Fourth-quarter 2021 freight railcar orders grew by more than 50% from the third quarter, potentially reflecting a favorable market for U.S. railcar manufacturers.
North American freight railcar orders rose to 13,477 railcars in the fourth quarter of 2021, compared with third-quarter 2021 orders of 8,607 railcars and fourth-quarter 2020 orders of 3,397 railcars, according to the Railway Supply Institute’s (RSI) American Railway Car Institute Committee. RSI compiles the data from North American freight railcar builders.
Changes in the number of railcar orders and the order backlog can indicate broader trends in the business cycle.
The order backlog has increased sequentially for the past five quarters, while deliveries remained steady, RSI said. Order backlogs can show where the railcar market is in the supply-and-demand cycle, with the backlog increasing if there is demand for new railcars.
The backlog totaled 42,993 railcars in the fourth quarter of 2021, compared with 37,779 railcars in the third quarter of 2021 and 34,829 railcars in the fourth quarter of 2020.
In analyzing the fourth-quarter figures, transportation analyst Bascome Majors with Susquehanna Financial Group noted that railcar orders had reached their highest single-quarter total since 2018, “with a broad base of demand by car type boosted further by a multidecade high in steel gondola railcar orders.” This “bodes well” for his firm’s constructive view toward the North American railcar cycle into 2023, he said.
Indeed, the two railcar manufacturers and lessors that have recently held quarterly earnings calls, Greenbrier (NYSE: GBX) and GATX (NYSE: GATX), were upbeat about the railcar market’s prospects in 2022.
“For the first time in years, the market for North America seems to have turned a corner and has recovered to a point that the GATX fleet has a pricing leverage,” GATX President and CEO Brian Kenney told investors during the company’s fourth-quarter 2021 earnings call last Tuesday. GATX expects positive lease rate changes upon renewal in 2022.
Greenbrier expects a “strong order book,” rising fleet utilization and fewer railcars being idled in North America in 2022. “We are now ramping up 21 active production lines in North America and approximately eight internationally. Importantly, we are harnessing our flexible manufacturing footprint to extract more production from each line,” Greenbrier CEO Bill Furman said.
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