Railroad boxcars hit buffers

However, one of the traditional areas for equipment finance – railroad boxcars – is not likely to deliver strong growth this year according to a report for Dow Jones. This shows the number of boxcars in service in North America has fallen by 41% in the past decade to just under 125,000 last year as 101,600 cars were scrapped and only about 13,800 replacements were added.

Federal regulations limit boxcars to 50 years in service. More than 75,000 will reach that age over the next 15 years. The paper industry accounted for half of the 1.25 million boxcar loads in North America last year, and there are reports that production at some mills is slowing because of a shortage of transport.

Without significantly more new boxcars, paper company executives say they will have to switch to trucks, which will increase their costs. But the railroads, railcar-leasing companies and the companies that use the cars have shown little enthusiasm for big investments in new boxcars.

Railroads are instead swapping to more specialized railcars and intermodal carriers that allow shipping containers to be moved directly from trucks to trains.

“There is a looming crisis,” said David Friedson, director of logistics and distribution for Evergreen Packaging, which produces paperboard for milk and juice cartons. “The next three to five years is when we go over the cliff and boxcars just come out of service.”