April 11, 2017 – TRA Newswire –
There’s been an upswing in drilling so far this year and that’s translating into good news for Texas railroads that are hauling frac sand. Frac sand is a durable sand used in hydraulic fracturing. According to Naples, Florida-based PFLPetroleum.com, the railcar market is showing optimism.
Rail shipments are up and 50% of all shippers surveyed indicate that they will be putting in major railcar equipment orders this year, according to PFL. The company suggests that parties should look at the market cap increases of the major car manufacturers.
Railcars that carry frac sand to oil producing regions such as the West Texas Permian Basin and the Barnett Shale region in South Texas are being fully utilized and few hoppers are remaining in storage, according to PFL. Backlog of new frac sand railcars have been pushed toward the front of railcar manufacturing production.
Overall it’s reported that Class 1 rail operators are moving substantially more cars than in the mid fourth quarter.
The demand for frac sand is creating price spikes and creating shortages both with railcars and trucks. The industry price has shot up to nearly $40 a ton from a 2016 low of under $15 a ton.
Not everyone is happy with the frac sand surge. The journaltimes.com reports that in Atascosa County, south of San Antonio, residents are fighting a 300-acre sand mine proposed by Preferred Sands of Radnor, Pennsylvania, citing health risks, potential well water contamination, truck traffic and potential damage to the site of the 1813 Battle of Medina, a bloody fight in the early years of Mexico’s long war for independence.
Oil tankers are another matter. The market is correcting itself and some fleets are getting very aggressive on price. PFL reports seeing full service lease rates dropping into the $200’s with some takers. The feeling is some of the cars with substantial useful life will be placed into service for three or four years at almost any price. Older cars, still with useful life but no book value will be pointed to scrap. There is an active market in re-leasing, subleasing and selling cars.