Last month, Railinc Senior Data Scientist David Humphrey was in La Quinta, California, to present his annual railcar and locomotive reviews at the Rail Equipment Finance Conference. Railinc’s Corporate Communications team 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): 2021 marked the second consecutive year we’ve seen the total size of the revenue-earning fleet contract. The three equipment groups largely responsible for this trend are coal cars, box cars and covered hoppers, and all for similar reasons as we’ve discussed in the past. As we continue our orderly transition away from coal deliveries, the coal car population will continually shrink. Within the boxcar fleet, there is still that tension between the shippers and suppliers as to how quickly and how many of the box cars leaving actually need to be replaced. As for declines in the covered hopper population, that’s primarily due to there being too many covered hoppers with small cubic feet recently constructed for the sand business.
Separately, car volumes stayed relatively stable for the younger half of the fleet, whereas more cars within the 26-50 year age range were retired earlier than is typical. Because spot market rates for scrap steel have been relatively high, I believe that’s driven car owners with older assets to go ahead and scrap their older cars. Therefore, more of these cars have left the fleet over the past year.
CC: Are you able to make any predictions about what lies ahead for the revenue-earning fleet based on this year’s data?
DH: Prior to the onset of the Russia-Ukraine conflict, I would’ve predicted that we would absolutely see more cars being built in 2022, 2023 and 2024 than in the last two years collectively. I’m still optimistic that we will experience a period of robust building in 2023 and 2024, as long as there isn’t an unforeseen escalation of this conflict that directly affects North America. What’s still to be determined, though, is which cars will the right type of cars to build right now. This year’s presentation was the first year that I placed emphasis on the aging grain covered hopper fleet and box car fleet during my presentation.
I pointed out that 59,000 grain cars — representing 300 million cubic feet of capacity — will age out of the fleet in the next decade and will need to be replaced. Similarly, there are 37,000 box cars within the last ten years of their lives and it’s still an open question of how many will need to be replaced. I highlight this now because in the rail industry, if something’s coming our way in the next 10 years, that’s really right around the corner. It takes planning to set aside the capital, materials and time to build these cars and I think we need to plan to start building grain covered hoppers and box cars each year.
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 was one of the most interesting takeaways from the conference?
DH: As I’ve referenced in past years, there has been a lot of conversation around the technology advances locomotives could make in the next few years. Although there are no new high-horsepower line-haul locomotives being built right now, due in part to the excess of locomotives that’s occurred from adopting precision scheduling railroading, it seems as though anyone who makes locomotives is looking ahead to what’s next.
As for what’s next? That could be a shift from diesel- powered to compressed natural gas, green hydrogen, blue hydrogen, even battery-powered units! Personally, I’ll be keeping an eye on Cummins and its journey to developing a hydrogen-powered internal combustion engine in the early 2030s. Hydrogen locomotives would have a significant impact on making the world greener and Cummins has the potential to be a titan in this space.
Click here to read the full railcar report.
Click here to read the full railcar report.