SEP-OCT 2018

Crossties is published for users and producers of treated wood crossties.

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RTA EVENT CALENDAR CONTACT US RTA EVENT CALENDAR CONTACT US ADVERTISE Stella-Jones Corp. Railway Tie Association Wheeler Lumber Nisus Corporation MiTek Industries CROSSTIES • SEPTEMBER/OCTOBER 2018 11 MARKET OUTLOOK tions will only accrue if supply matches the need—2019 installs could thus be a wash versus 2018 due to supply woes once again. A review of August data provides addi- tional fodder for this concern. Not only did actual inventories decline 250,000 ties, but also the 3MMA is down another 552,000 ties. In addition, if black tie shipments con- tinue to increase throughout the fall, and with only a couple of more ideal months of procurement ahead, a real inventory and concurrent 3MMA slide seems to have fur- ther to go. And that doesn't even take into consideration multiple other factors that play their part. One of these is increasing traffic and the demand for future maintenance needs this portends. AAR reported that August traf- fic was up 4.5 percent compared to August 2017. Overall, Class 1s are up 2 percent YTD and short lines report a 2.7 percent YTD increase through the end of August. Add to this that the AAR monthly traffic data table (Figure 1) shows every month in 2018 rail traffic increased over the same months in 2017. And growth in shipments appears to be accelerating. This most recent jump in traffic could be the result of the "front-loading" effect of already imposed and future potential tariffs. Because of this, it is fair to note that ship- ments could moderate and freight traffic growth decelerate into 2019 as some have speculated. The questions for railroads sur- rounding tariffs and NAFTA impacts could further moderate any decision to announce increases in programs. Yet, if traffic is on a sustainable path of slow and steady growth, it would be a precursor for increasing maintenance demands, with the potential for further pressure on supply. Commercial Markets The words are robust to very robust. The only drag on demand right now is supply, the recurring theme here. It's interesting to note that some buyers who don't review the complete data set in context and rely only on snippets of information, executive summaries or headlines for understanding, Table 1 Crossties Laid In Replacement Or in Addition - 2017 Track Operated by Reporting RR Rail Laid In Replacement Or In Addition - 2016 District & Railroad New Wood Ties New Ties (Other than Wood) Second-Hand Ties (All Types) Miles Occupied Crossties Per Mile Avg. Spend Per Tie* New Rail Laid (Tons) Relay Rail Laid (Tons) Avg. Weight Rail (lbs/yd) Eastern District CSX Transportation 2,908,131 62,824 0 29,786 99.7 $110.5 121,985 4,487 135.9 Grand Trunk Corp. (CN) 753,254 164 997 9,275 81.3 144.0 37,037 17,141 135.1 Norfolk Southern 2,250,034 38,388 143,270 28,471 85.4 112.3 110,120 13,480 136.0 Total Eastern Dist. 5,911,419 101,376 144,267 67,532 91.2 115.3 269,142 35,108 136.0 Western District BNSF 3,683,460 138,933 0 40,140 95.2 $117.1 190,338 2,160 135.2 KCS 488,438 30,404 0 4,043 128.3 165.3 14,950 805 134.0 Soo Line Corp. (CP) 311,508 0 0 4,478 69.6 180.7 7,445 4,172 132.0 UP 4,064,245 418,502 15,695 43,454 103.5 128.2 178,189 22,597 136.0 Total Western Dist. 8,547,651 587,839 15,695 92,115 99.3 127.5 390,922 29,734 135.4 Total U.S. 14,459,070 689,215 159,962 159,647 95.9 122.6 660,064 64,842 135.6 Source: Association of American Railroads * Installed Costs Country Canada United States Commodities (All) Chemicals Coal Farm and Food Products Forest Products Grain Metallic Ores and Metals Motor Vehicles and Parts Nonmetallic Minerals and Products Other Petroleum and Petroleum Products Total Carloads Total Carloads & Intermodal Total Intermodal Units Carloads and/or Intermodal Units (in thousands) Source: Association of American Railroads Figure 1

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