Chris B

All Aboard for Railroad Opportunities

I'm not so sure about that...

Coal demand:
Like it or not, the new administration/Congres... will discourage the expansion of coal demand in favor of renewables. Coal shipments will remain flat unless deposits closest to power plants are exhausted and longer shipments are required. That's a sketchy bet.

Ethanol transport:
Will grow about 10-15% as much as US gasoline consumption, so still none. Some producers are already going out of business, so pricing power is weak.

Lumber & Building Materials:
Residential construction is overbuilt for a decade. This will only be partially offset if there is a New Deal type infrastructure program, requiring shipment of materials such as steel beams, rebar, etc.

Chemicals / Fertilizers / Foods / Grains:
Possibly weak pricing power with low diesel prices making trucks more competitive. The decline of the big 3 at the expense of Chinese imports will reduce domestic shipping of chemicals and metal.

Vehicle Transport:
Military contracts will decline as the Iraq war winds down. The big 3 automakers will end up a shell of themselves no matter what happens, and RR's might lose some accounts receivable in a bankruptcy. The bright spot for railroads is when the Chinese imports start arriving in 2010 or 2011 and have to be shipped by rail from the West coast to everywhere else. However, credit availability for new car buyers may never again be as loose as it was in the early-to-mid 2000's, so new car demand may not reach those levels for a decade. In any case, consumers are buying smaller, cheaper cars now, because they can't finance anything more expensive. This means fewer railcars to ship the same number of units.

Light rail / Mass transit:
Possible enhanced investment in Chicago-style light rail will probably not affect the freight RR's unless it costs them money due to right-of-way issues, forced sharing of rails, or construction interference. I don't anticipate major revenues from rail construction contracts.