GLG News by Mr. Toby Kolstad, President
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Railcar builders to enjoy another great year
January 30, 2012
North American Fourth Quarter Rail Freight Car Orders | www.bloomberg.com
Railcar orders stayed relatively close to deliveries during the fourth quarter of 2011, and the backlog stayed above 64,000 cars. Although many of the backlogged orders are for delivery beyond 2012, most will be built this year, propelling builder deliveries well beyond the 47,000 rail cars manufactured in 2011.
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Environmentalists and the EPA are likely to stop U.S. West Coast coal exports through 2012
January 19, 2012
Two coal companies want to export coal through the Port of St. Helens | www.oregonlive.com
Powder River Basin coal is currently being transported by railroad to Vancouver BC for export to China, but an export terminal on the Columbia River between Washington and Oregon could capture this traffic and allow for even more tonnage to be exported. The Pacific Northwest is “greenie” territory, however, and environmentalists have been very successful to date in blocking the permitting of any new coal terminals in “their” region.
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Railroad intermodal traffic predicted to continue growing
August 30, 2011
Big shippers see continued demand slowdown | www.dcvelocity.com
A recent survey of shippers indicated that a modal shift from trucking to railroad may be boosting railroad traffic more than lackluster economic and import growth would suggest. The recent surge in orders for new 53’ well cars from The Greenbrier Companies may continue if truck traffic continues to migrate to railroad.
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Railroad profitability probably won't limit freight rate increases
August 24, 2011
Union Pacific crosses profitability threshold | www.ft.com
For the first time, Union Pacific Railroad earned more on its invested capital in 2010 than its total cost of capital, and the other major U.S. railroads most likely did the same. However, if the experience of the Norfolk Southern Railroad is any guide, freight rate increases are not likely to slow. That railroad has earned more than its cost of capital in almost every year since 2003 and yet its freight rate increases resembled other railroads.
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Industrial Sand: New boom for rail traffic and railcar builders
August 19, 2011
Natural Gas Extraction Creates A Boom For Sand | www.npr.org
Industrial sand is used in the hydro-fracking method of oil and gas extraction from shale rock formations and demand is exploding as energy companies develop new wells. Demand for the small cube covered hoppers used to transport the material is also booming, taking up the slack from the decline in ethanol car production. Shipments of Industrial Sand could soon match those of Ethanol which are beginning to peak after climbing in a short time from almost nothing to about 2% of all railroad carloads.
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Railroad domestic coal traffic forecasted to fall in 2012
August 12, 2011
EIA sees small decline in US coal consumption in 2012 | www.platts.com
The EIA has forecasted that coal use by domestic utilities will fall another 3% in 2012, which should have a similar impact railroad coal traffic numbers. Although coal exports increased this year to almost offset the decline in domestic coal use, they are not expected to increase significantly above the 100 million tons projected for 2011. Therefore the decline in domestic consumption is expected negatively impact railroad traffic in 2012.
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As current economic indicator, railroad loads do not show retreat
August 11, 2011
North American Rail Freight Carloads for Aug. 6 | www.bloomberg.com
The carloads and intermodal shipments for the week ending August 6th remained strong, ahead of last year and continuing to grow at a steady, albeit slow rate during 2011. The weekly totals for the past few years shows the fall in railroad traffic beginning in September of 2008, coincident with the financial crisis but fully 10 months after the supposedly official beginning of the recession in December 0f 2007. During the first ten months of 2008, railroad traffic marginally exceeded that of 2007.
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Drop in gasoline prices will boost railroad intermodal shipments
August 9, 2011
Big gas prices drop on the way | content.usatoday.com
Gasoline prices have been around $4/gallon only two times in recent years: during the summer of 2008 before the financial crash in the fall of that year, and during the second quarter of 2011, before the fears of a double dip recession put the stock market into a free fall. In the first instance, retail sales improved when the price of gasoline plummeted and the economy began to mend. The same type of recovery is expected to develop in the fall if gasoline prices get close to $3/gallon.
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Greenbrier will be running near capacity soon
August 5, 2011
Greenbrier Books Railcar Orders for $285 Million | www.joc.com
The fears that are gripping Wall Street have not been reflected in the reports of deliveries and new orders coming from the railcar builders. Business is booming and the backlogged orders are high enough to keep production increasing well into 2012. The Greenbrier Companies is battling Trinity Industries for the top spot in delivery totals and the recent orders may help it gain the lead if it can ramp up production fast enough before the end of the year.
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Railroad traffic is not signaling a double dip
August 4, 2011
Railroad Rates Top Inflation on Pricing Power: Freight Markets | www.bloomberg.com
With the collapse of the stock market after the news of the European banking problems and the initial assessments of the US debt deal, it is comforting to see carload railroad volumes remaining steady and intermodal traffic following its seasonal climb towards the holiday season. The slow growth in rail traffic matched the small increase in the GDP during the first half and the numbers since May indicate a repeat performance in the second half.
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Coal exports are helping, but railroad coal stats are dismal
July 11, 2011
US coal exports reach 19-year high, up 20 percent | www.topix.net
Last year, almost 82M tons of coal were exported (up 38% from 2009) but production totaled around 1.085B tons, up less than 1% from 2009. This year, the situation is much the same; coal exports were up 48% in the first quarter but production for the first half of 2011 was less than last year. Rail traffic was much the same. Without those exports, the traffic sector for the railroads would have been much worse.
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Big intermodal plans in West, but few results to date
June 29, 2011
Western rails get ready to redraw intermodal map | www.dcvelocity.com
The western rail carriers have benefitted more than their eastern counterparts from the boom in imports. They have provided land-bridges between West Coast ports and Midwestern cities for many years that were very difficult for trucking companies to match. Now BNSF and Union Pacific claim to be going after the domestic traffic in the West where trucking companies have traditionally enjoyed cost and service advantages. There’s been a lot of talk of success, but few real numbers to support their claims.
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Railroad traffic confirms economic slowdown
June 29, 2011
Rail Automobile Shipments Reach Two-Month High | www.joc.com
Notwithstanding the good news for some traffic segments, carloads are down for more than a few railroad traffic groups and the overall assessment is that the first quarter totals may not be much higher than those of the first quarter. Rail traffic is a good barometer of the overall economy and the lackluster traffic in the second quarter is expected to be reflected in the GDP, which is not expected to increase much beyond the 1.9% recorded in the first quarter.
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Prospects for railcar builders and railroad companies look very different
May 26, 2011
Rail Orders at 13-Year High Validate Buffett: Freight Markets | www.bloomberg.com
In the short term, i.e., this year and next, the fortunes of the two related industries could be very different, regardless of what happens in the overall economy. The rosy outlook painted by many “rail industry” analysts overlooks some basic differences between the two industries and misinterprets some of the recent developments to paint the future of both industries with the same brush.
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Unusual factors driving demand for new railcars
May 3, 2011
EPA: 37,000 new freight cars this year | www.railwayage.com
While railcar traffic is up, the volume is still below pre-recession levels and there are hundreds of thousands of surplus railcars of every type. So why are there so many orders for new cars and why are the builders' production rates expected to increase so rapidly? If deliveries fall between the 35,000 and 42,000 cars predicted by the forecasting community, the increase in production, as measured as a one year percentage gain over the bottom of the recession, will exceed any previous recovery.
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EIA sees only marginal increase in coal production in 2011
April 25, 2011
EIA Short term energy outlook | www.eia.doe.gov
Although they are forecasting that coal exports will rise to 88M tons this year, the EIA is estimating that overall production will only increase slightly over 2010 totals, which were only up 1% over those of 2009. Through mid-April, EIA weekly estimates show an 0.8% rise in production compared to the 2.9% increase in AAR reported railcar loads for the same period. EIA estimates are always revised and the AAR numbers may be a better indicator of the current status in the coal fields.
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Rail traffic continues to point to a strengthening economy
April 8, 2011
Rail Carload Volume Hits Highest Level Since Late '08 | www.joc.com
Rail traffic is like the canary in the coal mine for the economy: it sings when times are good and doesn’t when they’re not. Despite of the troubles in the Arab World, the catastrophe in Japan, and the budget problems facing lawmakers, the canary is singing. Rail carload traffic is solidly above 2010 levels and climbing toward the pre-recession levels of early 2008 and intermodal traffic has already slipped past pre-recession levels and could set a new benchmark by the end of the year.
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Greenbrier benefits from change in intermodal logistics
March 18, 2011
Greenbrier Nabs Orders for 4,200 Railcars | www.joc.com
The recent spate of orders for intermodal railcars seems to defy logic when one counts the thousands of relatively new intermodal cars in storage. However, there have been a few operational changes in the intermodal sector which are driving the need for intermodal cars designed to carry 53’ (domestic) containers. All of the intermodal cars in storage have 40’ wells and are best suited for the international containers.
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GATX and Trinity Industries make up
March 15, 2011
GATX to buy 12.5K railcars from Trinity over 5 yrs | www.whbf.com
Four years ago, Trinity Industries was so aggressive in the leasing business that GATX and other major railcar leasing companies were grumbling that they might not buy cars from them anymore. Time and low prices have always smoothed ruffled feathers and that is what seems to have apparently happened just now. GATX has purchased large quantities of railcar in the past from Trinity and their recent order signals both a renewed confidence in the market and a close relationship to a major builder.
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FreightCar America sustained by orders for export coal cars
February 22, 2011
Norfolk Southern to buy cars | www2.timesdispatch.com
Norfolk Southern Corporation recently announced their order of 3,000 steel and aluminum/steel hybrid coal cars for delivery in 2011-2012, matching an almost identical order of CSX Corporation for cars to be delivered in 2010-2011. Both companies are expected to use the cars primarily to transport coal destined for export from East Coast ports. FreightCar America seems to have a lock on the market for these cars, but is suffering from the general downturn in the coal car market.
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