Railway Track & Structures - October 2008 - (Page 27)

Overall, demand for ties across all market sectors is good thanks to railroads continued infrastructure investments, but will Wall Street’s woes ﬁlter down and create trouble? Crosstie report 2008 Wood ties from RTA’s Member Field Trip. F RTA by Mischa Wanek-Libman, managing editor inancial market troubles, including the credit crunch and housing downturn, have begun to trickle down and impact some tie suppliers. However, the railroads’ robust business, continued proﬁts and persistent commitment to upgrading infrastructure are bright spots in the market. Here’s a look at what’s new to the industry, what the rest of 2008 may bring and what could be right around the corner in 2009. Jim Gauntt, executive director of The Railway Tie Association, says that, allin-all, the crosstie market remains surprisingly strong. “Tie demand remains strong even with what we now believe will be a rather protracted recession. Our forecast for the remainder of 2008 is that total new wood tie purchases will be around 19.9 million for all markets. In comparison, 2006 was the peak demand year with 20.6 million and in 2007 we saw 20.4 million ties purchased,” said Gauntt. “Our models suggest that if the recession is mild, we’ll begin to see a return to 2006-7 demand levels starting sometime in 2010. At best, we expect 2009 to be about the same as 2008.” Gauntt points to three issues that, he says, need to be understood before anyone can feel great about the current market: “First, while the Class 1 demand is remaining steady, the shortlines and other smaller purchasers are where we are seeing the greatest weakness. This likely has to do with the fact that the shortline tax credit did not get extended in 2008. We estimate that this has caused demand to drop from 500,000-750,000 ties. “Second, we don’t yet know the extent of the drag that recessionary forces will impose on the overall U.S. economy. Since U.S. GDP is a major driver of railroad trafﬁc expansion or contraction, our forecasts could be a little on the high side if the U.S. and world economies continue to suffer. Moderating oil prices could ease the burden expected from a recession, but even so, the credit crunch that looms appears to us to be the biggest risk to economic growth. “Third, while demand remains healthy, supply may be constrained. Hardwood sawmills are facing very difﬁcult times as they struggle to sell hardwood lumber that is the by-product of cutting ties. As inventories pile up, cash ﬂow gets restricted and some sawmills may have a hard time keeping the doors open. Thus, even with healthy demand, we may see a shortfall on the supply side of the equation. Some railroads are already reporting that they are behind in procurement for 2009 installations,” said Gauntt. Matt Clarke, president and chief operating ofﬁcer of Gross & Janes Co. and a former president of the RTA sees the ﬁnancial health of sawmills impacting the www.rtands.com Railway Track & Structures Ocotber 2008 27 RTS1008 p27-37-crossties.indd 27 10/1/08 4:08:44 PM http://www.rtands.com

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Railway Track & Structures - October 2008 Contents On Track Industry Today Supplier News AREMA News NRC News TTCI R&D Railroads Building Solid Foundation for More Capacity with Crossties Safety in High Density Areas M/W Challenges: CN Places New Bridge in Only Six Hours Products and Literature People Calendar Website Directory Advertisers Index Sales Representatives Professional Directory Classified Advertising Chicago Perspective

Railway Track & Structures - October 2008

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