FINANCIAL EDGE, RAILWAY AGE APRIL 2025 ISSUE: The 39th Rail Equipment Finance Conference, held March 2-5, 2025, reflected an atmosphere of cautious optimism in very uncertain (some say crazy) times, when what was thought to be the case one day makes a U-turn overnight. Here is a summary of the presentations, as well as the key takeaways. Bear in mind, though, that this conference was held one month prior to POTUS 47’s global tariff bombardment.
John Orr (Norfolk Southern Chief Operating Officer), in a fireside chat with Railway Age Editor-in-Chief William C. Vantuono, discussed that increasing train velocity and decreasing loading dwell times are key NS objectives today. NS continues an ongoing pivot to service and safety and is implementing technology for customer and railroad benefit. Key notes: NS is implementing PSR 2.0—applying PSR principals while staying focused on growth.
REF’s “Railcar Guru,” Dr. David Humprey (Railinc), discussed annual changes in the national railcar fleet. Key takeaways: The fleet grew by 4,000 cars due to increases in tank railcars and covered hoppers. The boxcar fleet lost 3,000 cars in the same year. Thinking coal? Coal gondola cubic capacity has decreased 30% since 2009.
Brian Smalley (National Steel Car) addressed the railcar market from the perspective of a new railcar builder. Constrained demand for railcars continues with modest railcar storage levels and decreased loadings. Hot take: Since 2010, railcar labor and steel have increased roughly 50% and componentry has risen just over 25%.
Eric Starks (FTR) discussed the North American trade picture, why tariffs matter and how that might impact rail loads in 2025. The trade deficit between Mexico and Canada is mostly tied to commodity groups such as automotive, beverages and steel products. Key quote: (speaking of tariffs) “This is nuts! I feel like I am in a bad movie.”
Taylor Robinson (PLG Consulting) discussed the U.S. energy landscape. Loadings growth moving NGLs and resins is expected to continue through the coming years. Even with a trade war, U.S. NGLs will find positive market traction for resale. Key takeaway: Chemicals, Propane/Butane and Renewable Diesel are markets expecting year-over-year (YOY) loadings growth.
Dan Anderson (TrinityRail) took stock of the tank car market. Commodities moved in tank railcars that generally have better rail modal share saw weakness in 2024 growth versus truck. One reason: Labor strikes forced preemptive action for rail borne high hazard commodities. Thinking growth? Over the past decade, only NGLs and refined products had a CAGR of more than 3%.
Sam Sexhus (Oliver Wyman) discussed the path for modal share growth for the railroads. Sad news? Since the pandemic and PSR, rail lost market share in all major commodity groups. Good news? There are (at least) three paths to growth: rail to truck conversion, intermodal growth and growth through short line railroads. Interesting takeaway: Without growth, transcontinental mergers may be required to boost railroad profitability.
Ron Sucik (RSE Consulting) weighed in on the intermodal market. Current intermodal issues include tariffs and goods stolen from intermodal trains. Insiders expect a pull forward of freight to avoid tariffs. Growth story? Current thinking projects a 7% YOY increase in intermodal loads; Sucik sees 4%.
Stefano Rieppi (NS) and Paddy O’Neill (Glynn Lane Consulting) talked about the steel market and trends in steel transportation equipment. Rieppi noted that NS is looking to replace older equipment with cars that use higher strength materials and asset utilization technology (such as RailPulse) and to increase car design standardization. O’Neill noted an increase in transverse vs. longitudinal coil cars since 2015 and sees value in mill gondola standardization. Scrap steel success: NS’ ultra-high-strength steel gondola car loads 231,000 pounds of product.
John Ward (National Coal Transportation Association) addressed the outlook on coal for 2025, noting that power grid disruption is causing generators to rethink closure plans on coal-fired generating capacity. Global coal use and production increased in 2024 and is expected to increase in 2025. Burning news: Power generators believe that recent trends in railroad service have been positive with good volumes.
Doug Driscoll (Genessee & Wyoming), David Horowitz (GATX) and Anthony Petrillo (Packing Corporation of America/PCA) discussed the boxcar market. Horowitz noted that 7,800 boxcars had been scrapped in 2024. When asked how PCA could shift more freight to rail, Petrillo quickly answered, “Cost.” Driscoll described that G&W’s boxcar fleet as staying mostly level YOY, even as G&W replaced 1,000 older boxcars with newer cars.
Johanna Biggs (Biggs Appraisal), Sean Hankinson (Adaptive Rail), Pat Mazzanti (Railroad Appraisal), Greg Schmid (Residco) and Bryan Vaughn (Modern Rail) discussed the railcar equipment market. Biggs noted growth in large-cube covered hoppers and large-capacity tank railcars. In discussing valuations, the panel saw an increase in some car types but felt many values had reached valuation peaks. The panel felt that industry health was trending positively.
On Tuesday morning, Anthony “Tony” Hatch dug into whether the railroads would execute the often-promised pivot to growth in 2025. Intermodal has underperformed since 2014. An unsettled economy and a tariff ridden landscape are growth hindering concerns in 2025. Hot take: Although intermodal loads are underperforming, intermodal revenue has been larger than coal’s revenue since 2013.
Dr. Sergio Rebelo (Northwestern University), Tuesday’s Keynote speaker addressed some of the journalistic murkiness about deficits, immigration and tariffs. Trade imbalances have been and will continue to be useful tools that help to accelerate U.S. economic development. They are not things to be feared. The same is true for the value of immigrant labor to a workforce between the ages of 25-54 years old that is very close to being unable to fill all the jobs needed in today’s economy. Key takeaway: Encouraging trade between nations has been viewed as a way to keep peace among those nations for almost 350 years.
Patrick Kurtz (AITX) dug into the covered hopper market, noting that food product loadings are following seasonal patterns and exhibiting growth while non-food loadings are gently trending lower. There is potential enthusiasm for increased small-cube hopper demand from frac drilling. The 5,200cf and greater market maintains a 94% utilization rate. Hot take: Even with all of the growth in the covered hopper fleet, age-related retirements are outpacing new deliveries.
Paul Titterton (GATX) closed out the Tuesday program. He opined that recent (past three years or so) separation between lease rates and new car backlogs and deliveries indicates a supply-led recovery in the railcar market that is a new paradigm for the railcar industry. This thesis is backed by three primary conclusions: shorter railcar backlogs, fewer new car deliveries and more stable fleet dynamics. Key takeaway: Since 2008 to today, core carloads (except coal and intermodal) have stayed within a fairly narrow range of 1.6 million to 2.1 million car loads.
On Wednesday, Dr. David Humphrey (Railinc) again took the stage discussing the North American locomotive fleet. The national fleet grew by 100 units. Over the past eight years, an average of 290 new locomotives were brought into the fleet. Fun fact: Assuming a 25-year service life or a 15-year post rebuild life leaves roughly 1,000 locomotives at or near the end of their service life.
Don Graab (Triangle Brothers) discussed the current state of the locomotive market. The removal of the CARB locomotive regulations possibly pushes the alternative fuel shift in the U.S. back more than four years. However, in Canada the pursuit of alternative fuels will continue as a result of the Canadian Clean Air Act. Status quo alert: Graab sees neither a strong motivation for a large-scale build of today’s Tier IV locomotives nor a potential executive branch rollback of today’s EPA Tier IV emissions requirements.
Wayne Kennedy (Kennedy Consulting) got energized in discussing currently available strategies that can be expected to reduce greenhouse gas emissions for the railroads today. Railroads, without making larger systemic changes, will struggle to meet SBTi goals they have set for the 2029-2034 timeframe. Not blowing smoke: Energy Management Systems can provide significant emissions improvements if the industry makes a commitment to the strategy.
Graciela Trillanes (HGmotive) provided an update from the leading alternative fuel tender provider in North America. The HGmotive hydrogen tender is operating successfully in revenue service on CPKC (moving coal!). Future tender designs will haul larger quantities of hydrogen (cryo-compressed) or renewable natural gas. Now hear this: HGmotive is working on opportunities around the globe to deploy its technology.
Dr. Matthew Findlay (CPKC) discussed progress on the railroad’s successful alternative fuel program. CPKC sees the switch to alternative fuels as the heart of a strategy that reduces reliance on and the need for new locomotives. CPKC has partnered with CSX to put more units into service and has large-scale plans to move hundreds of fuel cell locomotives into service in the next five years. Clean getaway: CPKC’s refueling system creates a diesel-like experience, so the time refueling with hydrogen is similar to diesel.
Ryan Mueller (Progress Rail) discussed Progress’ locomotive products for battery hybrid road locomotives and battery switcher locomotives (BEL). Progress feels a battery hybrid locomotive can deliver greater tractive effort than a diesel-only locomotive. Rapid and easy to implement charging will help to increase demand for BEL lower horsepower units. Reuse redo: Progress notes that many existing locomotives can reasonably be converted to battery hybrid units.
Joseph Stack (Cummins Inc.) updated the audience on Cummins approach to engines in passenger and freight rail. The QSK95, Cummins’ flagship Tier IV compliant engine, continues to operate successfully worldwide. Cummins is continuing to develop its fuel-agnostic engine that could burn any of hydrogen, diesel, or natural gas. Hot tip: Cummins notes that there are unprecedented levels of grant money available for emissions conversion projects.
Joel McNeil (Brookville Equipment) highlighted the pros and cons of different fueling methods at play in today’s locomotive market. In the market for fuel supremacy, legacy diesel’s ease of use and reliability will continue prominence until alternative fueling infrastructure is put in place. Hot take: Long term, battery power will be most useful for shorter-haul applications.
Jason Kuehn (Oliver Wyman) issued a call for the railroad industry to continue to address the need for locomotive fueling and technology improvements to remain competitive with trucking. Battery technology, including utilizing regenerative braking, will help to push technology improvements into standard service. BEL units need to make larger inroads in the freight market. Hot take: The last large-scale technology change in locomotive power was implementation of AC traction motors more than 30 years ago.
Stuart Biggs (Biggs Appraisal) updated the new locomotive order book. There are a projected 309 units being rebuilt through 2025 mostly from the Dash 9-44CW. The largest new unit increase came from Wabtec. Key takeaway: Rebuild units outpaced new builds three to one.
In the final panel, Pat Mazzanti, Rick Ortyl (Metro East) and Greg Schmid discussed locomotive values. Older units stayed mostly firm while the valuation on newer units was split depending on manufacturer. The removal of CARB’s rules will support values on older switcher locomotives. Longevity needed? A 45-year-old GP38-2 locomotive built new for $275,000 in the 1980s has a current estimated fair market value of $295,000. Wow!
What amazing content from an amazing roster of presenters!
REF 2026—our 40th year—is March 1-4, 2026 (www.railequipmentfinance.com). See you in La Quinta!
Got questions? Set them free at dnahass@railfin.com.
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