Nearly 25% Of Cars In Storage Nationwide

A Year of Declining Carloads Due to Strategic (Psst ... PSR), Cyclical, and Seasonal Forces Press Storage Capacity - Everywhere but New England.

05 January, Nationwide – As the effects of Precision Scheduled Railroading and a slowing economy converge, 24.4% of freight cars were parked as of 01.January, up from 16.7% in October 2018 {AAR}. Much of the contraction in railcar demand reflects more efficient fleet use by Class 1 railroads, and a national 9.6% YOY carload decline {AAR, 11.Jan.2020}.

Hoppers, tankers hit hard

Nearly 30% of the covered hopper fleet is stored. Covered hopper storage rose sharply in late 2019, reflecting normal seasonal grain movements, compounded by the eroding impact of trade tariffs on China. Covered hopper demand has also been hit by more local sourcing of frack sand. Tank cars rank second in stored types, at ~26%, largely due to the decline in domestic crude oil shipments as oil prices remain soft. The January rise in crude prices is starting to put more tank cars back on the rails. Open hoppers and gondolas continue to pile up amid coal’s bottomless fall. Some are finding work repurposed to handle increasing waste movements. At the other end of the market, only 16% of the intermodal flat car fleet is stored and only 10% of auto rack cars are stored {Bascome Majors, Susquehanna Financial Group “Rail Equipment Update,” 05.Jan.2020}.

{SFG “Rail Equipment Update”}.

New England immune – so far

Happily, New England is largely exempt from most of these fluctuations. Crude oil was never moved in the region more than one train per day; there is no grain export activity, and only modest regular imports supplying the relatively few processing facilities; frack sand has never been part of the traffic mix; and coal has been a minuscule factor for years. As a primarily import-supplied region, New England is “home” to relatively few railcars, and even fewer non-seasonal idle ones. A telling fact is that Pan-Am’s traffic grew in 2019.

Regionally, only Vermont Rail System has stored significant quantities of cars. Until a recent revival, hundreds of Omya tankers and covered hoppers stood idle, in addition to the seasonally-idle heating oil and propane tank cars. According to railfan reports, Pan-Am had held about 100 stored lumber and box cars in Maine, though that batch seems to be declining. Genesee & Wyoming advertises the NECR having space for 412 cars, and St. Lawrence & Atlantic having 175 cars worth of space, yet their yards remain largely empty.

{SFG “Rail Equipment Update”}.

Alternate opportunities

The storage surplus represents an opportunity for certain shippers and producers to take advantage of lower delivery cost. Aggregate and cement producers can utilize the many two-bay covered hoppers and open coal hoppers that are suited to sand & gravel. Regionally railroads do move cement and aggregate but trucks move a lot more, despite the large trainload scale volume of these moves.

Some rail cars are stored loaded. For example Pan-Am and Vermont Rail System have for several years brought propane cars into New England to wait for higher winter demand. As winter heating season kicks in, cars return to circulation. Nationally only 2% of stored cars have loads {Majors}.

Some deliveries are seasonal, for example heating oil cars that deliver to Vermont and New Hampshire are stored during summer months. Heating oil, which is now largely trucked from regional ports, represents another opportunity to use tank cars that are no longer qualified for upgraded crude oil specifications.