News / US railcar shortage sees shippers hit the buffers in search for capacity

© Hanna Tverdokhlib |

Last June, General Motors faced the prospect of having to throttle back on production, just as it was getting ready to launch new electric models, as some 70,000 cars were waiting for shipment to dealers across the US because of a shortage of rail cars.

Food and grain shippers also faced challenges getting hold of sufficient rail capacity.

To most observers the news was not a surprise. Rail car availability has been a slow burning fusel. by one estimate, the North American fleet has shrunk by about 3% since 2020, with more than 40,000 fewer units in service today.

Improvement is not in sight. Over the past two years, orders for new rail cars have been below replacement levels, and the active fleet looks set to shrink further.

By some estimates, about 188,000 cars are set to reach retirement age within the coming five years. Given anaemic order activity, this could reduce the fleet by 60,000-80,000, one industry expert warned.

Appetite for investment in new rail cars is dampened by relatively high prices, pushed up further this year by Washington’s tariffs on steel.

Most types of rail cars are already in short supply, which is good news for lessors that control the lion’s share of the North American fleet, as it keeps leasing rates aloft.

Over the years, ownership has shifted decisively from carriers to leasing firms, a group undergoing consolidation, which points to fewer players exercising greater control over the fleet.

The railways have largely turned away from rail car ownership, preferring to concentrate on locomotive and infrastructure investment. For that matter, they have not shown much drive to grow their business, but concentrated largely on their operating ratio, a metric hugely popular with the investment community.

This is short-sighted, say critics, particularly at a time when the intermodal business appears to be headed for a slowdown, as containerised imports are expected to shrink in the coming months, according to projections by the National Retail Federation (NRF).

For this month, it has predicted US containerised import volumes to fall to 1.86m teu, down 12.7% year on year, to bring the tally for the full year to 25.2m teu, a decline of 1.4% from 2024, despite the strong volumes seen earlier in the year.

Three of the first four months of the coming year will see year-on-year declines of more than 10% in intermodal volumes, the tally in February likely to be 8.5% lower than a year earlier, the NRF predicted.

Carload traffic, on the other hand, has been resilient – unlike most other segments of the freight rail business. The most recent statistics from the Association of American Railroads, which cover the week ending 29 November, show US, Canadian, and Mexican railways collectively moved 3.1% more carloads year on year, whereas intermodal units were down 3.7%.

US carload traffic that week registered a 4.3% increase, while intermodal volumes fell 6.5%. Over the first 48 weeks of the year, US railroads moved 1.8% more carloads and 1.9% more intermodal traffic.

At this point, there seems to be no sense of urgency to address the worsening shortage of rail cars. Moreover, a merger of Union Pacific and Norfolk Southern may cause a further reduction in the fleet as the pair consolidate operations.

For shippers, from automotive giants to farmers, the coming year may produce more stress as they struggle to secure enough capacity to move their cargo by rail.