Rail-car forecast: 83,000 freight cars in 2015

— by Toby Kolstad

When I made my first rail-car forecast for Progressive Railroading back in February 2003, I was very optimistic about both the immediate and the foreseeable prospects for rail-car builders. As I write this, my last public forecast, I again am very optimistic about the rail-car industry. Last year's early forecast of 61,500 cars and the statistical model forecast of 62,400 are close to our final 2014 projection of 66,000 deliveries. It appears 2015 deliveries will exceed 83,000 rail cars — if builders can secure enough wheels and cast parts.

Notwithstanding the dearth of orders for coal cars and lumber flats, there is strong demand for most other car types. Box cars once again are in the production schedule and I expect about 3,000 of the cars to be delivered next year, as well as about 1,600 mill gons, 2,400 flat cars and 1,000 coal cars. All of these deliveries involve replacement demand for aging fleets.

Intermodal traffic has been very strong for the past few years and railroads finally are ordering new equipment in substantial quantities. New deliveries should exceed 7,000 intermodal cars next year; based on the current backlog, even more could be built. Railroads are beginning to win back traffic they lost to the trucking industry over the years, and this traffic segment is expected to continue to require more equipment with each passing year.

Demand for Hopper Cars

The prospects are similarly rosy for covered hopper cars, with traffic currently near the operating capacity of all three related fleets. For small-cube cars, the industrial sand used in hydrofracking shale deposits of natural gas and oil is driving the demand. By 2015's end, the fleet will have doubled in size since 2005 — and traffic likely will require even more cars after next year. For grain cars, an export boom once again is driving car demand and keeping the old fleet (built in the 1970s) fully leased. Once the older cars approach 50 years in service, the annual replacement demand will be substantial. Finally, rumors that more plastic pellets will be produced in the coming years may be reflected in the boom in orders and deliveries of jumbo covered hopper cars. More than 6,000 of these cars are expected to be built in 2015, twice the average rate of the past 10 years.

For the past few years, tank cars have dominated production schedules, and in 2014, they again will account for more than 50 percent of all deliveries. Expect the same in 2015, with deliveries to exceed 40,000 cars as the tank-car builders expand production to deal with the constant flow of new orders. There were nearly 52,000 tank-car orders backlogged at third quarter's end; the quarterly production rate already had climbed to 9,235 cars. It isn't too much of a stretch to guess it will reach 10,000 cars in 2015.

However, there is considerable uncertainty regarding the need — in both the short and long terms — for so many new tank cars. For one thing, falling oil prices have slowed shale oil production volumes. Also, some cars that had been ordered as replacements in case the current fleet is restricted or condemned might not be needed. When the crude-by-rail boom ends, and it undoubtedly will end at some point, there will be cars in the backlog that will not be needed. At present, though, that isn't likely to be the case in 2015.

One final note: It has been my pleasure and privilege to write this column for the past 12 years. Other than this annual rail-car forecast, which seemed to write itself, my other essays sprang from another source and lately, the Muse that has guided my pen is taking me in another direction: to histories and fictional stories that fit between covers instead of on one page. So, this will be my last column. I would like to thank Pat Foran, my editor, for his patient guidance over the years. I also offer my best regards to all the folks at Trade Press, who have been so gracious to me.

Toby Kolstad has been in the railroad industry for more than 40 years, with stints at the Illinois Central Gulf Railroad, Denver & Rio Grande Western Railroad, a car builder and lessor. Currently a consultant on rail-car matters and president of Rail Theory Forecasts L.L.C., he can be emailed at Tkolstad@aol.com.