After strong first quarter, rail-car production will be a tad higher in 2014, EPA projects

Rail-car demand continued to broaden in the first quarter. Car orders reached 24,050 units, up 61.8 percent from the fourth quarter's total, while assemblies totaling 13,954 units expanded the backlog from 72,937 units at the beginning of the year to 81,927 units at March's end, according to Economic Planning Associates Inc.'s (EPA) "Rail Car Overview" report on the first quarter.

"This level of backlogs ensures a healthy level of assemblies both this year and next, EPA officials said in the report. "In fact, our analyses of each car type indicate steady and/or stable growth out to 2019."

Although tank cars remain dominant in the freight-car environment, EPA officials "are enthused" by the strong recent growth in demand for mid-sized and small-cube covered hoppers, as well as the high level of backlogs for hi-cube equipment, the report states.

"The 11,565 small-cube hopper cars ordered in the opening quarter for frac sand and construction markets has boosted our outlook for this equipment," they said. "By the same token, the rebound in grain haulings and the need for dry fertilizers have also boosted our outlook for mid-sized equipment."

In addition, a rebound of sorts has begun for intermodal equipment that should continue longer term. However, EPA officials remain cautious about the pickup in demand for coal carrying equipment and expect to closely monitor coal demand this year and next.

From this point on, EPA projects steady demand for box cars, grain cars, small-cube covered hoppers and mill gondolas, and continued strong demand for tank cars.

"With railroads espousing the growth of petroleum movements, the possibility of over-hauling a major portion of the fleet with newer equipment, and industry reports of expanding productive capacity among the car builders, we expect 2014 deliveries of 33,000 tank cars," the report states. "By the same token, our 2015 estimate of assemblies is a healthy 29,000 cars."

Based on the strength in car orders, assemblies and backlogs in the first quarter, EPA has modestly raised its short-term deliveries estimates. The company now expects deliveries of 62,300 cars this year and 61,300 cars in 2015.

"Longer term, we are hopeful that stronger economic activities will provide support for certain rail-car assemblies while an improvement in the financial environment, high gasoline prices and strong government backing stimulate greater demand for ethanol and DDG cars," EPA officials said. "Replacement pressures and technological advances as well as legislative measures will also play a role in promoting the demand for a variety of rail cars."

Beginning in 2016, annual car assemblies will expand very moderately, at historically high levels, from 60,800 units in 2016 to 62,500 cars and platforms in 2019, the report states.