In an article published in Railway Age, Matt Elkott (analyst at Cowen and Company) indicates their modeling anticipates an increase in demand for railcars in 2021 and 2022 that will be significantly above demand (measured as orders for new equipment) in 2020. In fact, they project a 77% demand for new car orders in the coming year. To us, increased demand for new railcars will also indicate an increase in demand overall for railcars in the secondary market. Here are the reasons they offer to support this anticipated spike in demand:
- Lessening of the decline in railcar traffic as 2020 has come to an end, coupled with a projected overall net growth next year;
- Nearly 100,000 fewer railcars in storage in December as compared to July 2020;
- A potential for interruptions in reliable service by the Class I railroads in the coming years due to the challenges of implementing Precision Scheduled Railroading (meaning to us more railcars in transit or awaiting service; and,
- Continuing normal demand to replace a range of railcar types due to age and other factors.
Also, it makes sense to recognize that the number of orders for new equipment in 2020 can only be considered in light of the tremendous uncertainty over how the pandemic would unfold and its overall effect upon the economy and various business sectors. With the availability of new treatment methods and vaccines, we should all anticipate there will be a “return” to business decisions not clouded by this veil of uncertainty.
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