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5/3/2010



Rail News: Rail Industry Trends

Freight-car deliveries to gradually increase during next two years, EPA says


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In light of reports of high levels of idle rail-car equipment at 2009’s end, officials at Economic Planning Associates Inc. (EPA) were “pleasantly surprised” that rail-car orders jumped to 5,078 in first-quarter 2010 — the highest level since third-quarter 2008, EPA said in its April “Rail Car Overview” report.

New equipment demand was confined to three car types: coal and related product service cars, covered hoppers and tank cars.

“We believe coal cars are not a reflection of the need to expand fleet capacity, but rather replace aging equipment,” according to the report. “However, during the first quarter, ethanol production had been accelerating and previously idled cars were being put back into service.”

In the near term, EPA officials are “enthused by the outlook for commodity and intermodal haulings but are cautious with regard to new equipment demand … due to the still-large amount of idle capacity on the rail system.”

Based on current backlogs and first-quarter assemblies, EPA expects “modest” orders for covered hoppers, tank cars and coal cars in 2010, with assemblies reaching 16,000 units.

In 2011, the over-supply of rail cars will dampen the rebound in activity, despite continued economic improvements, EPA predicts. The firm expects deliveries to reach 21,500 cars next year.

Beginning in 2012, “far stronger economic activities” will support certain rail-car assemblies while an improved financial environment and higher gasoline prices will stimulate demand for ethanol and DDG cars, according to the report. Replacement pressures and technological advances, as well as legislative measures, also will play a role in the demand for a variety of rail cars, EPA said.

“After three dismal years, we look for rail-car deliveries to advance moderately to 33,500 in 2012 and expand to almost 60,000 in 2015.”



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