Crossties is published for users and producers of treated wood crossties.
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TACT US A DVERTISE RTA EVENT CALENDAR S tella-Jones C orp. Wheeler Lumber R ailway Tie A ssociation Nisus Corporation Corporation Nisus MiTek ustries ustries MiTek %41556+'5ŖJULY/AUGUST 2015 7 MARKET OUTLOOK By Fred Norrell Constrained Growth In the Crosstie Market his past year was unusual in that modest supply appears to have put a limitation on the wood tie market, contributing to a decline LQSXUFKDVHVRIDERXWSHUFHQW Although Class 1 track miles showed little change, Class 1 freight was up about 6 per- cent, so tie demand should have been robust. Year-to-date May 2015, overall tie pur- FKDVHVDUHGRZQDERXWSHUFHQWIURPWKH previous 12-month period. But at this point, there are signs of weakness in demand. The Energy Information Administration (EIA) predicts U.S. coal production will decline by DERXWSHUFHQWWKLV\HDU%DVHGRQWKLV RTA's model predicts a 10 percent decline in coal shipments by rail. EIA's prediction calls for a leveling off in coal production in 2016, but this scenario could be upset by rapid industrial switching from coal to natural gas. Crude-by-rail was up by a modest 2 per- cent in 2014, but that was from a pretty high level. Crude oil (WTI) price plunged from DQDYHUDJHRIODVW\HDUWRDERXW now, and not much change is expected in the next several months. U.S. oil production is forecast by EIA to continue to grow (by 8.6 percent) through the current year but suffer a decline of 1.6 percent in 2016. RTA's model predicts crude by rail ship- ments will follow a path very similar to pro- duction. North American Class 1 intermodal units are up 3.4 percent as of week 28 this year, but other freight is down by the same degree, resulting in a slight decline in total WUDI¿F57$SUHGLFWVWRWDO&ODVVIUHLJKW; will remain weak through the current year, ending in a 1.4 percent decline. Standard & Poors forecasts economic growth to acceler- DWHIURPSHUFHQWLQWRSHUFHQW the following year. This pushes RTA's freight forecast up 5.5 percent in 2016. RTA's forecast of new wood tie purchases generally follows the economic growth forecast: slow in 2015, a little faster in 2016, as the table shows. Tie purchases in the current year are especially slow due in part to lingering supply constraints. As of May, the invento- ry-to-sales ratio was 0.68 compared to an DYHUDJHRIIRUWKHPRVWUHFHQW¿YH\HDU period. Although tie supply is not part of the RTA forecast model, constrained recent purchases represent an important variable. The Class 1 WLHSXUFKDVHVIRUHFDVWIRUUHÀHFWVDUH- covery from supply constraints. On the other hand, the small market tie forecast suggests a maturing of gas and oil markets. Crude-by-rail is predicted to have reached a peak in the near term. Summarizing, after DVLJQL¿FDQWGHFOLQHLQ57$PHPEHUV should see a slowly recovering market in the current year, followed by a more robust market next year. Q NEW WOOD CROSSTIES (IN THOUSANDS) Year approx Real GDP Class 1 Purchases Small Market Purchases Total Purchases Pct 2011 1.6% 16,525 5,363 21,888 11.8% 2012 2.3% 16,968 6,054 23,023 5.2% 2013 2.2% 24,448 6.2% 2014 2.4% 15,931 23,014 -5.9% 2015 2.3% 1.5% 2016 6,623 24,151 3.4% T