PFL Railcar Report 2-3-2020

“You don’t make the poor richer by making the rich poorer.”

Winston Churchill

Groundhog’s Day

We hope that everyone had a great Super bowl celebration. Yesterday was also Groundhog Day. Punxsutawney Phil was awoken from his wintry sleep and predicted an early spring as he did not see his shadow good news for farmers and bad news for energy companies selling energy. Out of last 103 forecasts by the groundhog only 17 called for an early spring. We will see if Phil is right this year!

Oil Posted its Largest Monthly Loss

Oil posted its largest monthly loss since May 2019 during the month of January, as fears of the coronavirus continue to rise. With crude trading near $51 a barrel, OPEC are considering calling an emergency meeting. Potential dates being discussed are Feb. 8-9 and Feb. 14-15, though for now the next regular meeting on March 5-6 remains on schedule. OPEC, meanwhile, is holding a meeting of technical representatives – the Joint Technical Committee – on Tuesday and Wednesday to assess the coronavirus’ effect on markets and demand, according to delegates. 

Flights to China have been Suspended

Airlines have suspended flights to China, copper prices are plunging, and industrial activity in mainland China is scaling back. At least 21 provinces, municipalities and regions in China have told businesses not to resume work before February 10 at the earliest basically shutting down half of China. If you are a non-resident in the U.S. and you have been to China in the last 15 days you are going to be refused entry into the United States – if you are a resident expect to be quarantined for 14 days once you touch U.S. soil. (Australia and other Countries have adopted the same U.S. rules) 

Demand Destruction Evident

Demand destruction is certainly evident and it seems the market is anticipating a prolonged demand destruction environment, with the DOW closing down 603 points on Friday. Returning from a long holiday for the first time since the coronavirus’ threat became clear, Chinese investors sent shares in China down about 9 percent this morning. The latest reported death toll from the coronavirus outbreak has risen past 360 and total confirmed cases have reached almost 17,400.

We had weak earnings for the biggest oil and gas companies last week. Chevron reported its largest quarterly loss in a decade after writing down $10.4 billion, largely related to its Appalachian shale gas assets. Exxon earned $5.69 billion in the fourth quarter, down from $6 billion a year earlier. But that number was made better by a one-time $3.7 billion divestment in Norway. Shell saw its fourth quarter earnings fall in half from a year earlier, weighed down by lower oil and gas prices, as well as weaker refining and chemical margins.

PFL’s call….This day will pass. With impeachment seemingly behind us (for now), a China/U.S. trade deal, USMCA passed by both the House and the Senate we should be good to go if we can get a handle on coronavirus.

North American Rail Volumes

Total North American rail volumes were down 3.6% year over year in week 4 (U.S. -7.1%, Canada +1.4%, Mexico +30.5%), resulting in quarter to date volumes that are down 6.3%. 7 of the AAR’s 11 major traffic categories posted year over year decreases with the largest declines coming from coal (-19.5%), intermodal (-3.1%), nonmetallic minerals (-5.2%) and forest products (-8.3%). The largest increases came from petroleum (+14.4%), metallic ores & metals (+7.9%) and farm products & food (+5.6%).

In the East

CSX’s total volumes were up 1.4%, with the largest increase coming from intermodal (+3.8%). The largest decrease came from coal (-7.5%). NSC’s total volumes were down 8.9%, with the largest decreases coming from intermodal (-9.5%) and coal (-23.2%).

In the West

BN’s total volumes were down 4.0%, with the largest decreases coming from intermodal (-3.6%), coal (-5.8%) and stone sand & gravel (-26.9%). UP’s total volumes were down 13.4%, with the largest decreases coming from intermodal (-15.2%), coal (-38.3%) and stone sand & gravel (-23.6%). The largest increase came from petroleum (+30.6%).

In Canada

CN’s total volumes were down 0.3% with the largest decrease coming from coal (-31.2%). The largest increase came from petroleum (+19.7%). RTMs were up 4.0%. CP’s total volumes were up 7.4%, with the largest increases coming from intermodal (+13.4%) and petroleum (+50.1%). The largest decrease came from coal (-29.4%). RTMs were up 7.7%.

Kansas City Southern

KCS’s total volumes were up 16.2%, with the largest increase coming from intermodal (+34.5%).

The Railway Supply Institute

The Railway Supply Institute reported last week industry railcar statistics for the fourth quarter of 2019. New orders improved 1,200 units (+16%) to 8,500 units (from 7,300 units in Q3 2019), the backlog fell 12% to 51,300 units. The slight improvement in orders was driven by a 1,400 unit increase in tank car orders that offset a 200 unit decline in non-tank orders. We believe the railcar demand environment will likely remain weak in the quarters due to freight market uncertainties, possible prolonged demand destruction and PSR implementation.

North American Rig Count

North American Rig count is down 1 rig week over week with the U.S. losing 4 and Canada gaining 3 rigs week over week. Year over year we are down 251 Rigs collectively.

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The market is extremely active. Storage is continuing its trend with many facilities filling up. This trend is causing some facilities to expand their operations to accommodate the demand.

PFL offers turn-key solutions to maximize your profitability. Our goal is to provide a win/win scenario for all and we can handle virtually all of your railcar needs. Whether it’s loaded storage, empty storage, subleasing or leasing excess cars, filling orders for cars wanted, mobile railcar cleaning, blasting, mobile railcar repair, or scrapping at strategic partner sites, PFL will do its best to assist you. PFL also assists fleets and lessors with leases and sales and offers Total Fleet Evaluation Services. We will analyze your current leases, storage, and company objectives to draw up a plan of action. We will save Lessor and Lessee the headache and aggravation of navigating through this rapidly changing landscape.

Hot Markets

PFL is offering:

• 340Ws for long and short term lease
• 117Rs last in diesel service
• 4750 cu covered hoppers for sale or purchase
• Various box cars for lease, 31.8’s clean and last in refined products.

PFL is seeking:

• 117s with magnetic gauging devices for lease
• 89 ft flat cars for purchase
• DDG hoppers for lease
• 117Js last in ethanol
  

Live Railcar Markets