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Rail News Home Rail Industry Trends

5/31/2007



Rail News: Rail Industry Trends

Explosive ethanol growth is enough evidence to suggest '07 car deliveries will reach 62,000, Rail Theory Forecasts' Kolstad says


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Not quite halfway into 2007, how do rail-car deliveries stack up against a January projection of ’07 deliveries totaling 61,000 to 62,000 units? Right on target, according to Rail Theory Forecasts L.L.C. President Toby Kolstad.

During Progressive Railroading’s “Rail Car Counts 2007” Webinar held yesterday, Kolstad explained that, although demand is down for every car type save for one — tank cars — and deliveries only totaled 11,000 units in the first quarter, economic conditions and the car market climate indicate deliveries will reach the low 60,000s by year’s end.

A Progressive Railroading columnist, Kolstad in October had predicted ’07 deliveries would total 65,000 units.

“We pulled 4,000 intermodal cars out,” he said. “There won’t be 10,000 double-stack wells produced this year.”

Declining rail traffic, a softening economy and gradually increasing train speeds are affecting demand for every car type. Only the explosive growth of ethanol — an industry that has the capacity to produce 6 billion gallons now and will have the capability to produce 12.5 billion gallons by 2008’s end — is sustaining the rail-car industry for now, said Kolstad.

“It’s growing faster than anyone could have predicted,” he said.

So much so, the three companies that build tank cars likely will produce 18,500 units this year compared with 14,000 in 2006.

“They might even churn out 20,000 this year, all due to the ethanol industry,” said Kolstad.

However, coal car demand is down — along with railroads’ 1 percent dip in coal traffic through April — primarily because of a large drop in coal usage by eastern utilities. And demand is sluggish for various types of hopper cars.

Although Kolstad is confident his delivery projection will be met come December, the car market can’t afford another weak quarter in ‘07.

“Eleven-thousand is low,” he said. “If there isn’t any improvement in the coming quarters, the prospects will be dim for 2008.”

Jeff Stagl


Contact Progressive Railroading editorial staff.

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