New Coal Plants and Required Coal Railcars

Implications:     The biggest driver for orders of coal railcars will be the new coal plants coming on line the next few years.  The commentary section below discusses the number of new coal plants presented by FreightCar America on its Q1 2008 conference call versus an updated analysis by this author.

Analysis:     FreightCar America stated on its conference call that approximately 75 coal-fired power plants are expected to come on line in the next six years.  FreightCar America forecasts these 75 new coal-fired power plants will require approximately 40,000 coal railcars.  FreightCar America also forecasts that of the75 plants, 47 are currently either under construction, near construction, or permitted for construction, requiring approximately 20,000 coal railcars.  Unfortunately, FreightCar America is using dated information that does not include the numerous number of coal plants that have been cancelled in the last 15 months.  Furthermore, FreightCar America does not reduce this coal railcar demand by those coal plants that will receive coal by truck or barge or are mine mouth; not requiring any coal railcars.    

    Once the number of new coal plants is reduced and adjustments are made for those coal plants not requiring coal railcars for coal transportation, the number of coal railcars required for new coal plants is substantially less than FreightCar America’s estimates.  Recent analysis computes the number of required coal railcars to be less than half of FreightCar America’s estimate over the next six years (2008 to 2013, inclusive).