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Rail sector poised to make huge capital investments

Keywords: Tags  metals transportation, rail transportation, Burlington Northern Santa Fe Railway Co., Matthew K. Rose, Bill Beck

Rail transportation, the backbone of the nation’s metals sector logistics system, is poised to make major capital investments to add to its fleet in 2013 and beyond. Much of that capital investment is being fueled by a boom in domestic gas and oil production unprecedented since the 1950s.

Burlington Northern Santa Fe Railway Co. (BNSF), Fort Worth, Texas, recently announced a planned 2013 capital commitment program exceeding $4 billion. About 25 percent of that will be used to acquire new locomotives, freight cars and other equipment.

“This record capital plan continues our long-term focus on ensuring our network is prepared for the growing U.S. demand for freight rail,” chairman and chief executive officer Matthew K. Rose said. “We are focused on investing to meet our customers’ expectations and to expand capacity where growth is occurring. Given the importance of our low-cost supply chain to the U.S. economy, our privately funded rail infrastructure is well positioned to ensure the U.S. ability to compete in global markets.”

Much of the fleet investment will be targeted at upgrading BNSF’s armada of rail tank cars. BNSF is the major rail supplier for the Bakken shale in western North Dakota, which has catapulted the prairie state to the No. 2 oil producer in the United States. The Bakken shale is ill-served by existing pipelines, and producers have been using rail to ship oil east to refineries and processing terminals. BNSF expects its volume from Bakken to skyrocket to an estimated 500,000 barrels per day by year-end from 400,000 barrels per day in 2012, and could top 1 million barrels per day within five years.

That’s good news for steel and metals producers on two fronts. BNSF is making a significant investment in a manufacturing resurgence that is being sparked by the oil boom. And the Texas rail giant will be a big end-use customer for the steel used to make all of those rail tank cars.

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