Steel industry demand for rail cars poised to pop

Mar 31, 2011 | 07:00 PM | Gregory DL Morris

Tags  Rail cars, American Railcar Industry, Jim Cowan,

After several very lean years, North American demand for rail freight cars is expected to boom this year and continue on that course for the next few years, according to rail car manufacturers, railroads and major shippers. At the same time, rail car design advances will increase the amount of steel used in each one, especially in new high-pressure tank cars.

The entire U.S. rail car industry delivered just 16,500 cars last year, the lowest level since 1987, according to Jim Cowan, president and chief executive officer of American Railcar Industries Inc. (ARI), St. Charles, Mo., noting that normal production averages 45,000 cars per year to replace those retired, which are mostly scrapped.

With only 16,500 cars delivered last year and just 22,000 in 2009, there is clearly pent-up demand in the system, Cowen said. "Most freight cars can last 50 years, and the decision point to scrap and replace usually comes at about 40 years. There are several variables in the equation, including scrap prices and shipper demand for rail capacity. There is a point where there is a pull from the scrap value of an older car. Now that we are up to $400 a ton for scrap, there is starting to be a pull, but it is not like back in 2008 when the market went crazy."

ARI at the end of February completed delivery of 240 new taconite cars for Canadian National Railway Co.’s Mesabi & Iron Range subsidiary in Minnesota, replacing a 50-year-old design.....