“There’s no shortage of remarkable ideas, what’s missing is the will to execute them.” – Seth Godin
AAR Rail Time Indicators
The AAR just released its monthly Rail Time Indicators Report where it reports railcars in storage. As of June 1, 2020, there were 520,729 empty railcars in storage (31.2% of the North America’s rail car fleet), representing roughly a 102,600 unit increase (+24.5%) month over month and a 209,700 unit increase year over year (+64.7%). This is the largest sequential increase on record and the highest level of cars in storage on record. The market has been impacted by the temporary closure of businesses and production facilities. The auto market alone represented roughly one-third of the increase in railcars in storage. We believe the data over the next couple of months will be more normalized and believe that we are peaking or soon to peak with the amount of railcars heading to storage. However, we do expect railcars in storage to remain around historical highs for the next couple of months due to the economic downturn, PSR implementation, new car construction and crude by rail headwinds.Railcar Storage
The financial impact of late on leasing companies, car owners and lessees has been significant. If one was to assume an average cost of $4 pcpd for rail car storage (some areas are significantly higher and some are lower depending on location) for each railcar in storage, that would mean that the current burn rate for these companies is roughly $2.1 Million per day or $766 Million on an annual basis. Railcar storage is approaching a billion dollar a year industry – go figure. If you are a short line or storage operator please keep in mind that this windfall is not going to last forever. Customer satisfaction diligence and good service is imperative through these difficult times for shippers. If you are a shipper it is prudent to lock in rates and flexibility in contracts when you can, but please do not procrastinate, as spots are filling up quickly. Folks, Americans are innovative and resilient – it has amazed us at PFL the new facilities that are coming to market or nontraditional areas where one could store cars hitting the market on a weekly basis and the creative nature of the American people and how we have worked together to absorb the impact of excess railcars. Longer term we expect a sharp reversal of rail cars leaving storage, but it is difficult to predict when this will happen. It is all up to consumer behavior as we reopen the U.S. economy.
Looking Ahead, We Do See Some Light at the End of the Tunnel
Positive Note:
- Jobs report came out for May 2020 and we actually added 2.5 million jobs during the month of May which was completely unexpected considering the state of the economy. The current unemployment rate now stands at 13.3%. We did expect unemployment to come in at closer to 20%, but we are happy to see that did not happen!
- Auto sales are bouncing off or lows (See today’s PFL Rail Report)
- Consumer confidence is up believe it or not.
Head Winds:
- Low crude oil environment – pipelines are not full. We need to see pipelines get full before crude by rail will have a place in the market.
- Demand destruction rebound – when will we get back to a normalized supply/demand structure.
- Supply chain realignment or disruptions.
If you are need of or have storage available or if you need maintenance, the cleaning of cars or are looking to reposition cars in a cost effective manner, call PFL today! We can trouble shoot your situation and work diligently to find a solution for you!
If you are a leasing company and having cars being returned on lease call PFL today to secure a return on lease location.
Loaded hazmat storage in key market areas is still available, so please give PFL a call today.
Live Railcar Storage Availability
As a storage operator or a user of storage, PFL can help maximize you profitability. PFL offers turn-key solutions to operators and users alike. PFL Field Services LLC is preforming work inside many storage operations and short lines. PFL Field Services will clean railcars, service railcars cars and scrap cars on a mobile basis with a PFL Guarantee and has crews available ready to serve you today no matter where you are at in the country. We have acquired top rated, brand new equipment to service you the customers. PFL Field Services also offers inspection services from top rated qualified inspectors now full time at PFL. Call us today to book a time! Our goal is to provide a win/win scenario for all and we can handle virtually all of your railcar needs onsite at a storage facility. Saving a user empty moves to a shop. Not only is it more efficient saving time and money for the car owner or lessee and lessor but retains the short lines storage customer at the facility over the long term. PFL handles loaded storage, empty storage mobile railcar cleaning, blasting, mobile railcar repair and scrapping of all railcars at storage facilities across the country. If you are an operator and have cars onsite that your customers need to have work done let them know you can do it via PFL Field Services. We can assist on return on lease scenarios saving Lessor and Lessee thousands of dollars. Call the desk today 239-390-2885.