RBN Energy With Nice Update On CBR Tank Cars

Active rigs: 183

RBN Energy: a likely oversupply of tank cars for the CBR market.

A dramatic increase in crude-by-rail shipments over the past two years as well as surging lease rates for hard to come by tank cars encouraged an 18 month backlog of new orders – even while crude shipments only represent a small fraction of total rail carloads. Changes in the crude price differentials that encouraged the growth of crude by rail have reduced both the demand for tank cars and lease rates. Today we present analysis from PLG Consulting that shows rail tank car oversupply is quite possible - barring a few "wild cards."

The article contains a nice description of the two main types of tank cars:

The differences between the two widely used CBR tank car designs are worth further discussion. The higher volume tank car is the general-purpose non-coiled non-insulated car with nominal capacities of 30,000 gallons (GP30) and 31,800 gallons (GP31.8) used for light/sweet crude that is produced in the US shale oil plays. The GP31.8 is a crude optimized car that started being manufactured in 2011. These general-purpose non-coiled non-insulated cars have a lower tare (empty) weight, a higher usable capacity (up to 286,000 lbs. gross-weight-on-rail), and cost less to manufacture.  A GP31.8 car has an ability to haul about 720 Bbl of light crude oil, while a GP30 with a 263,000 lb. gross weight is able to haul about 675 Bbl of light crude oil.

The heavier Canadian Oil Sands type crude requires a more complex coiled and insulated railcar because the commodity is more viscous and needs to be heated to help it flow.  The coils and insulation decrease a tank car’s usable capacity and make it both heavier and more expensive to build.   The optimized “heavy crude” style car has a nominal capacity of 28,800 gallons and ability to haul about 600 Bbl of heavy crude oil.

In general, the leasing community will prefer to own the smaller cars with coils and insulation because they have far more flexibility across numerous commodities (chemicals, etc.), whereas the larger GP cars are more limited in scope (with ethanol, methanol and some refinery chemicals being the only sizeable alternative markets to crude).

The "wild cards" have to do with possible regulatory changes following the Canadian CBR spill and explosion.

By the way, one of the first presentations ever on CBR is still available at the NDIC site: a nice PowerPoint presentation of North Dakota's CBR terminals, click here for NDIC's conference held earlier this year (February, 2011), a PDF file. One presenter did refer to this as "Crude By Rail" but I did not actually see the "CBR" acronym in the presentation. It is possible some used the "CBR" acronym on a website prior to my using the acronym, but it would have been very, very rare. I have a 131 posts tagged with "CBR." The earliest post tagged with CBR was posted February 3, 2011.