Leasing Improvements May Be Unsustainable

摘要

Ah,the summer doldrums.While many were hoping for carefree days and a return to normalcy,sadly,the world continues to fret and struggle with the coro-navirus and its Delta variant. However, in the shadows of this looming global crisis, the world of North American rail is all atwitter with political activity and other news-grabbing headlines. At the center of the political maelstrom is STB Chairman Martin Oberman. Seven months into the job, Oberman is handling two headline grabbers: First, the CN/KCS/ CP melodrama. Second, STB was called out by Joe Biden's July Executive Order calling for freight rail to give more respect to Amtrak and for improved "competition." As tempting an issue as the Executive Order is for "Financial Edge," Railway Age (William "Shakespeare" Vantuono) covered that topic in good stead. Perhaps next month, the origins of the Biden Executive Order will make for an interesting read. (Spoiler alert: Rail is an afterthought rather than an originator of this initiative.) If that's the "political," this column must be about the "other." GATX CEO Brian Kenny made a fairly bold statement in GATX's second-quarter release on July 20: "Absolute lease rates ... increased for the fourth quarter in a row ... We expect these favorable trends to remain for the rest of this year" (italics added). WOW! Optimism from an operating lessor! That's so 2014! Cue Pharrell Williams! In the June Railway Age "2021 Guide to Equipment Leasing," high scrap rates and finished steel cost were highlighted as impact factors for lease rates that had not created measurable impact in the overall marketplace. Heading into the second half of 2021, that may be starting to change. This is good news for railcar lessors. It demonstrates that lease rates (which have languished for years) can actually rise as a result of market conditions. That is a welcome change for some new entrants in the market that have never seen the historically plum lease rates associated with an uptick in demand.