“Pain doesn’t tell you when you ought to stop. Pain is the little voice in your head that tries to hold you back because it knows if you continue you will change.”
Kobe Bryant
The Coronavirus Pandemic
Folks, what a week last week was in the markets. The market went from being bullish crude to bearish seemingly overnight as news erupted over the coronavirus virus hitting China in a big way and spreading. The virus is related to the SARS virus that broke out in 2003 that infected over 8,000 people worldwide killing over 10% of those that were infected.
Early reports indicate that this particular coronavirus strain may not be as deadly as SARS was, but needless to say, has the markets concerned as equities sold off as well on the back of potentially softening demand for virtually everything. China is taking the matter very seriously. China’s President Xi Jinping said that China is facing a grave situation over the Wuhan coronavirus epidemic, according to Chinese state media. Chinese health officials say the strain came from wild animals sold at a market in Wuhan a city of 11 million.
There are 50 million people on lock down in China right now and Hong Kong is cancelling school until February 7th. We are already seeing demand destruction in energy as flight bans are in effect in China and travel is at a standstill. Goldman Sachs estimated that demand for crude could be reduced by as much as 250,000 barrels per day. Be prepared for a volatile week in commodities and equities alike. We are set to open much lower on crude due to demand concerns and futures in equities are down across the board. Let’s hope authorities get this one under control quickly.
North American Rail Volumes
Total North American rail volumes were down 8.8% year over year in week 3 (U.S. -8.0%, Canada -16.0%, Mexico +10.3%), resulting in quarter to date volumes that are down 7.2%. 8 of the AAR’s 11 major traffic categories posted year over year decreases with the largest declines coming from intermodal (-8.1%), coal (-22.7%), grain (-19.5%), forest products (-15.8%) and motor vehicles & parts (-7.6%). The largest increase came from metallic ores & metals (+2.3%).
In the East
CSX’s total volumes were down 3.8%, with the largest decreases coming from intermodal (-5.9%) and coal (-11.4%). NS’s total volumes were down 11.8%, with the largest decreases coming from intermodal (-11.4%) and coal (-25.9%).
In the West
BN’s total volumes were down 4.6%, with the largest decreases coming from coal (-11.9%), petroleum (-23.5%) and grain (-13.0%). UP’s total volumes were down 11.1%, with the largest decreases coming from intermodal (-16.1%) and coal (-34.4%).
In Canada
CN’s total volumes were down 15.5% with the largest decreases coming from intermodal (-16.3%), coal (-33.4%), chemicals (-15.2%), motor vehicles & parts (-20.9%) and lumber & wood (-33.4%). RTMs were down 19.8%. CP’s total volumes were down 13.5%, with the largest decreases coming from grain (-44.5%), coal (-31.3%) and chemicals (-18.3%). RTMs were down 22.0%.
Kansas City Southern
KCS’s total volumes were up 2.8%, with the largest increases coming from petroleum (+39.9%) and intermodal (+6.1%).
Crude Railcars
Some good news is we are seeing quite a few crude cars come out of storage. Some are going to the Bakken and a big chunk are heading to Canada to fill up and make their way to the Gulf as continued pipeline constraints by Enbridge have made economics favorable, for now. WCS Basis in Alberta closed at -24 on Friday while WCS at Houston fell by roughly 80 cents per barrel to -4.25 per barrel leaving $19.50 per barrel for transportation and arbitrage. We see the UP and CN benefitting the most from the increased rail activity as they are allowing unit car train service for R’s where the BN is refusing that traffic.
New York Fracking Ban
In other interesting news, New York Governor Andrew Cuomo announced last week that legislation would be put in place that would make the state’s current fracking ban permanent.
The measure would restrict the state’s Department of Environmental Conservation (DEC) from approving permits that would authorize the ability to drill, deepen, plug back or convert wells that use high-volume hydraulic fracturing as a way to complete well projects.
Cuomo announced the legislation in the fiscal-year 2021 executive budget.
“New York’s leadership on hydraulic fracturing continues to protect the environment and public health, including the drinking water of millions of people, and we must make it permanent once and for all,” Cuomo said in a press release.
North American Rig Count
North American Rig count is down 2 rigs week over week this time with the U.S. losing 2 and Canada holding steady week over week. Year over year we are down 253 Rigs collectively.
Despite the reduced rig count U.S. oil production continues to grow as operators have concentrated on well competitions. The EIA said last week that production from US shale basins is expected to rise by 22,000 barrels a day to 9.2 million barrels per day. Overall US production is roughly 13 million barrels per day.
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 accomodate the demand.
We have been busy with all sorts of subleases, trouble shooting for return on lease programs and turn keyed storage programs to reduce costs and maximize utilization. Call PFL today for the latest and greatest!
Hot Markets
PFL is offering:
- Long term 340w pressure cars for lease.
- 4750cu covered hoppers for sale or lease. Clean and/or last in refined products.
- 31.8k’s & various 117’s available for lease or purchase.
- 6200cu 286GRL plastic pellet covered hoppers.
- Bulkhead & center beam flats for lease (riser or riserless).
- Various Boxcars for lease.
PFL is seeking:
- DDG Hoppers for a 1-3 year lease.
- 117J’s last in ethanol service for lease.
- 286GRL boxcars for purchase
- 286GRL wood chip gondolas for purchase
- 89 Ft Flat Cars for purchase.
Live Railcar Markets
| CAT | Type | Capacity | GRL | QTY | LOC | Class | Prev. Use | Clean | Offer | Note |
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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.