US Oil producer turn to rail tank cars-5 mfg companies are cranking out cars at record pace-Oil pipeline approvals and construction lags
As the U.S. gears up to become the number one oil producer in the world by 2020 on the back the shale gas revolution, tank car manufacturers are poised to benefit as more crude oil gets transported by railway to take advantage of cheaper prices in the midcontinent United States. Tank cars are specialized rail cars designed to haul liquefied freight and are manufactured by a small select group of companies.
Given that current crude-by-rail volumes are approximately 500,000 to 600,000 barrels a day, while the U.S. produces 6.6 million barrels a day (and U.S. refineries refine 14.8 million barrels per day), the potential for railway companies to increase its exposure to the crude oil transportation business can be exponential. The current consensus is that the lack of available tank cars is causing a bottleneck in the crude-by-rail supply chain, while other impediments to growth include the lack of offloading terminals to deliver the product, absence of rail access to origination sites, and the need for coastal refiners to re-configure their plants to be able to process heavier crude that is produced in the U.S. midcontinent.
FTR Associates data through the Bloomberg service show that there is currently a backlog order of roughly 47,000 tank cars for the tank car manufacturers. In the third quarter of 2012, 4,500 tank cars were delivered and the time for an order to be processed and the tank cars to be manufactured has now lengthened to around 15 – 18 months.