In a year where we have seen rail traffic fall dramatically, and now gradually recovering, there hasn’t been much news about layoffs by major railroads. Just a few days ago Norfolk Southern announced it was in the process of furloughing an undisclosed number of employees, indicating the mechanical department would be the focus. Certainly, this isn’t the first shift in asset deployment this year for the major railroads in the Nation, however, it is nonetheless a sign of the times.
It is hard to predict future rail carload traffic however one may expect that, for example, the incoming administration, which is apparently committed to battle climate change, is unlikely to foster policies that will foster a rebound in coal and energy carloads. Coal carloads in particular are down about 20% year over year.
We can also measure the impact of the decline in overall energy rail traffic in pricing for small cube covered hoppers that in the not too distant past were in great demand for frac sand service. Pricing today is so low it is hard to imagine leasing companies are doing not much more than avoiding storage costs. As the pendulum typically swings both ways, this will change again we expect and those that take advantage of the marketplace today for this and other railcar types will likely be very pleased they did so in the future.
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