Hopper cars — Hardly a hopping market

Two trends in the covered hopper car market are troubling to builders: demand for new cars is decreasing and surpluses for all car sizes are increasing. The outlook for total covered hopper car production this year isn’t any better.

After hovering around the 20,000 mark the past few years, production in 2008 will fall to about 14,000 cars, according to Rail Theory Forecasts L.L.C., which monitors the freight-car market. Deliveries of small, large and jumbo covered hoppers are projected to total 2,000, 5,000 and 7,000 units, respectively.

Market conditions tell the story. A soft construction market has stifled demand for small-cube hoppers used to move cement and other building products; railroads’ grain shipments in 2007 lagged 2006 levels by about 1 percent, creating a small surplus in the grain car fleet; and ethanol producers last year shipped fewer distillers’ dried grains (DDG) — and therefore used fewer jumbo covered hoppers — than expected because of a slight weakening in the ethanol industry.

Construction-related and DDG rail traffic likely will remain sluggish this year.

“I think the construction industry’s woes will continue for a while. It’s like the S&L mess in 1980 — it’ll take years to sort out,” says Rail Theory Forecasts President and Progressive Railroading columnist Toby Kolstad. “We don’t do a survey on DDG cars, but the people I’ve talked to are concerned about them. There’s a slight downturn in ‘new’ ethanol output and some people are waiting to see which way the winds blow for ethanol.”

Grain to ease pain
But there’s hope for one segment of the covered hopper car market. The United States registered a bumper grain harvest last year that should translate into increased grain-car usage in 2008.

“Grain looks healthy and will spur rail shipments,” says Kolstad.

That’s good news for The Greenbrier Cos., which introduced a new all-steel 5,188-cubic-foot covered hopper for grain service in early 2006. Orders for the car — the builder’s first through-center sill covered hopper to enter production — took off last year and business potential for 2008 bodes equally well, says Bill Bourque, Greenbrier’s vice president of marketing.

The 286,000-pound gross rail load grain car features four water-tight aluminum hatch covers and discharges its load through triple hopper openings using any customer-specified gate.

The car is 58 feet long compared with a conventional 60-foot-long grain hopper.

“A grain car usually extends over the trucks, but that’s dead space,” says Bourque. “We set out to develop a shorter car with the same carrying capacity. Railroads can add more cars per train.”

Greenbrier also produces 6,252- and 6,352-cubic-foot jumbo covered hoppers for DDGs, and a heavy-duty 3,262-cubic-foot covered hopper for cement service.

In October, the company obtained an order from GE Equipment Services, Rail Services to produce 11,900 covered hopper and tank cars — although the majority will be tank cars — over an eight-year period.

TrinityRail Group L.L.C. hopes to begin landing orders for a shorter, 286k-capacity covered hopper for grain service the company is introducing. The 5,201-cubic-foot car is 55 feet, eight inches long compared with the company’s 5,161-cubic-foot grain hopper, which is 60 feet and one-half inch long.

More for less
A railroad can create a 97-car unit train using 5201s that would be the same length as a 90-car unit train featuring 5161s — a more than 7 percent boost in capacity, says Robert Hulick, senior VP of business development for TrinityRail, a Trinity Industries Inc. subsidiary.

“There’s a lot of talk in the industry about improving capacity,” he says. “We took lessons from the coal market to develop a 286,000-pound-capacity car as a shorter car, with a shorter overhang, and applied it to the covered hopper car market.”

TrinityRail also offers a range of small, mid-range and jumbo covered hoppers, including 3,230-cubic-foot and 5,600-cubic-foot pressure differential cars, a 6,241-cubic-foot pellet hopper and 6,151-cubic-foot car for grain service. Introduced in 1995, the 6151 features a through center sill and 286k capacity.

“There are 27,000 of them in service now,” says Hulick.

TrinityRail also markets a 6,351-cubic-foot jumbo covered hopper for DDG service. Introduced in 2002, the car features a through-center sill and provides improved cargo flow, says Hulick.

“It’s a viable product in the renewable fuels market,” he says.

American Railcar Industries Inc. (ARI) is introducing the T6350 Thru Sill Covered Hopper Car, a 6,350-cubic-foot model designed to ship DDGs, grains and other free-flowing products. The hopper, which is available with a variety of loading hatches and discharge outlets, is the third model in ARI’s through-center sill covered hopper car line that includes the T3272 for cement and dry bulk products, and T5200 for grain, sugar and other free-flowing cargo.

Shippers have say
The builder has developed several prototype T6350s that are being tested by shippers.

“We’re looking to get feedback from the shippers on their experiences with loading and unloading, and then tweak the design,” says ARI VP of Marketing Jim Doty. “We’ll finish that in early 2008 and take orders by mid-2008 or sooner.”

Currently, ARI offers a 6,224-cubic-foot Center Flow^® covered hopper for plastic pellets and 3,256-cubic-foot
Center Flow® covered hopper for cement and high-density products.

The company also is introducing the CF5650ON Pressureaide^® covered hopper car, a 5,650-cubic-foot pressure differential car that includes no interior bulkheads.

The fourth model in ARI’s Pressureaide® line, the CF5650ON is targeted at flour and starch shippers, well suited for flood load and pressure loading systems, and easier to load and unload, says Doty. Similar to the T6350, ARI is testing prototype CF5650ONs with shippers and using feedback to tweak the car’s design. The builder will begin taking orders later this year.

Meanwhile, National Steel Car Ltd. expects to continue producing a 3,230-cubic-foot pressure differential covered hopper the company introduced last year.

National Steel Car also offers a 3,220-cubic-foot covered hopper for cement service; a 4,275-cubic-foot model for potash service; 5,150- and 5,300-cubic-foot covered hoppers for grain service; 6,245- and 6,400-cubic-foot models for pellet service; a 6,350-cubic-foot covered hopper for DDGs; and a new larger model for DDGs.

Largest of the large
In early 2007, the builder introduced a 6,500-cubic-foot covered hopper to provide additional DDG carrying capacity.

“To our knowledge, it’s the largest jumbo covered hopper car offered in the marketplace,” says National Steel Car Executive VP of Marketing and Sales Hugh Nicholson.

The 6500 model includes a through-center sill, a feature that’s also available on several of the company’s other covered hoppers.

Although National Steel Car expects its two covered hopper car production lines to keep humming through 2008’s first half, the ethanol industry’s effects on DDG shipments will influence production of the 6500 model, says Nicholson.

“The ethanol industry is in a rest period, per se,” he says. “We expect we’ll see a reduction in overall demand in that segment of the market.”

As all car builders can anticipate sluggish orders for most covered hopper cars, outside of those used to move grain. A contraction in demand that remained in place through 2007 likely will continue into 2008, says Nicholson.

However, ARI’s Doty is cautiously optimistic about this year’s business prospects. A slightly better 2008 is in store after 2007, which was a “bottom-out year,” he says.

“We expect to build more cars in ’08 vs. ’07, but not as many as in ’06, which was a super year,” says Doty. “We look for grain and cement to bounce back.”