GLG News by Railcar Leasing Experts

Toby KolstadPresidentRail Theory Forecasts

Rail freight, thought to be stable, is falling again

April 27, 2009

Analysis of:US rail shipments sink 24.3 percent from a year earlier, industry trade group reports | finance.yahoo.com

The American Association of Railroads (AAR) reported that rail shipments decreased 24.3% during the week ending April 18. Unlike the AAR statements in previous weeks, this one did not contain an explanation about how weather or the Good Friday holiday caused the unfavorable comparison. In the detailed report available to AAR members, carloads were down by significantly more than 24.3% for most traffic segments, with Motor vehicles (-57.7%) and metallic ores and metals (-52.9%) suffering the most. Grain traffic was still down 21.3% and even coal shipments, which for the year are only down 5.8%, decreased 16.2%. Could rail traffic be settling at an even lower level than previously projected?

Toby KolstadPresidentRail Theory Forecasts

FreightCar America to halt production at its second shop in two months

April 16, 2009

Analysis of:FreightCar to halt production in Roanoke | www.roanoke.com

With the temporary closure of its Roanoke VA plant, FreightCar America (RAIL) will be down to just one plant in Danville IL where union workers were notified in February that four of five jobs would soon be cut. In 2007, with production falling to 10,282 from 18,548 railcars in 2006, the company closed its largest and oldest facility in Johnstown PA and transferred all production work to its two other plants in Roanoke and Danville. Deliveries held constant in 2008, at 10,239 railcars, but output was expected to a fraction of that total this year. The closure of the Roanoke VA facility indicates that this forecast was on target.

Toby KolstadPresidentRail Theory Forecasts

Enlarged STB might be better than anti-trust legislation for railroads

April 13, 2009

Analysis of:Compromise bill getting close | www.railwayage.com

Railroads, shippers, and legislators seem to be working on a compromise bill that would enlarge the STB and remove some exemptions the railroads currently enjoy from regulatory oversight.  Railroad labor unions have join forces with the rail carriers to oppose the alternate bills that are currently in committee and are expected to advance in both the house and senate next month.  The compromise bill seems to have some chance of passing then either of these pieces of legislation. It will probably be unnecessary legislation and an example of more government waste by the time the bill becomes law since the railroads are already under market pressure to rectify some excessive rates.

Toby KolstadPresidentRail Theory Forecasts

Despite bad weather related weekly carloads, coal traffic is one bright spot of rail traffic.

April 6, 2009

Analysis of:Coal volume slump leads freight traffic decline | www.railwayage.com

Coal traffic was down 21% for the week ending March 28, compared to last year, and railroad ton miles were off 24% for the same period. Blizzard conditions in Wyoming hampered loading operations and contributed to the decline in production and transportation more than any other factor.  Before these numbers were added to the yearly totals, coal traffic was only down 3.9% on a national basis, and all of that loss was in the East and was due to the decline in export sales of Appalachian steam and metallurgical coal. Coal production and railroad traffic in the West was running about even to last year until the weather interfered with mine operations. Moreover, new coal plants coming online this and next year should keep coal traffic climbing, albeit slowly, for a while out of the Powder River Basin fields.

Toby KolstadPresidentRail Theory Forecasts

Railcar builders may have to wait two years or more for their fortunes to improve

March 25, 2009

Analysis of:Is It Time To Jump On Railcar Companies? (TRN, GBX, RAIL, ARII) | community.investopedia.com

Finding good news for railcar builders and lessors is getting harder with each new crisis in the economy. Railroad traffic has declined to levels not seen in many years and surplus railcars are clogging sidings and branch lines and annoying local residents across the nation. Railcar builders are seeing little new demand for their products and are hoping that backlogged orders will not be cancelled by distressed buyers. It is true that much of the fleet is old and will have to be replaced, but the start of that process could be delayed another few years and could be spread out over more than a dozen years into the future. It will take time before the recovery begins, and the recovery of railcar builder will trail the recovery in the overall economy.

Toby KolstadPresidentRail Theory Forecasts

Railroad volumes signal economic contraction has ceased

March 16, 2009

Analysis of:Rail Freight Traffic Down During First Week of March | www.aar.org

Railroad traffic volumes for both carloads and intermodal (container and trailer) shipments have stopped falling, at least in the aggregate if not for all individual commodities. Weekly reports from the American Association of Railroads (AAR) have been pretty consistent in recent weeks with carloads down 15% and intermodal shipments down 15%.  The same comment could be made for rail traffic in Canada and Mexico, although at different levels. Since railroad traffic has been a concurrent indicator of economic activity in the US, the rail data implies that the economy has stopped contracting near the end of the first quarter and has stabilized at a lower rate of output than recorded for the same period in 2008.

Toby KolstadPresidentRail Theory Forecasts

Coal and Rail are both four letter words

March 11, 2009

Analysis of:Companies rethink coal plants | www.usatoday.com

Many companies are scaling back plans to build coal fired electric generating plants, and more states are halting approvals of new coal fired plants already on the drawing boards. During January the EIA cut its forecasted increase in coal fired generating plants in half, and that was before many of the current cutbacks were announced. The Obama Administration and its allies in the Green Movement have stated in unambiguous terms their opposition to any new coal generated electricity. What this means is that there will be no increase in national coal production in coming years, and perhaps even a decrease from the current depressed levels. Since coal accounts for about 30% of all railroad carloads, this does not look good for overall railroad traffic.

Toby KolstadPresidentRail Theory Forecasts

Wabtec forecasts for 2009 freight car and locomotive business appear too rosy

March 4, 2009

Analysis of:Wabtec profit rises 9 percent in 4th-quarter on transportation strength, co. backs outlook | finance.yahoo.com

In their news conference to present the fourth quarter results and to explain their 2009 earning guidance, Wabtec executives gave some of the assumptions they used in arriving at their forecasts. They noted that new freight car production was expected to fall from the 60,000 units produced in 2008 to around 30,000 railcars in 2009 and that new locomotive deliveries were expected to fall 25%. It was noted that half of their freight car business was in the aftermarket (repair) segment that it related to fright car use and that they expected ton-miles to decrease only 5% in 2009. While these projections made sense in January, they now appear too optimistic.  

Toby KolstadPresidentRail Theory Forecasts

Will the railroads be able to repeat their 4Q08 performance during 2009?

February 23, 2009

Analysis of:US rail companies steam through the downturn in profit | www.ft.com

Although railroads saw their traffic volumes decline significantly in the fourth quarter, they managed to keep their revenues from falling as fast by flexing their pricing power during the early part of the year and raising rates in the face of weak or falling demand.  The situation in 2009 looks to be very different; traffic volumes are falling much faster and much farther than they did during the last quarter of 2008, and increasing freight rates will not be able to compensate for that much lost revenue. For the first 6 weeks of the year, carload traffic is down 16.1% and intermodal traffic is down 13.2%, and railroad executives are forecasting only single digit increases in freight rates.

Toby KolstadPresidentRail Theory Forecasts

Greenbrier faces loss of major order for 2009

February 12, 2009

Analysis of:Greenbrier Announces Work Force Reductions and Other Cost-Cutting Measures; Company Expects $16 Million in Annualized Savings | finance.yahoo.com

At the very end of their plant closure and payroll reduction announcements, Greenbrier (GBX) hinted that its contract with GE for 1,000 tank cars in 2009 and 10,000 tank cars to be delivered between 2010 and 2018 is being renegotiated. The 2009 deliveries covered by this contract account for over 50% of the total projected North American deliveries for this company, and any significant reduction could have major consequences. Since Greenbrier does not own either of its two manufacturing operations in Mexico, its realignment options are constrained by operating contracts at both facilities. Given its bleak outlook for the next few years, the moves made in 2009 may become permanent in 2010.

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