{"id":307,"date":"2020-03-09T12:00:41","date_gmt":"2020-03-09T16:00:41","guid":{"rendered":"http:\/\/pflpetroleum.com\/reports\/?p=307"},"modified":"2023-07-28T11:07:46","modified_gmt":"2023-07-28T15:07:46","slug":"pfl-railcar-report-3-9-2020","status":"publish","type":"post","link":"https:\/\/pflpetroleum.com\/reports\/pfl-railcar-report-3-9-2020\/","title":{"rendered":"PFL Railcar Report 3-9-2020"},"content":{"rendered":"\n
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\u201cThe best argument against democracy is a five-minute conversation with the average voter.\u201d<\/strong><\/p>\nWinston Churchill<\/cite><\/blockquote>\n\n\n\n

News Flash: Dow Jones futures plummeted Sunday night in overseas trading, along with S&P 500 futures and Nasdaq futures, as an all-out crude oil price war adds to coronavirus fears. Trading in S&P futures was halted in overnight trading once levels hit the maximum allowed drop of 5%. Covid-19 cases are increasing rapidly in the U.S. and Europe, with northern Italy on lockdown. Meanwhile, crude oil futures are crashing as Saudi Arabia ramped up production following Friday’s OPEC+ collapse. Treasury yields plunged to fresh record lows, approaching near zero yields.<\/strong><\/u><\/p>\n\n\n\n

Folks it was a busy week for\nconferences last week!<\/u><\/strong><\/p>\n\n\n\n

The Rail Equipment Finance\nConference<\/strong> was held in Palm Springs, California.  While we missed it this year due to conflicts,\nwe were able to get a summary for you on the main topics of discussion.<\/p>\n\n\n\n

Conference attendance\nheld up well – <\/strong>Turnout was 350 people down just 20% year over year\non COVID-19 concerns.<\/p>\n\n\n\n

No quantifiable\nimpact from the spread of<\/strong> COVID-19\u2026.yet! –<\/strong> Industry\ncontacts, rail suppliers have not yet seen impacts on their businesses that are\ntraceable to COVID-19. Specifically, no customer cancelations or deferments\nappear to have occurred as a result of the outbreak.<\/p>\n\n\n\n

Intensifying\ndemand headwinds in near term is base case assumption but abrupt spring\/summer recovery\nis possible- <\/strong>There appears to be consensus that freight demand\nwill come under further pressure in the next several weeks as a result of COVID-19\ndisruptions of global supply chains and potential negative impact on consumer\nspending. However, if springtime virus containment hopes materialize, a\nsomewhat abrupt rebound could occur, driven by replenishment of depleted\ninventories.<\/p>\n\n\n\n

Demand remains soft but has not worsened materially in recent weeks –<\/strong> <\/strong>Railcar\ninquiries remain fairly solid, but translation into orders continues to be low.\nIndustry orders came in at 9,500 units and 8,400 units in Q319 and Q419,\nrespectively. This is apparently below projected replacement demand.<\/p>\n\n\n\n

PFL did attend the Opis LPG Summit last\nweek in San Diego and SWARS in Galveston <\/strong><\/p>\n\n\n\n

Main topics of discussion\nOpis:<\/strong><\/h2>\n\n\n\n

Attendance was lower than\nanticipated but Canadians were there in full force escaping the cold!  <\/strong>Many Energy companies have instituted\nnon-essential travel bans including BP and Shell over COVID-19.<\/p>\n\n\n\n

Pressure car length and\ntightening supply seemed to be the theme <\/strong>(for now \u2013 we all know how quickly\nthat can change in the LPG space) \u2013 New projects are coming on line in the not\nso distant future and we are seeing a barrel shift with more supply being supply\nbeing sourced from Mont Belvieu to export into Mexico. Sending Edmonton bbls\ninto Mexico is no longer favorable and more of Canadian LPG\u2019s are making their\nway to the West Coast for export overseas. <\/p>\n\n\n\n

Main topics of discussion\nSWARS<\/strong><\/h2>\n\n\n\n

Attendance was robust \u2013\nreceptions were full and the speakers great.<\/strong>  Service companies and storage companies are happy\nand busy.  Lessees looking to reposition\nfleets and lessors are looking for market share. <\/p>\n\n\n\n

If\nyou have any questions about any of the above conferences or want to\ntroubleshoot with PFL please call us now at 239-390-2885.  We will be attending SEARS on Tuesday and\nspeaking on storage trends and hope to see you there!<\/strong><\/p>\n\n\n\n

The impact of COVID-19 on\nworld economies is not over yet as markets struggle to define a bottom. <\/strong>The\nmarket\u2019s gradual rise to record highs over the first three weeks of February\ntook a sudden turn in the final week of the month, resulting in heavy losses\nfor equity indexes. The Dow dropped around 10% for the month, the S&P 500\ntumbled around 8%, and the NASDAQ fell around 6%. Last week, believe it or not,\nwas slightly up week over week.   There\nis uncertainty as to how COVID-19 will continue to effect supply chains, demand\ndestruction and ultimately consumer spending – the life blood of the U.S.\neconomy.  <\/strong>U.S. consumer spending\ngrew 0.2% in January 2020 from December 2019. The average month over month gain\nwas 0.4% in the first half of 2019 and 0.3% in the second half, so spending was\nalready slowing over the course of last year. Anything at or above 0.3% from\none month to the next is considered pretty good; January\u2019s 0.2% is on the\nweaker side. <\/p>\n\n\n\n

If the COVID-19 spreads\nwidely into U.S. communities, consumers are likely to limit their exposure to\nstores, theaters, restaurants, sporting events, air travel, and other places\nwhere people congregate in confined spaces. There is likely to be some advance\nbuying and increased online shopping, but much of the discretionary spending that\nwe have seen may not occur. <\/strong><\/p>\n\n\n\n

The danger we run if we see a continued decline in equities is that consumers may not feel as rich as they once were and tighten their purse strings accordingly, especially as more Baby Boomers continue to approach retirement.  Though consumer spending growth is slowing, personal consumption expenditures are currently about 70% of US economic output.<\/strong> The most recent numbers for Personal consumption expenditures (PCE) are at an all-time high of $14.87 trillion, with total US GDP around $21 trillion. If consumer spending starts to wane, the whole economy could suffer. Let\u2019s hope we don\u2019t get to that point so keep spending America. <\/strong><\/p>\n\n\n

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\"Personal<\/figure>\n<\/div>\n\n\n

Total\nNorth American rail volumes were down 8.3% year over year in week 9 <\/strong>(U.S.\n-9.6%, Canada -4.7%, Mexico -4.4%), resulting in quarter to date volumes that\nare down 5.1% (U.S. -6.8%, Canada -2.0%, Mexico +7.2%). 7 of the AAR’s 11 major\ntraffic categories posted year over year declines with the largest decreases\ncoming from intermodal (-12.4%), coal (-20.8%), non-metallic minerals (-5.2%)\nand grain (-5.8%). The largest increases came from petroleum (+16.7%), farm\nproducts & food (+13.9%) and metallic ores & metals (+4.6%). <\/p>\n\n\n\n

In the East, CSX\u2019s\ntotal volumes were down 2.9%,<\/strong> with the largest decrease coming from\ncoal (-31.4%). The largest increase came from petroleum (+38.6%). NSC\u2019s total volumes were down 11.5%,<\/strong>\nwith the largest decreases coming from intermodal (-8.6%) and coal (-35.2%). <\/p>\n\n\n\n

In the West, BN\u2019s\ntotal volumes were down 10.1%,<\/strong> with the largest decreases coming from\nintermodal (-15.5%), coal (-20.0%) and stone sand & gravel (-19.7%). UP\u2019s total volumes were down 7.7%,<\/strong>\nwith the largest decreases coming from intermodal (-19.7%), coal (-9.6%) and\nstone sand & gravel (-18.7%). The largest increases came from petroleum\n(+39.9%) and chemicals (+7.0%). <\/p>\n\n\n\n

In Canada, CN\u2019s\ntotal volumes were down 13.4%<\/strong> with the largest decreases coming from\nintermodal (-26.4%), grain (-33.1%) and motor vehicles & parts (-24.0%).\nThe largest increases came from metallic ores (+16.2%) and farm products\n(+119.6%). RTMs were down 9.3%. CP\u2019s\ntotal volumes were up 15.6%,<\/strong> with the largest increases coming from\nintermodal (+14.6%), petroleum (+79.7%) and chemicals (+19.6%). The largest\ndecreases came from grain (-22.9%) and coal (-15.5%). RTMs were up 14.7%. <\/p>\n\n\n\n

KCS\u2019s\ntotal volumes were up 1.7%,<\/strong> with the largest increase coming from\npetroleum (+56.7%). The largest decrease came from coal (-35.4%).<\/p>\n\n\n\n

For the\nmonth of February North American rail volumes declined 6.6% year over year\ncompared to the 3.8% year over year decrease in January.<\/strong> While COVID-19\nmay have played some role in the weakness, volumes were also negatively\nimpacted by rail blockades in Canada, accelerating coal declines and lingering\nheadwinds from trade and economic uncertainty.<\/p>\n\n\n\n

Looking ahead, we expect rail volume weakness to\npersist in the near term. <\/p>\n\n\n\n

North American Rig count is down 34 rigs week over week<\/strong> with the U.S. gaining 3 rigs and Canada losing 37 rigs week over week.  Year over year we are down 220<\/strong> rigs collectively.<\/p>\n\n\n\n

North American Rig Count Summary<\/strong><\/h2>\n\n\n
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Source: Baker Hughes<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n
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PFL is offering: <\/strong>340Ws for long and short term lease, 117Rs last in diesel service, various box cars for lease, 31.8\u2019s clean and last in refined products and 25.5K 117Js coiled and insulated, 5000 CFC Center Flow Pressureaide Covered Hopper cars that have recently been cleaned.Call PFL for details today!<\/p>\n\n\n\n

PFL is seeking: <\/strong>23.5Ks and 25.5Ks for fuel oil products, 117s with magnetic gauging devices for lease, 89 ft flat cars for purchase, 100 mil gons for short term lease, 117Js last in ethanol, and 4750s for use in coke service. <\/p>\n\n\n\n

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