16.11.15. Short-term rail tank car leasing rates for GP-31.8 CPC-1232 models have fallen more than US$2,000 a month per car to $475 a month since early 2014, according to analyst firm Genscape.
On the firm’s blog site, oil editor David Arno wrote that the collapse in lease rates was in the wake of lower crude prices and uneconomic North American crude-by-rail price arbitrage.
“The price plummet in leasing rates has caused a shift in tank-car leasing strategy with notable market participants, including Valero Energy, moving tank cars to non-crude service and others once again looking to lock in long-term leases to capture the relatively low rates,” Arno wrote citing industry sources. Newer coiled and insulated tank-cars were said to be offered the week before last at $650 a month for six- to 24- month leases.
The previous industry norm was for six-months to one-year lease rates terms, while market participants waited for new US tank car safety standards to be handed down by the US Department of Transportation. The standards were announced on 1 May 2015.
“Now, interested parties are looking for two-, three- and sometimes even five-year-long leases, Arno continued. But most companies do not want their cars leased out that cheap for that short a time, a tank-car source was quoted as saying, adding that “most” market participants expect oil to be back up around $75-80 a barrel within five years.
Although some companies have shifted crude-carrying tank cars to refined products, interest in buying and leasing cars has plummeted, leading to multi-year low rates for short-term leases.