Last month, Railinc Senior Data Scientist David Humphrey presented the 2021 railcar and locomotive reviews at the virtual 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.
Corporate Communications (CC): What were some of the important trends that you touched on when presenting this year’s reviews?
David Humphrey (DH): For the first time in more than a decade, the total size of the revenue-earning fleet declined last year, by about one percent from 1.66 million to 1.64 million. That decline was due to both the impact of precision scheduled railroading and the recession-like period caused by the COVID-19 pandemic that resulted in fewer than average new car orders. Additionally, several phenomena observed in the subfleets in 2019 — such as the sizeable reduction of the coal fleet population and absence of new cars added to the sand and cement fleet — persisted in 2020. Finally, in the boxcar and grain subfleets, cars that are 40-years-old and older are leaving the fleet in large quantities and being replaced with new cars.
CC: Are you able to make any predictions about what lies ahead for the revenue-earning fleet based on this year’s data?
DH: I expect to see high single-digit percentage decreases in the coal fleet year after year. 2020 marked the second consecutive year we saw a large decrease in the total coal car fleet — 11,017 cars lost to be precise. The loss of those cars is a clear reminder that what was once a big, significant part of the railroad industry that was very heavily relied on for decades is in decline and no one expects anything other than a slow, methodical closing down of that business. It’s still at least 20-40 years away, but it’s a bit sobering to everyone because nobody expects any increases; everyone knows where that coal business is going.
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: How do you expect the impact of the COVID-19 pandemic recession to affect long-term freight rail industry trends?
DH: I don’t anticipate the COVID-19 pandemic to have a serious, significant impact on longer term trends. Railroads are used to weathering economic shocks, most recently in 2001-2002 and 2008-2009. While there were a short term disruption in the number of new cars added to the fleet during each of those periods, we saw additional building activity in the following few years that focused on adding the right number of and type of cars back to the fleet. I think we’re going to experience something similar in regard to the COVID-19 recession. The number of cars built in 2020 and 2021 may be down from the average number of cars built per year set in these past couple of decades, but in 2022 and beyond, I expect to see a rebound in the number of cars that get added to the fleet to make up for that short falling. The COVID-19 recession may slow things down for a couple of years, but I don’t think it’s anything unprecedented for railroads. They’ve been through difficult times before and they’ll navigate their way through difficult times again.
CC: What was one of the most interesting takeaways from the conference?
DH: There has been a lot of conversation around the technology advances locomotives could make in the next few years. Two years ago, when asked this question, I referenced CNGmotive’s REF presentation on building a locomotive tender that runs partially on compressed natural gas. Now, the conversation has grown to include using liquified natural gas, compressed natural gas, lithium batteries and even hydrogen fuel cells as fuel sources for locomotives. Each have their advantages and disadvantages and we’re at least two or three years away from those types of advancements, I think. But it’s on the horizon.