Freight car suppliers forecast a market slowdown

Railway Age, Jan, 1997

Freight car manufacturers have enjoyed steady increases in business since 1991, but they may now be heading into a period of belt tightening.

Johnstown America has called attention to a shrunken backlog. The Greenbrier Companies President and CEO Bill Furman says that "while we're optimistic about 1997, the overall demand for railcars is not anticipated to be as strong as in 1996.

"In addition, while intermodal loadings have improved, we continue to experience what we believe is a temporary decline in intermodal markets. Therefore, 1997 is a more uncertain year in which it may be difficult to sustain the growth of previous years."

Now, Thrall Car Manufacturing President John Carroll puts numbers to the forecasts. Last year, he told a railroad/supplier group in Chicago last month, the delivery total of 60,800 cars was the highest since 1980, and in 1996 "deliveries of 54,900 units will be far stronger than expected entering the year." But he quickly added, "industry backlog shrank every quarter throughout the year, and the Jan. 1, 1997, backlog will only be four to five months' production at current production rates."

American Railway Car Institute numbers back him up. From a backlog of 32,574 cars last Jan. 1, the numbers have dropped to 32,355 on April 1, to 28,424 on July 1, and to 24,000 on Oct. 1 (RA, Dec. 1996, p. 1).

So, at this point, John Carroll sees deliveries falling from 54,900 units in '96 to 41,600 next year and to 40,500 in 1998, representing "a market decline of one-third in three years."

As for emerging trends in 1997 and beyond:

* Almost all new cars will be built for 286,000 pounds gross rail load.

* There will be "increased use of aluminum, composites, and other non-milled steel materials."

* "Industry standards for quality, functionality, and reliability in freight cars have irrevocably changed."

* There will be a continuing shift among railcar buyers "toward shippers and financiers."

John Carroll also sees the market mix changing somewhat from 1995 through 1998. His predictions on this aspect of the freight car market are detailed in the accompanying chart.

Thrall Car's John Carroll: A changing market mix through 1998

Car type                     1995     1996   1997   1998
Boxcars                      2,000    3,200  2,000  2,000
Large covered hoppers        4,200    6,000  6,600  5,000
Small covered hoppers       14,500   22,600 10,000  9,000
Coal cars                   13,000    6,000  6,000  7,000
Mill gons/coil cars          2,500    2,500  2,000    500
Centerbeam/89-foot flats     2,500      500  2,000  2,000
Intermodal                  10,500    1,500  3,000  5,000
Tank cars                   10,500   11,600  9,000  9,000
Other types                  1,100    1,000  1,000  1,000
Total                        60,800  54,900 41,600 40,500