GATX CEO: North American rail market is uncertain; Europe, India are bright spots

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CHICAGO — The North American railcar market is risky, officials of leasing company GATX say, while opportunities are booming in Europe and India.

GATX, with 119,500 railcars and 644 four-axle diesel locomotives in its North American fleet, saw increased North American profits for the second quarter of 2019 compared to the second quarter of 2018 but they were down nearly 11% for the first half of the year, compared to the first half of 2018.

Although non-boxcar fleet utilizations increased to 99.5% in the second quarter of 2019 from 99.4% in the previous quarter, and leases increased from 39 months to 53 months, GATX officials say a decline in lease prices has dampened North American investment opportunities.

Utilization of the aging GATX boxcar fleet is down to 94% and may drop another 1 to 2%, GATX officials say.

“There is an uncertainty in North American rail,” says Brian Kenny, GATX president and CEO, although at present he wouldn’t give up on it.

On the other hand “Probably the best risk-adjusted return at GATX right now is in Rail Europe,” he says. “That traditionally hasn’t been the case.”

As with North American tank cars, the European railcar leasing market enjoys a manufacturers’ backlog. “They’re sold out this year,” Kenny says, “They’re sold about between 50 and 90% in 2020.”

As a result, European lease rates are high.

Also driving the European car leasing market are railroads replacing lower-capacity cars that tend to be older than the American fleet, and public policies desiring to move freight traffic from roads to rails because of concerns about air and noise pollution.

In India, GATX has a growing fleet that may reach nearly 3,700 cars by the end of the year.

The GATX fleet in India is at 100% utilization with average leases of 90 months, Kenny says, “at very attractive rates,” but given the newness of the market, he is reluctant to predict the amount of risk.

Besides rail, GATX is involved with Rolls Royce on spare jet engine leasing and owns American Steamship Co. which operates boats on the Great Lakes.

NEWSWIRETrains News Wire

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