Followers | 241 |
Posts | 12089 |
Boards Moderated | 1 |
Alias Born | 04/05/2009 |
![](http://investorshub.advfn.com/images/default_ih_profile2_4848.jpg?cb=0)
Wednesday, June 03, 2015 10:08:13 AM
By Nick Carey
Oil railcar makers hoping for a lasting boost in demand from tougher North American safety standards may be in for a disappointment.
Factors including volatile oil prices and a loophole allowing shippers to keep running older cars could leave rail car makers like Trinity Industries Inc and Greenbrier Co with a capacity glut, once initial orders for cars that comply with tougher safety rules are filled, analysts and industry officials said.
Investors cheered safety standards issued in early May after a string of deadly accidents involving trains hauling crude oil.
The U.S. rules call for retiring by 2025 older tank cars that lack safety features such as thicker hulls, shields to protect the ends of each car, and pressure-relief valves. Canadian rules are similar, but not harmonized with the U.S. ones.
The order backlog for tank cars hit record levels of over 52,000 in the first quarter. At current production levels, it would take five quarters to fill that demand. KeyBanc Capital Markets analyst Steve Barger estimates the rules could push the price tag for a tank car to $160,000, up from $130,000.
The top tank car manufacturers are a mixture of publicly-traded and private companies. Trinity is the market leader, followed by Greenbrier and American Railcar Industries Inc, then privately-held National Steel Car, Union Tank Car and a number of smaller operators.
Robert Pickel, senior vice president for marketing and sales at National Steel Car, said about 140,000 tank cars could be affected by the new rules. But he described the industry's outlook as "very fluid and changing" thanks to low energy prices.
'UNPROVEN AND UNRELIABLE'
"They all have to be modified to one degree or another," he said. "The question is how many will be replaced or retrofitted."
Leasing companies will have to decide whether to buy new cars or spend up to $60,000 refurbishing 20-year-old tank cars or $10,000 on year-old models, Pickel said.
Resistance from railroads to new technology is one risk to future demand for the tank car makers.
The U.S. regulations mandate electronically controlled pneumatic brakes, which trigger all axles simultaneously rather than one at a time as in the current design. The requirement should bolster brake makers Westinghouse Air Brake Technologies Corp and Knorr Brake Company, but the prospects for a jump in orders are cloudy given major railroads' firm opposition.
The electronically controlled brakes "remain unproven and unreliable," No. 2 U.S. railroad BNSF's Chief Executive Carl Ice said in a speech Wednesday at the annual meeting of the National American Rail Shippers Association.
Another potential problem for rail car makers is a loophole in the new U.S. regulations that could allow many older cars to stay in service.
The Transportation department rules apply only to trains with "a continuous block of 20 or more tank cars loaded with a flammable liquid or 35 or more tank cars loaded with a flammable liquid dispersed through a train."
'TOO MUCH CAPACITY'
A DOT spokesman said the rules are aimed at long trains hauling crude out of the Bakken shale formation in North Dakota. But shippers could keep older cars in service to haul other flammable liquids such as ethanol, and configure shorter trains to stay below the limits in the rule.
"In my opinion, you ought to be matching the regulation with what's inside the car" rather than to train length, said Ed Hamberger, who heads industry lobby group the Association of American Railroads.
Tank car makers have ramped up production in anticipation that all tank cars would need to be replaced, but the way the rules are written could mean up to a third of tank cars or more remain in service, said Art Hatfield, an analyst at Raymond James.
"The industry has hurt itself by building too much capacity," he said.
After the new tank car regulations were released, railcar lessor GATX Corp said 13,700 of its tank cars could be affected, but added that number "could be substantially less" depending on how many travel in larger trains.
A plant being built by equipment maker Vertex Rail will lift the U.S. industry's already swollen annual production capacity by 5,000 to 45,000, said Andreas Aeppli, a principal at consulting firm Cambridge Systematics. The industry normally replaces 10,000 tank cars a year.
"With this massive capacity overhang, we could see a pricing war," Aeppli said. (Editing by Joseph White and Christian Plumb)
http://www.reuters.com/article/2015/06/01/oil-railways-idUSL1N0YN1ET20150601
"Someone said it takes 30 years to be an instant success" - Gabriel Barbier-Mueller, CEO of Harwood International
Recent TRN News
- Trinity Industries, Inc. Announces Date for Earnings Release • Business Wire • 07/09/2024 08:15:00 PM
- Trinity Industries, Inc. to Host Investor Day on June 25, 2024 • Business Wire • 06/17/2024 10:55:00 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/05/2024 08:02:21 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 06/04/2024 08:04:29 PM
- Form 11-K - Annual report of employee stock purchase, savings and similar plans • Edgar (US Regulatory) • 05/31/2024 09:09:02 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/23/2024 08:10:17 PM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/23/2024 08:01:17 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:35:45 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:35:11 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:34:57 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:34:42 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:34:29 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:34:16 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:34:03 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:33:29 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:33:13 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:32:45 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:32:24 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:32:04 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/22/2024 08:31:47 PM
- Trinity Industries, Inc. Announces Pricing of Offering of $200.0 Million of Additional 7.750% Senior Notes Due 2028 • Business Wire • 05/21/2024 11:54:00 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/21/2024 12:53:11 PM
- Trinity Industries, Inc. Announces Offering of Additional 7.750% Senior Notes Due 2028 • Business Wire • 05/21/2024 12:51:00 PM
- Trinity Industries, Inc. Declares Quarterly Dividend • Business Wire • 05/20/2024 08:05:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/17/2024 08:54:05 PM
FEATURED ELEMENT79 GOLD CORP PROVIDES UPDATE ON CHACHAS COMMUNITY CHARTER AND REVENUE GENERATION, M&A ACTIVITIES • Jul 30, 2024 8:00 AM
Avant Technologies Opens Equity Line with GHS Investments as Company Explores Expansion into Additional Technologies • AVAI • Jul 30, 2024 8:00 AM
INDEXR AI Merges With Moon Equity Holdings Corp. (MONI), Creating a Leading-edge Technology Company • MONI • Jul 29, 2024 9:59 AM
Cannabix Technologies to Deliver Innovative Breath Logix Alcohol Screening Device to Texas, USA • BLOZF • Jul 29, 2024 9:07 AM
BNCM AND DELEX UNVEIL POST-MERGER MANAGEMENT PLANS • BNCM • Jul 29, 2024 9:00 AM
Glidelogic Corp. Announces Revolutionary AI-Generated Content Copyright Protection Solution • GDLG • Jul 26, 2024 12:30 PM