A nearly fivefold increase in steel prices is driving railcar owners to scrap older railcars, a trend that could continue into 2022, according to railcar manufacturer Greenbrier.
Jay Carter, strategic marketing manager for Greenbrier (NYSE: GBX) estimates that steel prices have risen in recent months from $400 per short ton to $1,900, prompting railcar owners to scrap outdated equipment to take advantage of higher scrap metal pricing.
The metal can be recycled to manufacture steel, either domestically or abroad.
In 2020, about 47,000 railcars were scrapped, and 2021 has already reached that mark, according to Carter. About 60,000-65,000 railcars altogether could be scrapped in 2021, Carter said at FTR’s virtual conference last week.
But inquiries to order railcars are also strengthening year-over-year even though higher steel prices could raise manufacturing costs as railcar owners weigh the need for new railcars against how much they’re willing to pay for them, according to Carter.
Those with more railcars in storage could be less inclined to be in the market, Carter said.
Indeed, the number of railcars in storage has fallen to below 400,000, which is more in line with normal levels. The number of railcars in storage peaked last July and August at around 525,000-plus cars. But railcar utilization has been increasing since then, with utilization rates rising for 14 consecutive months, Carter said.
Railcars coming out of storage may…