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North American Freight Car Market

North American
Freight Car Market


Crude Oil by Rail

Jan. 2013


Of the 11,021 railcars ordered during the 4th quarter, 6,839 were tank cars, raising the number of backlogged units to 48,206. It is estimated that the number of tank cars ordered for moving petroleum crude and expected to be delivered by the end of 2014 will be enough to move 2 million barrels of oil per day, almost three times what is currently being extracted from the Bakken Shale Rock Formation. Many of these cars are also being used to move oil from the Canadian Oil Sands and are equipped with heating coils for that viscous crude, but the exact number is not known. As for railroad carloads, 2M bpd equals almost 1M carloads per year, more than replacing the traffic that has recently been lost in the coal sector.

Progressive Railroading Article

Dec. 2012

Railcar Forecast for 2013

I had not expected to see another car cycle in my railroad career; three were enough and I thought that the dip in railcar production after the Great Recession was the last I would have to forecast. Regardless of my personal expectations, railcar production will fall in 2013 from the delivery total recorded in 2012, and if there is a recession next year, it could fall ever further in 2014. However, there is reason to hope that things will not be as bad as they appear and that the nascent energy boom in the oil and gas industry will continue to grow and stimulate other sectors of the economy.

Our formal forecast of 58,500 cars for 2012 appears to be right on target. The early forecast of 51,500 was revised in late December of 2011 to reflect the boom in tank cars orders that were received during the third quarter of last year. However, in spite of the continued strong demand for tank cars throughout 2012, we expect to see a drop in total deliveries to around 47,000 units in 2013; unless however, there are significant economic improvements in the fourth quarter.

Much of that total will be tank cars which continue to account for the bulk of the current production. Tank cars accounted for over 30% of the cars built this year and next year they will be closer to 50%. In 2012, over 17,000 tank cars, most destined to move crude oil from the Bakken Shale Oil Formation in North Dakota, will have been delivered, and the total should be over 20,000 in 2013 as the backlog of unfilled orders currently exceeds 46,000 cars and represents over two year’s production. It’s a good bet that these cars will be needed for quite a while until new pipelines and refineries eventually make them redundant. The energy boom is also making chemical and plastic production more attractive in the U.S. and deliveries of tank cars and plastic pellet covered hoppers for these industries are expected to increase in 2013. However, new orders for new small cube covered hoppers to move industrial sand for oil and gas drilling operations appear to have stopped early last year and most of this new fleet of railcars has already been delivered.

The railroads are also enjoying significant growth in intermodal traffic, with weekly load levels now slightly in excess of their pre-recession peaks. Surprisingly however, orders for new intermodal container wells have been rather meager and the backlog of unfilled orders was only 327 units at the end of the third quarter. Either TTX fears another recession in 2013 or they are trying to force the railroads to use some of their surplus 40’ wells. Importers have been repackaging goods from their inbound 40’ containers into 53’ domestic containers, and intermodal wells for these boxes are now in short supply while 40’ well cars sit in storage.

The precipitous collapse of the domestic coal market has almost ended deliveries of new aluminum coal cars, and deliveries of hybrid steel and aluminum cars for the export market have also slowed dramatically. If demand for exported coal continues to be strong in 2013, deliveries of the latter should pick up since the fleet of railroad owned cars that are used to move these shipments needs to be replaced.

Except for the cars associated with the energy boom, the decline in production in 2013 would be very small and would not be considered the start of a new production cycle. Orders for most types of railcars have not really recovered much from the lows of last recession and production levels are not expected to fall significantly in 2013. There is even a chance that demand might pick up in early 2013 and lead to higher delivery counts next year for these cars types. The one-time production of new fleets, such as the fleet of ethanol tank cars between 2005 and 2008, the fleet of small covered hoppers for industrial sand in 2011 and 2012, and the current buildup of a fleet of crude oil tank, cars distort the overall picture of the true state of the railcar industry. Disregarding these cars types, we are still in the early stages of the recovery from the last recession. It always feels better to look at the bright side of the market.


Jan 4, 2013

A good article on oil boom and railroads:












Rail Theory Forecasts is a consulting company specializing in North American rail freight traffic and freight car demand forecasting. Publisher of the annual North American Freight Car Market

Rail Theory Forecasts (RFT) was founded in 2001 to advance the art and science of predicting future developments and trends in the railroad industry, especially with regard to the demand and supply of railcars. The basic premise which has guided the company’s efforts is that current developments can only be understood and evaluated within an historical context, and that forecasts and projections of future developments must be soundly based on the interplay of the factors that have most influenced past events




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