Railinc Senior Data Scientist David Humphrey was in La Quinta, California, March 2-4, to present his annual railcar and locomotive reviews at the Rail Equipment Finance Conference. Corporate Communications sat down with David post-conference to delve into some of the most significant takeaways from this year’s data and event.
Corporate Communications (CC): What were some of the important trends that you touched on when presenting this year’s reviews?
David Humphrey (DH): Despite railcar volumes being down, the size of the revenue-earning fleet still increased in 2019 due to growth in three subfleets: tank cars, covered hoppers and flats. Growth within the tank car subfleet can be attributed to a 2015 regulation requiring older DOT-111 cars to be rotated out of crude oil and ethanol service and new DOT-117 cars to be rotated in. This process is still ongoing for ethanol service, therefore, in 2019, the subfleet grew by 15,000 cars. As for covered hoppers, its growth is driven by economics rather than regulatory requirements. There is a transition in the grain car fleet taking place where smaller, lighter cars are being rotated out of service as they get older because they are expensive to maintain and larger, heavier new C-114 grain cars are replacing them.
CC: Are you able to make any predictions about what lies ahead for the revenue-earning fleet based on this year’s data?
DH: There is a strong possibility that I will share during next year’s presentation that the size of the revenue-earning fleet shrunk in 2020 for the first time in more than a decade. While we’ve recorded small yet steady growth in the fleet these past few years, there are a number of factors currently at play — from the drop off in coal volume to flat intermodal volumes to year-over-year carload volumes being down to precision scheduled railroading idling equipment — that could lead to relatively few cars being built this year. Due to the growing percentage of idle railcars, experts are projecting that between 30,000 to 40,000 railcars will be built this year, which might not be enough growth to offset the number of older cars being idled, retired and scrapped. This could lead to an overall reduction in the size of the fleet at year-end.
CC: How do you feel Railinc, and these reports, add significant value to the Rail Equipment Finance Conference?
DH: Railinc is responsible for the Umler® system, which is the one database in which all railcars used in interchange service in North America must be registered. We have ready access to this data, plus we work with this data all of the time. Other organizations may receive parts of files from time to time, but still, they aren't spending as much time with the data as we are. So, Railinc is able to exclusively offer a comprehensive view of a dozen different subfleets, presented in a consistent view year over year, to attendees.
CC: What were some other general topics touched on by this year’s speakers at the conference?
DH: Almost everyone spoke about the COVID-19 outbreak to some extent; several speakers hypothesized that intermodal volumes will be down through the summer due to the impact the virus has had on Chinese manufacturing and exports. Also, in past years, there’s been a lot of conversation around how the coal business is steadily declining. This year, we heard from a representative of the National Coal Transportation Association, who stated that the coal business will continue to persist through 2050, maybe even 2065. Because coal is an abundant resource in the United States and has a higher energy density than alternative energy sources, such as solar rays or wind, they project that coal will continue to be a significant source of energy for electricity through mid-century.
CC: What was one of the most interesting takeaways from the conference?
DH: Graham Brisben, CEO of PLG Consulting-Logistics Consultants, presented on the current state of the plastics business in North America. He shared that in recent years, the United States has become a net exporter of petroleum and energy products, a trend that is likely to hold. This is great news for plastic producers. Through fracking, the United States is capable of producing large amounts of cheap gas and crude oil at low costs, which has led to record-high production levels. As developing nations continue to drive demand for plastic products, they’ll look to the U.S. because we can harness this cheap energy to create plastic resin pellets. Therefore, Brisben stated, the plastics subfleet is currently very healthy and he’s predicting steady growth moving forward.