Friday, March 27, 2015

N. American Railroads Caught by Speed of Crude-Oil Collapse

North American Railroads Caught by Speed of Crude-Oil Collapse

By Thomas Black    3/26/15

(Bloomberg) -- The slowdown that North American railroad companies had been bracing for in crude oil shipments has turned into a rout, with volumes falling faster than executives had predicted.

With energy companies scaling back drilling after prices for the commodity fell about 50 percent since July, industry executives and analysts anticipated that demand for hauling crude and extraction materials such as frac sand and pipes would slow after a four-year surge. They didn’t expect it to slow this much this fast.

“The impact is occurring more quickly than the rails originally projected to investors,” said Matt Troy, an analyst with Nomura Securities International Inc. in New York. “The consensus view was that very high double-digit growth would moderate to low double digits, and as we have seen in recent weeks we’ve broken that floor and in some cases gone negative.”

Rail stocks and tank-car leasing are reflecting the dwindling traffic. The Standard & Poor’s 500 Railroads Index is on course for the biggest weekly decline since September 2012 and lessors’ rates for oil cars have fallen by about a third in the last six months, Cowen & Co. said in a report on Friday.

“We would not be surprised if the downward trend continues as long as oil prices remain depressed,” Jason Seidl, a New-York-based Cowen analyst, said in the report.....   more here

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