With the auto industries not selling cars I have noticed that lots of autoracks are parked in sidings and some have not moved in months. Who is paying the lease while they just sit there?
GrogWith the auto industries not selling cars I have noticed that lots of autoracks are parked in sidings and some have not moved in months. Who is paying the lease while they just sit there?
The railroads are paying the bill. Most autoracks are owned by TTX, a car-leasing company that is owned by the railroads, or by railroads themselves (in some cases the rack is separately owned from the flatcar it's welded to). The mortgage on the cars has to still be paid each month to the bank that loaned TTX the money to buy the cars from a carbuilder. If TTX's revenues don't cover the bills, then the railroads are assessed dues.
RWM
Car owner (pool) and they pay to store them too if not railroad owned at 2.50(?) a day.
In the midst of all of this gloom and doom (and I, too, have seen strings of racks moving to wherever they can be stored), I should point out that new auto racks are still being built. This past week I saw several Trinity-built racks (both bilevel and trilevel) on older TTX-owned flat cars--racks built in about November, rack numbers with AOK reporting marks, but the racks themselves carrying Ferromex (bilevel) and Canadian Pacific (trilevel) markings.
I suspect that eventually some of the oldest flat cars (and the racks thereon) will be cut up for scrap, and that other flats will be de-racked and used (one sincerely hopes) for moving things necessary for infrastructure revival: power poles, windmill parts, rebar, and, yes, lengths of rail.
Carl
Railroader Emeritus (practiced railroading for 46 years--and in 2010 I finally got it right!)
CAACSCOCOM--I don't want to behave improperly, so I just won't behave at all. (SM)
So a 50 car train costs someone $125.00 every day they sit idle? Thats $3,750.00 a month. $11,250.00 for 3 months for just that one train? That does not factor in the loss of revenue the cars would have produced.....WOW! Anyone have a ballpark idea of how many cars are sitting parked?
GrogSo a 50 car train costs someone $125.00 every day they sit idle? Thats $3,750.00 a month. $11,250.00 for 3 months for just that one train? That does not factor in the loss of revenue the cars would have produced.....WOW! Anyone have a ballpark idea of how many cars are sitting parked?
More like $15 a day per car for the lease payment to the bank. The $2.50 a day is the track space for storage. Of course if it's a railroad-owned car on its own railroad, it's paying the storage charge to itself.
OK. 50 cars at $17.50 per day. $15.00 lease + $2.50 parking. Thats $875 per day. $26,250 per month or $78,750 for 3 months and the loss of revenue. You know the rates are going to go up once shipping starts again.
GrogOK. 50 cars at $17.50 per day. $15.00 lease + $2.50 parking. Thats $875 per day. $26,250 per month or $78,750 for 3 months and the loss of revenue. You know the rates are going to go up once shipping starts again.
Rates are "what the traffic will bear." I think it's going to be a long, long time before auto buyers will bear much of a rate at all.
I know of a shortline that's storing over 1000 cars for a Class One, at $1 a day, per car. They weren't using the tracks anyhow, so aside from the cost of spotting the cars, it's all gravy. It's certainly helping to pay the bills.
I've been told that at least some of the cars being stored are "in the bank" against future car purchases - instead of selling the cars for scrap now and having the steel go directly overseas.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
tree68 I've been told that at least some of the cars being stored are "in the bank" against future car purchases - instead of selling the cars for scrap now and having the steel go directly overseas.
James
The Butler tree68 I've been told that at least some of the cars being stored are "in the bank" against future car purchases - instead of selling the cars for scrap now and having the steel go directly overseas. Mr. Larry, by "in the bank" do you mean they will be traded in on the new cars?
I"m not sure I totally understand the concept - I think the steel is the thing - perhaps they can get a break because they're supplying the raw material for the car as opposed to having to buy it on the open market. The steel still has to be processed into the actual materials needed to build the new cars, but I think there are mills that do that sort of thing using recycling techniques.
Bear with me, I can be a little slow at times. Are you implying the railroads store the cars until time for new ones arrives, then scaps the old cars, and then uses the money to pay for the new railcars?
Cars get stored when there aren't enough loads for a car type to support that type in the fleet as it exists. If and when loadings for the car type rebound the cars are pulled out of storage and used to support the business again.
If the long term business projections for car use indicate that there is no likelyhood of a business rebound to utilize all of the the car type that is stored, the fleet of that car type will be culled of the oldest, most maintenance intensive members of that car type in the fleet. Those cars that are scrapped will provide a level of revenue that will be used for anything the carrier may need it for at the time the revenue is recieved - engines, track, new cars of an active car type, fixed facilities.
Never too old to have a happy childhood!
BaltACD is correct, and I am also having trouble wrapping my head around the idea that TTX or a railroad would intentionally lose money.
If you own something called "scrap metal" -- which might be in the shape of a freight car -- there's only two things you can do with it: sell it for market value today, or store it anticipating the market will rise and sell it when the market rises. Scrap metal is an analog for money, and just like money, you invest it wisely. In any case, it's a simple calculation to discount the future value of the scrap metal value (whatever you think it will rise to) using whatever you predict the interest rate will be, between now and the day and you sell it. In general, you either have to be predicting either a very high future value for scrap, or a very low interest rate, to want to sit on the scrap metal for any appreciable length of time, because it cannot be loaned like money so earns you no interest, but in contrast it costs you money to store it, insure it, and, if you do not own it, to make payments to the bank you borrowed the money from in the first place.
I don't think anyone is predicting a return in the near future to the stratospheric scrap prices of early 2008, so I think the reason the railroads are parking these cars have nothing to do with any plan to scrap them in the near future. They're parked because there's nothing else to do with them, but someone thinks there might be demand for them to move autos in the future. If there was an expectation that the demand for new autos in North America will never be enough to put them back to work, then they would go to scrap despite the low scrap value at the present time.
Foreign vs. domestic steel making or ownership of the scrap steel resource is not relevant.
I only know what I was told by an employee of the shortline that's storing them.. I'm also under the understanding that the hoppers in question aren't really serviceable anymore.
As the stored auto racks I hear that FEMA is stockpiling them and adding shackles......
Railway Man I don't think anyone is predicting a return in the near future to the stratospheric scrap prices of early 2008, so I think the reason the railroads are parking these cars have nothing to do with any plan to scrap them in the near future. They're parked because there's nothing else to do with them, but someone thinks there might be demand for them to move autos in the future. If there was an expectation that the demand for new autos in North America will never be enough to put them back to work, then they would go to scrap despite the low scrap value at the present time. Foreign vs. domestic steel making or ownership of the scrap steel resource is not relevant. RWM
Automotive sales are typically 15 million vehicles yearly in U.S. Sales are off 30% and are in the 10.5 - 11 million range. When will production pickup? That is the big question right now.
United States personal savings rate is now approaching the 8% level, which is very amazing since we have been a net consumer over the past years, rather than saving. The American consumer has seen the writing on the wall and understands (at long last) the need to have an emergency fund set behind. Using the home as an ATM in the form of HELOC, while it did stimulate (overly so) the economy has proven to be in bad form.
One dollar per day seems pretty cheap for storage.
ed
If you look at January's figures it is a 9 million annualized production rate....although I personally believe we are bottoming out in that regard.
>>>>Sales are off 30% and are in the 10.5 - 11 million range.
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Many short line RR & museums store RR cars during a major downturn in rail traffic. The RR's don't want them on the properity as they take up track space in yards. Remember when traffic flow is good these cars are out on the mainline in a train going someplace. With no auto's to transport you got to put them someplace, preferably out of the way & not plugging up your yard.
Charging a couple of bucks per day and "a switching in & out fee" is great for the short lines & museums, espically this time of the year as most museums are shut down for the winter & have no $$$$$$ comming in. It helps pay the bills or the refurbishing of a piece of equipment.
CShaveRRIn the midst of all of this gloom and doom (and I, too, have seen strings of racks moving to wherever they can be stored), I should point out that new auto racks are still being built. This past week I saw several Trinity-built racks (both bilevel and trilevel) on older TTX-owned flat cars--racks built in about November, rack numbers with AOK reporting marks, but the racks themselves carrying Ferromex (bilevel) and Canadian Pacific (trilevel) markings.
GA SW RR has miles of baretables of various vintages parked on all of their end of line spurs. Bet they wish that they had kept the Cof GA track north of Columbus instead of pulling it up for additional storage.
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