PFL Railcar Report 10-4-2021

“Stop trying to make everybody happy – you’re not tequila”. – Emmy Rossum

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Jobs Update

• Initial jobless claims for the week ending September 25th came in at 362,000, up 11,000 people week over week.
• Continuing claims came in at 2.802 million people versus the adjusted number of 2.820 million people from the week prior, down 18,000 people week over week.

Stocks closed higher on Friday of last week but down week over week

The DOW closed higher on Friday of last week, up +482.54  points (1.43%), closing out the week at 34,326.46 points, down -471.54 points week over week. The S&P 500 closed higher on Friday of last week, up +49.5 points and closed out the week at 4,357.04, down -98.44 points week over week. The Nasdaq closed higher on Friday of last week, up +118.12 points (0.82%) and closed out the week at 14,566.7, down -491 points week over week.

In overnight trading, DOW futures traded lower and are expected to open at 34,100 this morning down 68 points.

Oil up on Friday of last week and up week over week

West Texas Intermediate (WTI) crude closed up +85 cents on Friday of last week, or (1.1%) on Friday of last week, to settle at  $75.88, up +$1.90 per barrel week over week, while Brent futures closed up +97 cents, or (1.2%), to settle at US$79.28 per barrel up +US$1.19 per barrel week over week. Goldman expects Brent oil prices to hit $90 by year-end as supply tightens.  Goldman Sachs raised its forecast for year-end Brent crude oil prices to $90 per barrel from $80, as a faster fuel demand recovery from the Delta variant and Hurricane Ida’s hit to production led to tight global supplies. Brent futures hit a near three-year high last week as global output disruptions have forced companies and prompted governments (U.S. and China) to pull large amounts of crude out of storage to put a cap on prices.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.6 million barrels week over week. At 418.5 million barrels, U.S. crude oil inventories are 7% below the five-year average for this time of year.

Total motor gasoline inventories increased by 200,000 barrels week over week and are 3% below the five year average for this time of year.

Distillate fuel inventories increased by 400,000  barrels week over week and are 12% below the five-year average for this time of year. 

Propane/propylene inventories increased by 2.6 million barrels week over week and are 19% below the five-year average for this time of year.

Propane prices continue to rise along with global LNG prices as Asian LNG spot prices hit an historical high on Thursday of last week.  Northeast Asian LNG spot prices surged to an all-time high on Thursday of last week as buyers across the world compete for barrels due to seasonally low inventories in Europe.  November front-month spot levels closed at $34.45 per MMBtu on Friday of last week in the U.K. breaking the previous record of $33.65 per MMBtu set in January this year when Northeast Asia grappled with a frigid winter and supply outages. Supply tightness has also been further exacerbated by higher demand from South America, where countries are grappling with lower hydro electric power output due to droughts.

These developments have been a plus for coal and rail ironically – the higher Natgas goes the more coal we use here in the U.S. and elsewhere. In fact, coal prices soared to their highest on record as China accelerated it’s buying of late. High-quality thermal coal loaded on ships at the Newcastle port in Australia surged to $203.20 a ton last week, breaking the previous record set in July 2008. Newcastle is the benchmark price for Asia, the world’s largest market for coal.  Coal traffic is up significantly year over year and so is consumption here in North America – exports are up as well.  This has been and continues to be great news for rail, but arguably not so good for the environment.

Overall total commercial petroleum inventories increased by 10.9 million barrels week over week.

U.S. crude oil imports averaged 6.6 million barrels per day for the week ending September 24, 2021, up by 87,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged 6.1 million barrels per day, 18.7% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) averaged 989,000 barrels per day, and distillate fuel imports averaged 300,000 barrels per day for the week ending September 24, 2021.

U.S. crude oil refinery inputs averaged 15.4 million barrels per day during the week ending September 24, 2021 which was 67,000 barrels per day more week over week. Refineries operated at 88.1% of their operable capacity week over week.

Oil is lower in overnight trading and WTI is poised to open down as of the writing of this report, WTI is poised to open at 75.77, down  11 cents per barrel from Friday’s close.

North American Rail Traffic

Total North American rail volumes were down 1.9% year over year in week 38 (U.S. -1.3%, Canada -4.5%, Mexico +0.7%) resulting in quarter to date volumes that are flat year over year and year to date volumes that are up 8.2% year over year (U.S. +9.3%, Canada +5.3%, Mexico +5.9%). 4 of the AAR’s 11 major traffic categories posted year over year decreases with the largest declines coming from intermodal (-7.3%) and motor vehicles & parts (-28.4%). The largest increases came from coal (+21.5%) and metallic ores & metals (+18.2%). 

In the East, CSX’s total volumes were down 1.2%, with the largest decrease coming from motor vehicles & parts (-36.8%). The largest increase came from coal (+9.3%). NS’s total volumes were down 2.5%, with the largest decreases coming from intermodal (-7.5%) and motor vehicles & parts (-31.1%). The largest increase came from coal (+19.1%). 

In the West, BN’s total volumes were down 1.3%, with the largest decreases coming from grain (-23.4%), intermodal (-2.7%) and motor vehicles & parts (-40.3%). The largest increase came from coal (+10.6%). UP’s total volumes were down 1.3%, with the largest decrease coming from intermodal (-12.1%). The largest increase came from coal (+36.6%). 

In Canada, CN’s total volumes were down 1.9%, with the largest decrease coming from intermodal (-9.2%). The largest increase came from coal (+67.4%). Revenue per ton miles was down 3.8%. CP’s total volumes were down 4.1%, with the largest decreases coming from motor vehicles & parts (-51.9%), farm products (-35.8%) and grain (-23.9%). The largest increase came from coal (+25.9%). Revenue per ton miles was down 4.1%. 
KSU’s total volumes were down 8.5%, with the largest decrease coming from intermodal (-18.2%).

Source: Stephens

Rig Count

North American rig count is up by 10 rigs week over week. The U.S. rig count was up by 7 rigs week over week, and up by 262 rigs year over year. The U.S. currently has 528 active rigs. Canada’s rig count was up by 3 rigs week over week, and up by 90 rigs year over year and Canada’s overall rig count is 165 active rigs.  Overall, year over year we are up 352 rigs collectively.   International rig count is up by 10 rigs week over week and up by 85 rigs year over year. Internationally there are 787 rigs active.

North American Rig Count Summary

A few things we are keeping an eye on:

SWARS

PFL attended SWARS last week – This was the best conference in two years hands down!  The final count of attendees was 595 people as the American Rail Industry got back to work.  The speakers were great and the organizers of SWARS did a fantastic job.  Everyone was looking their best (it was nice to wear a suit again), shook hands (who said we weren’t going to shake hands again??) and even hugged when appropriate.  People were networking once again – cutting deals and the tone was upbeat and heck, the hotel even ran out of vodka one night!   For information as it relates to SWARS latest event in Dallas and details please contact PFL’s desk for further details. 239-390-2885.  The next SWARS meeting will be in the Woodlands in March – we will see you then –  God willing, PFL will be attending in full force.

Petroleum Carloads

The four-week rolling average of petroleum carloads carried on the six largest North American railroads fell to 24,513 from 24,713 a loss of 260 rail cars week over week. Canadian volumes were mostly higher  – CP shipments were flat and CN shipments were up by 15.5%.  U.S. volumes were mostly lower week over week. The CSX had the largest percentage decrease, down by 15.8%.

Enbridge Line 3

Enbridge announced on Wednesday of last week that line three will be operational as of October 1 and that it would begin flowing oil on Friday of last week.  This step marks the full replacement of the entire 1,765-kilometre/1,097-mile-long pipeline from Edmonton, AB. to Superior, WI. Enbridge said that with new state-of-the-art, thicker-walled pipe, its completion ensures a safe, reliable supply of North American crude oil to U.S. refineries, helping fuel the quality of life for millions of people.

Line 3 Replacement Project

“After more than eight years of many people working together, extensive community engagement, and thorough environmental, regulatory and legal review, we are pleased that Line 3 is complete and will soon deliver the low cost and reliable energy that people depend on every day,” said Al Monaco, Enbridge President and Chief Executive Officer. “From day one, this project has been about modernizing our system and improving safety and reliability for the benefit of communities, the environment and our customers.

The $8.2 billion project allows Enbridge to roughly double its capacity to 760,000 barrels per day.

Line 3, which was built in the 1960s, carries oil from Edmonton, Alberta, to refineries in the U.S. Midwest, but for years was transporting less than its capacity because of age and corrosion. The project was opposed by environmental and Native American groups, particularly in Minnesota, the last stage of the expansion.

Enbridge began filling the line on October 1 with linepack.  Linepack is needed to fill the pipe initially so as one molecule of crude enters the pipeline  one molecule of crude comes out the other end – an instantaneous process but the pipe needs to be filled first.  Typically all pipeline companies own the linepack. Enbridge then intends to offer full capacity of 760,000 barrels per day in November of this year. Earlier last month, the company told shippers it would offer 620,000 bpd of crude capacity during the month of October.

Line 3 is the first major Canadian oil pipeline expansion to be completed since Enbridge’s Alberta Clipper project, finished in 2015. However, since 2019 Enbridge has also optimized parts of its existing Mainline system, adding roughly 150,000 bpd of capacity.

On the back of the news, Canadian basis numbers tightened on Friday of last week.  WCS began the trading day on Friday of last week (day one of the trade cycle) at -$11.60 per barrel against WTI before reaching an intraday high of -$11.50 per barrel but ultimately closed the trade session at -$12.00 a barrel.  The impact on rail is obvious with more pipe now online crude by rail that was itching to get started will be affected on a commercial basis, however, for a producer with excess supply, current WTI pricing would still provide a decent netback at the wellhead despite tighter differentials.   

CP & KCS merger

On Thursday of last week, the STB announced its approval for its previously granted voting trust which will now be applied to the merger. This is in-line with our previous opinion that the CP transaction should not have any material issues moving forward.

We are watching China

Not only is Europe in trouble meeting the peoples energy demands China has its hands full right now and their economy may be contracting – China’s factory activity unexpectedly shrank in September due to wider curbs on electricity use and elevated input prices. A shortage of coal, tougher emissions standards and strong demand from manufacturers and industry pushed coal prices to record highs and triggered widespread curbs on electricity usage in at least 20 provinces and regions in China.

The official manufacturing Purchasing Managers Index (PMI) was at 49.6 in September versus 50.1 in August, data from the National Bureau of Statistics (NBS) showed on Thursday of last week, slipping into contraction.  Higher raw material prices, especially metals and semiconductors, have also pressured manufacturers.

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We have been extremely busy at PFL with return on lease programs involving rail car storage instead of returning cars to a shop.  A quick turnaround is what we all want and need.   Railcar storage in general has been extremely active.  Please call PFL now at 239-390-2885 if you are looking for rail car storage, want to trouble shoot a return on lease scenario or have storage availability.  Whether you are a car owner, lessor or lessee or even a class 1 that wants to help out a customer we are here to “help you help your customer!”

Leasing and Subleasing has been brisk as economic activity picks up. Inquiries have continued to be brisk and strong Call PFL Today for all your rail car needs 239-390-2885

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PFL is seeking:

• 30, 29k coiled and insulated CPC1232s for use in biodiesel. Can be dirty with biodiesel, diesel or renewable diesel. Needed for one year.
• 100, 400W pressure cars for Propylene service. Preferred dirty to dirty for one year.
• 10-20 propane cars needed for a short term lease in ND off the CP.
• 70-90 Biodiesel cars C&I any type car in the midwest or TX 1-2 years
• 100 15K Tanks 286 for Molten Sulfur in the Northeast CSX/NS for 6 months negotiable
• 200 117Js 28.3 C&I 286 in the North on the CN for 1 year Crude dirty to dirty Negotiable
• 70, 5150 Covered Hoppers needed in the Midwest for 3 Month starting October. Any class one
• 20 5650 PD Hoppers 286s needed in Montana for talc BNSF for 3-5 years
• 100 Open Top Hoppers needed in the Midwest for coal BNSF 1 year
• 100, 5800 Covered Hoppers 286 can be West or East for Plastic 3-5 years
• 50-100, 4750 Covered Hoppers needed for Pet-coke. Can take in the South.
• 70, 117R or J needed for Ethanol for 3 years.  Can take in the South.
• 30, 25.5’s or greater food grade Kosher veg oil cars for 6-12 months
• 50, 6500+ cu-ft Mill Gon or Open Top Hopper for wood chips in the Southeast for 5 Years.
• 25 bulkhead flats 286 any class one for up to 5 years Negotiable
• 10 open top hoppers 2400 C FT in Texas needed for stone on the UP 3-5 years
• 20, 19,000 Gal Stainless cars in Louisiana UP for nitric acid 1-3 years – Oct negotiable
• 10, 6,300CF or greater covered hoppers are needed in the Midwest.
• 15-25, 20K 23.5K cars for chem needed in the South for 1 Year
• 2, 89’ Flat cars for purchase or lease – needed in TX off the BNSF

PFL is offering:

• Various tank cars for lease with dirty to dirty service including, nitric acid, gasoline, diesel, crude oil, Lease terms negotiable, clean service also available in various tanks and locations including Rs 111s, and Js – Selection is Dwindling. Call Today!
• 200 Clean C/I 25.5K 117J in Texas. Brand New Cars!
• 34 Clean C/I 25.5K CPC 1232’s located in PA.
• 200 117Js 29K OK and TX Clean and brand new – Lined- lease negotiable
• 142 111’s Clean last in gasoline in Texas for lease off the UP – negotiable
• 200 plus 4750 Covered Hoppers 263s off the CN For Sale
• 100 117Rs dirty last in Gasoline in Texas for lease Negotiable
• 20 117R 30K plus tanks for ethanol in Wisconsin off the CN Negotiable
• 90 117Rs 30K located in Alberta CN or CP Refined Products Dirty – negotiable
• 37 BRAND NEW 5161 Sugar Hoppers in Arkansas UP – negotiable
• 99 340W Pressure Cars various locations Butane and Propane dirty negotiable
• 100 73 ft 286 GRL riser less deck, center part for sale,
• 19 auto-max II automobile carrier racks – tri-49 for sale – negotiable
• 10 food grade stainless steel cars
• 20 20K Stainless cars in 3 locations in the south – negotiable
•  30 CPC 1232 25.5K C/I Pennsylvania NS clean negotiable
• 100-150 29K C/I 117J cars for lease. Dirty in Bakken crude and can be returned dirty.
• 100 29K C/I 1232 cars for lease. Dirty in Heavy Crude and can be returned dirty.
• 100 117Rs 29K clean last used in crude Washington State – price negotiable sale or lease
• 21 111s 29K tanks last in alcohol dirty on the CN in Wisconsin for lease price negotiable
• 100 111s of various volumes and locations last in fuel oil dirty price negotiable
• Various Hoppers for sale and lease 3000-5800 CF 263 and 286 multiple locations negotiable
•  45 Boxcars 60ft Plate F’s Located in Tenn CSX – Lease Negotiable
•  28 20K Veg oil cars for lease in Arkansas – Negotiable
• 100 3200 Covered Hoppers for sale price negotiable
• 100 Center beam Flats with risers 73ft in SD and Iowa for sale negotiable

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Call PFL today to discuss your needs and our availability and market reach. Whether you are looking to lease cars, lease out cars, buy cars or sell cars call PFL today 239-390-2885

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.

PFL IS READY TO CLEAN CARS TODAY ON A MOBILE BASIS WE ARE CURRENTLY IN EAST TEXAS

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