By Jeff Stagl, Managing Editor
So how is the North American rail-car leasing market faring of late? It’s in a lot healthier condition than it was about a year ago.
That’s what CIT Rail President Jeff Lytle stressed during a July 13 presentation at the Midwest Association of Rail Shippers’ summer meeting in Lake Geneva, Wisconsin. The market has improved considerably from the “dark days” of second-quarter 2020, when the pandemic placed a pall over business, he said.
“The only calls we got then were: ‘When can I return my rail cars?’” Lytle joked.
CIT Rail manages a diverse fleet of about 120,000 rail cars and locomotives, and serves 500 customers in North America. The fourth largest lessor in North America, the company maintains 10 offices in Canada, Mexico and the United States. Rail business accounts for 16% of CIT Group Inc.’s overall portfolio.
About 360,000 cars are idle in the total North American fleet, CIT’s Lytle said. Many covered and open hoppers, gondolas (shown) and tank cars are stored. However, the percentage of cars in storage dropped from 32% in June 2020 to 22% in June 2021, he said. Photo courtesy of AARLytle mentioned how a proposed merger between CIT Group and First Citizens Bank will create a top 20 U.S. bank with more than $100 billion worth of assets after regulatory approval is received. He also described why it’s challenging to predict the North American rail-car leasing market these days.
Since industrial production has spiked — up more than 17% so far year over year — rail-car customers are finding it difficult to forecast their car needs, Lytle said. For example, agricultural/food products and metallic ores/metals carloads are up this year compared with 2019 levels due to strong exports and a healthy domestic market.
But motor vehicles/parts, nonmetallic minerals and coal carloads are way down, and chemicals/petroleum and forest products traffic is slightly down. Green initiatives threaten long-term coal demand while supply-chain issues have impacted chemical markets, Lytle said.
Meanwhile, about 360,000 cars are idle in the total North American fleet. Many covered and open hoppers, gondolas and tank cars are stored. However, the percentage of cars in storage dropped from 32% in June 2020 to 22% in June 2021, Lytle said.
Car scrapping activity has increased in part due to scrap metal prices — more cars were scrapped than were built in 2020.
Green initiatives threaten long-term coal demand while supply-chain issues have impacted chemical markets. Photo courtesy of Union Pacific Railroad“The average age of cars also continues to shrink,” Lytle said, with the current average at 36.6 years compared with 38.7 years in 2020 and 39.9 years in 2019.
Only 33,417 cars were delivered in 2020 after deliveries totaled 58,026 units in 2019, he said. According to data from the Railway Supply Institute’s American Railway Car Institute Committee, car deliveries in first-quarter 2021 totaled only 5,996 units versus these figures in 2020: 6,216 in Q4, 7,953 in Q3, 8,441 in Q2 and 10,824 in Q1.
The ongoing dearth of new builds will continue amid challenges, Lytle said. Among them: underemployment amid surging demand, supply chain disruptions, capacity dislocations (i.e., labor, equipment and power) and high steel prices.
CIT Rail will provide tailored services offering more efficient transportation capacity and asset readiness in response to market conditions, Lytle said. The company also is allocating funds for new builds (as much as possible), as well as for repurposed, retrofitted and overhauled cars.
“We will invest in our maintenance network to minimize out-of-service time,” Lytle said.
