State of Play – Railcars

Per a PFL report:

Earnings are out for all the Class ones – bottom line, across the board, is not good. Traffic is down and so is revenue. People looking for cars hit an all-time low last week. With the arb officially closed in Mexico, propane demand delivered there has subsided. This is due to Pemex lowering their price for product sold within. What continues to be active is cars headed for storage as more cars continue to roll off the line without a home. There is also demand for short term loaded cars. Canada is phasing out DOT 111 for crude use now earlier than the United States and has targeted the date to be

Canada is phasing out DOT 111 for crude use now earlier than the United States and has targeted the date to be November 1. This is 16 months earlier than anticipated. This directive should have little impact on the market mainly due to so many crude cars in storage. A new proposed rule for box cars would be a welcome relief for lessors. In effect, the rule would extend the life of a box car by 15 years to 65 years. Box cars are in high demand and are costly to build relative to lease rates users are willing to pay.

We Now Have Full MRU Capability. Cleaning, Testing & Repair

We now have MRU’s and can do anything from bubble leak tests, to valve/gasket repairs, to Nitrogen pads and any mobile repairs as long as we have the parts your cars need before hitting the road. This is very important as it closes the loop for anything we need to do to your cars on a mobile basis. We can clean, test and repair. We are certified with all the major shops including: Trinity, CIT, UTLX, Greenbriar, etc.

And know that we take Safety Seriously: There is no acceptable goal for safety other than zero incidents. Safety is our No. 1 value, and it’s taken seriously by every employee, from the CEO to the front line. In the last 2 years, even as our company was experiencing triple-digit growth, we have not had one major incident. We’re proud to have one of the best safety records in the industry. We also are committed to the safety of the public, surrounding communities, and visitors to our sites and offices.

Keep em Clean, Boys

Inspections are Coming…

Per the PFL Petroleum newsletter :

Over a year ago the USDOT released its ruling on freight car retrofit requirements, and repair shops across the country anticipated an overflow of work. Since some of the DOT-111 cars are near the end of their useful life, and retrofit costs in some cases can run roughly half the cost of a new car, demand for retrofitting cars have not really materialized as some shops were hoping. For the moment, PFL expects retrofit maintenance will be left on the backburner until revitalized traffic demand forces more cars out of storage. Car inspections on the other hand will keep repair shops somewhat busy for the time being. Tank cars flew off the lot in 2006 in response to the ethanol boom, so as their 10 year certification comes to an end they will all need to be inspected.

PFL would like to remind you again that storing cars with petroleum residue over the long term will slowly destroy the cars. Hot summer temperatures will increase the risk of corrosion, rust, and cracking. Don’t wait to get your cars cleaned have us come out on your site and clean them before the end of year rush to clean thousands of tank cars.

Keep’em clean Boys

 

4 Months , 3000 cars to be cleaned

Here’s my rub today for the rail industry. Get your cars cleaned as soon as you can, but we both know you will wait, like everyone else, and then the price will spike due to deadlines. In approx. 4 months, 10 of our customers are holding off on cleaning approx 3000 cars that need to be finished and cleared by their Lessor before year end.

I don’t care what your company’s name is or if your the largest E&P entity in the world, your price to clean your rail cars will be increasingly higher in 4 months as there are not enough tank cleaners that can do good volume and clean 3000 rail cars to the lessors specifications in two months collectively.

We know your losing $250mm a quarter and cleaning your crude cars for a return to the Lessor is the last thing on your mind of your boss/executives. But, remember you will have rust and corrosion for the most part and that is a battle that will have to be fought in the tank and with your Lessor per the terms of your lease.  Most leases read “removal of residue” and do not mention rust and corrosion, but do you want to take that chance too. We already know CIT, UTLX, GATX are in lawsuits with good customers over no real stated inspection procedures (black light/white glove maybe) per the AAR or FRA. It’s, does your clean match my clean and that is really how you will work it out with your Lessor. But will you have the time and the budget to pay more and possibly battle with your Lessor over tank cars not being cleaned properly to their standards. We will soon find out..

Knowing this, good companies with great rail departments like Tesoro and Tauber are getting out in front of this impending tsunami and we applaud them for this.

Our hope is that you follow their lead and don’t get behind the eight ball as the year comes to a close as the longer you wait the more cost and issues you shall have my friends.

Good luck to those who do not take this as gospel 🙂

Keep’em clean everybody!

*And we didn’t even mention the BLTs and valve/gasket repairs!

 

Corrosion and Rust in Tank Cars – It’s Real

We recently did 100+ tank cars for a large unnamed company that had stored these specific crude cars for 9 months or longer and you will not believe the photos of the corrosion below. Understand these tank cars were all less than 8 years old.

What is amazing is the corrosion in the cars and the rust that had to be scraped off, but what many new people to the rail industry don’t realize is corrosion is a bigger issue than at first glance, if only the cleaning price alone.

The photos show rust and corrosion up to the 4 and the 8 positions in the tanks. A few went even higher. These cars don’t just need a $3500 cleaning, they need blasting, another $1200 and if you blast, typically you must line the cars at a cost of approx. $8000.  Hence, the cost goes from a base clean of $3000 with normal heal, before storage, to approx $12,500 per car if it has been in storage for approx 1 year. That is all it took for these cars to corrode and some of the pits in the steel were large enough to insert your fingers.

If you have more unit trains in storage…. I’m sorry.  You also might ask, well it depends on the crude. Yes and no. All crudes corrode, it’s just to what degree and that’s why you have corrosion engineers on staff. And do you really want to take this chance…. Keep’em clean guys!

Take a look at these photos and know these are after the cars have been cleaned and the rust has been scraped off and these cars have passed a blacklight test. 

After 9 After 9 after 8 After 9 After 8 after 9