Tank-car retrofits to drive freight-car repair activity in 2015

— by Pat Foran, editor

Given incrementally increasing North American freight-rail traffic volumes, looming tank-car design retrofit requirements, conventional wisdom suggests there will be more, perhaps a lot more, freight-car repair work completed in 2015. But will there be? Most likely, yes, if the sentiments we heard last month from repair market execs and observers are any indication.

Although several freight-car repair company execs declined to discuss the year ahead, citing public disclosure laws, competitive intelligence issues and even political concerns, those who were willing to talk market trends said they expect to be at least as busy as they were in 2014, and probably more so, for the aforementioned reasons.

Among the more bullish are officials at The Greenbrier Cos. Inc. They believe 2015 will be a "robust year" both for tank-car and general freight-car repair work, Vice President of Marketing Tom Jackson said in an email.

For starters, the "extraordinary bad weather" last winter and the corresponding reduction in rail velocity resulted in deferred preventive maintenance programs for many fleets, Jackson said. Completing some of that deferred work could lead to a "stronger general freight-car market in 2015," he added.

Meanwhile, tank-car repair facilities should see a "significant increase in HM-216B demand," Jackson said. A docket published in 2012 by the Pipeline and Hazardous Materials Safety Administration, HM-216B changed numerous hazardous materials regulations affecting tank-car owners and repair shops.

"This spike [in demand] has been widely forecasted and the tank-car repair market has been preparing for this surge in additional work," Jackson said.

Greenbrier certainly has. In June 2014, the company entered into a joint venture with Watco Cos. LLC to form GBW Railcar Services LLC. GBW owns and operates the combined network of 38 freight-car repair, refurbishment and maintenance shops. GBW's 14 tank-car certified repair facilities have been "staffed up with qualified workers and equipment," Jackson said, adding that GBW also is "making several capital additions" to prepare for the repair work to come during the next few years.

And then there are the soon-to-be-issued USDOT tank-car design standard changes, which are expected to "create a significant surge in tank car modification work for GBW's shops," Jackson said. One result: Many GBW customers are "very interested in reserving shop space to ensure they have their retrofit needs covered," he said.

Officials at Progress Rail Services also believe there'll be a premium on shop space due to a "bubble in scheduled tank-car recertifications," particularly at full-service shops that repair, clean, qualify, paint and line cars, said Senior Vice President Doug Creech in an email.

A Caterpillar company, Progress Rail operates repair facilities in the United States, Canada and Mexico, and provides a range of services — from routine freight-car maintenance and inspection to rebuilding, painting and inspection.

But the "unprecedented" drop in crude oil prices, which could last throughout 2015 and beyond, likely will "reduce some tank-car repair capacity pressure associated with oil-train maintenance and transloading events," Creech said. As a result, it also could ease at least some of the anticipated capacity pressure caused by the pending federal tank-car retrofit requirements, he added.

Meanwhile, general repair capacity needs probably will vary by location and car type this year, with an uptick likely for box-car and specialty hopper repairs, and maintenance remaining flat or slightly declining for unit coal train cars, Creech said. Shop business driven by auto rack recertifications should remain steady, he said.

Bottom line: Progress Rail officials believe the 2015 freight-car repair market "will be stable to improving, with some areas remaining flat or declining slightly and others growing significantly," Creech said.

Other car-repair service providers expect to be busy this year, too. Execs at Road & Rail Services Inc., which specializes in inspecting, servicing and repairing rolling stock in field operations, expect the company's 200 car-repair employees to perform "a lot of work" on multilevel fleets, in particular, as well as on box cars and even some private cars, said President and Chief Operating Officer Kevin Brandon.

Road & Rail also provides a range of rail-related services, including plant and terminal operating expertise.

"Our business tends to grow right along with the rail traffic, and 2014 was relatively busy," said Brandon. "Given the traffic trends, we think 2015 will be similar."

Of course, car-repair officials are looking well past this year's trend lines as they chart their respective courses.

"Well-positioned, full-service tank certified repair shops ... with the technical ability to partner with car owners to meet the new federal reliability and safety requirements should be in great demand for the next several years," said Progress Rail's Creech.

To that end, Progress Rail plans to boost capacity in that repair space this year by opening full-service tank-car shops in Raceland, Ky., and Sidney, Neb., Creech said.