May 2009
Deciding when and how to invest in private railcar fleets is always a challenge. A fleet manager has to match business forecasts with transportation needs and investment opportunities. Especially in 2009, business forecasting can be described as more art than science.
Buying or leasing railcars may not be on the table given the reduced transportation demand and capital spending restrictions facing many companies right now. However, fleet managers should be aware of the level of supply and demand in the railcar market so that they can lock in opportunities when the timing is appropriate.
The decrease in freight shipping caused by the economic slowdown has dramatically cut orders for new railcars. At the National Association of Rail Shippers meeting on May 28th, Dick Kloster from FTR Consulting provided the following data on the slowdown in the railcar market:
- In 2009 the total railcar fleet is 1,558,850 cars and almost 38% of the cars are idle. That’s 585,456 surplus or idle railcars! That figure is expected to drop slowly over the next few years but it will be 5-7 years or more before the number of surplus cars reaches the level it was a couple of years ago.
- There were approximately 2,400 orders placed in the first quarter of 2009 compared to 11,200 and 9,800 in Q1 of 2007 and 2008. The current backlog is approximately 26,200.
- The delivery forecast in 2010 is a mere 16% of what the market was in 2006 (chart below).
