Railcar Owners Shrink Idled Car Fleet in October

In a sign of growing strength in rail freight demand, North American railcar leasing firms and other car owners pulled 12,799 more railcars out of storage in October, said the Association of American Railroads.

That follows a drawdown in September of 17,638 idled cars and 10,759 in August, the AAR said, after a May-June slowdown that never saw owners reactivate even 6,000 railcars in a single month.

Industry sources say while owners are scrapping some older cars -- when scrap steel prices are attractive enough versus the cost of getting the equipment ready for cargo service -- by far most of the reduction in parked railcars reflects improving demand to get them back into the active fleet.

By The Numbers: Freight Cars in Storage.

Many of them first must go through maintenance shops for checks and minor repairs. Some equipment is also undergoing major refurbishment, including some older intermodal well cars that were designed for 48-foot domestic containers and are being lengthened for the 53-foot boxes now in demand.

Equipment owners that parked cars on sidings and in rail yards during the 2008-09 downturn include leasing fleets, railroads and shippers.

The AAR said they still had 318,275 stored as of Nov. 1, meaning those cars had not been used in revenue service for at least 60 days. That is 20.8 percent of the total fleet in the U.S. and Canada, down from 21.6 percent a month earlier.

At the bottom of the recession, nearly 32 percent of all North American railcars were stored, and the AAR said owners have pulled 185,000 out of storage since mid-2009.

They still have a long way to go, however. The trade group estimated that “when the economy and the rail industry are at their healthiest, around 2 percent or 3 percent of freight cars are in storage.”

The AAR has reported the following 2010 monthly drawdowns of parked railcars:

October, 12,799.
September, 17,638.
August, 10,759.
July, 5,808.
June, 3,064.
May, 747.
April, 18,000.
March, 31,500.
February, 21,079.
January, 8,924.

-- Contact John D. Boyd at jboyd@joc.com.