Table of Contents Introduction and Use of The Guide 1 Overview of the Market for Railroad Equipment Historical Overview 7 Supply and Demand Trends, 1975 – 2007 7 Supply and Demand Trends, 2008 – 2010 17 Supply and Demand Trends, 2011 – 2017 18 RS Railcar Market Index and Railcar Rental Rate Index 22 Trends in Equipment Ownership 22 Economic Useful Lives of Railcars and Locomotives 24 Salvage and Scrap Values 25 Railcar Evaluations Section 1 - General Service Boxcars 27 Section 2 - Small Cubic Capacity Covered Hopper Cars 41 Section 3 - General Service Covered Hopper Cars, Grain Service 55 Section 4 - Specialty Covered Hopper Cars 71 Section 5 - Pressure Differential Covered Hopper Cars 85 Section 6 – Mill Gondola and Coil Steel Gondola Cars 97 Section 7 - Open Top Hopper Cars, Coal Service 111 Section 8 - High Side Gondola Cars, Coal Service 125 Section 9 - Center Beam and Bulkhead Flatcars 139 Section 10 - Double Stack Intermodal Container Cars 153 Section 11 - Tank Cars, General Service 169 Section 12 - Tank Cars, High Pressure 187 Section 13 - Tank Cars, Acid Service 199 Section 14 - Autoracks 211 Overview of the Locomotive Market 225 Locomotive Evaluations Section 15 - Four Axle, Low Horsepower Locomotives 239 EMD SW1500 EMD MP15 RailSolutions, Inc. Section 16 - Four Axle, Medium and High Horsepower Locomotives 243 EMD GP9 EMD GP38 EMD GP38-2 EMD GP40 EMD GP40-2 Section 17 - Six Axle, High Horsepower Locomotives 251 EMD SD40-2 Section 18 - Six Axle, High Horsepower, DC Traction 255 Powered Locomotives GE ES44DC EMD SD70M-2 GE Dash 9-44CW EMD SD70M Section 19 - Six Axle, High Horsepower, AC Traction 263 Powered Locomotives GE ES44AC EMD SD70ACe GE AC4400CW EMD SD70MAC GE ES44C4 Glossary 271 RailSolutions, Inc. Overview 275 RailSolutions, Inc. Market for General Service Boxcars Historical Overview The general service boxcar has been a mainstay of the industry’s equipment fleet ever since railroads began hauling freight. Until railcars became more specialized after World War II, boxcars were used to haul virtually every type of commodity with the exception of coal and bulk liquid chemicals. Over the past 30 years, supply and demand dynamics in the boxcar market have been used by some analysts as an indicator of the general health of the overall rail equipment market. Since 1985, however, the volume and types of commodities moved in boxcars, the number of boxcars in service and the boxcar shipments are that they are usually loaded at ownership profile of the North American boxcar one point but are shipped to many different points fleet changed significantly. in non-unit train service averaging one load per car per month or less. Additionally, much of the In the mid-1970s, the total number of boxcars in existing infrastructure for loading and unloading the North American fleet exceeded 400,000 units; boxcars is based on the 50’, 70-ton car originally however, as railroads lost significant volumes of produced in the 1970s which is less efficient and general merchandise traffic to over-the-highway obsolete in the eyes of many railroads. truck carriers, the size of the boxcar fleet declined to less than 110,000 units by 2017. Over the past two The boxcar fleet in place today is composed of decades, railroads have directed marketing efforts many cars with different lengths, heights, load toward retaining existing traffic and regaining capacities and door configurations which makes certain types of general merchandise business which maintaining and more importantly, providing the can be moved efficiently and profitably by rail. correct car to a shipper, a challenge. Many of the railroads are promoting a new standardized car A significant volume of general merchandise traffic to boxcar shippers that is more efficient but does that now moves by rail is no longer moved in not address customers’ concerns about existing boxcars, but in intermodal containers and trailers. infrastructure and size restrictions at the loading Boxcars are currently utilized in four primary and unloading points. The only notable additions markets: paper products (both finished and scrap to the boxcar fleet in recent years have been by paper), lumber products (primarily wood pulp TTX which, as mentioned previously, is owned by and cut lumber), auto parts (which are shipped in a consortium of railroads and may have different equipped boxcars) and food products (packaged, criteria for investment than other investors. perishable and frozen foods, which are shipped in refrigerated boxcars). Supply and Demand Trends – General Service Boxcars A major issue for boxcar investment is the return on investment associated with the equipment. Since the mid-1970s, the ownership profile of Boxcars generally move lower revenue producing the boxcar fleet has shifted from primarily Class commodities in merchandise service meaning that I railroad ownership to a mix of Class I, regional revenue per carload and carloads per month are and short line railroads and private (leasing low relative to many other car types. The nature of company) ownership. A significant factor in this 27 RailSolutions, Inc. General Service Boxcars shift of ownership is directly related to certain New deliveries of boxcars averaged approximately artificial investment incentives (investment tax 3,500 units annually during the period from 1996 credits and incentive per diem) that existed in the to 2006. Compared to the number of newly mid and late 1970s which helped fuel a period of manufactured railcars in other general service massive overbuilding between 1977 and 1980. A classifications, the boxcar production numbers majority of the boxcars built during this period were modest. We believe that the relatively high were 50-foot, 70-ton general service boxcars that cost of new boxcars during the peak production were placed in free-running service by regional years of 1996 to 1998 and 2004 to 2006 was one and short line railroads and financed by private of the major factors in explaining the low number owners and leasing companies. of orders for new boxcars. The massive overbuilding of the late 1970s Overall demand for unequipped and equipped created an oversupply of boxcars that existed general service boxcars is tied primarily to rail until the mid-1990s. During the period from 1982 traffic levels in pulp and paper markets, and to 1992, orders for newly manufactured general in lumber and wood products markets. Since service boxcars were virtually nonexistent. By the recession of 1991, rail traffic levels in those the mid-1990s, many shippers began to recognize markets have been somewhat volatile with traffic the deteriorating state of the boxcar fleet, and peaking in 1994 (which was considered a banner as a result, a modest level of demand for new year for rail freight traffic in general). Boxcar boxcars began to surface. Over the past 15 years, traffic declined during the period between 1995 the demand for newly manufactured boxcars has and 1998, before increasing again in 1999. been focused primarily on 50-foot and 60-foot, 108-ton (286,000 pounds gross rail load), high By late 2000, the softening U.S. economy began capacity cars for use in high grade (Class A) to take its toll on rail traffic of all types, including paper service. general merchandise, paper and lumber traffic. Traffic volumes for those commodities typically Boxcar fleet statistics include several variations carried in boxcars posted healthy growth in 2004 of car lengths and interior configurations, and and 2005 along with almost every other sector are usually classified as equipped or unequipped served by rail. Demand for equipped boxcars used cars. Historically, the equipped versus unequipped in auto parts service is tied directly to the fortunes designation usually referred to the type of interior of the automobile manufacturing industry, and as lading securement devices installed. The standard might be expected, has followed the same trends practice among car owners has been to assign described above. equipped boxcars to specific traffic moves known as dedicated services rather than using those cars Another sector of the boxcar market which, until in free-running or general services. In order to recently, received relatively little attention is the control the movement and availability of boxcars, market for refrigerated boxcars. Beginning in the many shippers and railroads have redesignated a 1950s, the transportation of packaged and frozen significant number of boxcars from unequipped to foods shifted from rail to highway and the demand equipped status (regardless of those cars’ actual for refrigerated boxcars posted steady declines interior configuration). By the mid-1990s, the (both insulated cars used in beer and beverage equipped status of boxcars became more of an services and mechanically refrigerated cars used indicator of the type of service in which cars are in packaged and frozen food services). Virtually employed rather than the configuration of the car. no new mechanically refrigerated boxcars entered service between 1980 and 2000. 28 RailSolutions, Inc. General Service Boxcars In the early 2000s, both BNSF and Union Pacific Demand for newer, 100-ton and 105-ton boxcars recognized that some potential exists to grow the began to improve in early 2011 as rental rates and traffic base in this sector and to ship packaged utilization rates posted respectable gains. Virtually and frozen foods profitably in long haul corridors no orders for newly manufactured boxcars were with a high level of equipment utilization (more placed between 2007 and early 2010. In late 2010, than two loaded trips per month). Both railroads TTX placed an order for a significant number of took delivery of new, high capacity mechanically boxcars that were delivered in mid and late 2011. refrigerated boxcars in the early 2000s. The newest After that one noteworthy order, very few orders generation of mechanically refrigerated boxcars for new boxcars were placed in 2012 and 2013.