According to a recent Railway Age report, Cowen and Company experts are anticipating a potential 90% increase in industry orders for railcars in 2021. They attribute this positive outlook to four elements:
- Inquiries for new railcars are increasing, indicating higher demand;
- They anticipate the decline we have seen in rail traffic since the pandemic started to gradually recede and forecast growth in 2021 of about seven percent;
- They anticipate Class I railroads may not be able to meet the increased demand for railroad-owned railcars, which itself may drive further orders for new private cars; and,
- An increase in demand for certain car types as a replacement for an aging fleet. They mention grain railcars, boxcars, and plastic pellet railcars in particular.
So, what impact would higher demand for new railcars have upon the overall secondary marketplace? Clearly, some buyers will seek to fill an immediate need in the secondary market as either a replacement for or in sync with the lead time associated with new orders.
As we have indicated in recent posts, the expectation of growing demand for rail capacity as North America comes out of the pandemic-related slow-down will very likely make it more difficult and expensive to add to or upgrade your fleet in the future.
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