level of scrapping activity.

“The question is: What types of cars were scrapped?” Longbow officials wrote. “A large number of intermodal, box cars and housing-related cars does not help new car orders to the degree that scrapping of steel coal cars, covered hoppers and tanks would because the former car types were in excess supply in recent years prior to the downturn.”

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More News from 1/20/2010