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What is a Railroad Boxcar & Why Are Their Numbers Declining?

The Future of Railroad Boxcars in the U.S. | Transportfolio

Boxcar

For those unfamiliar, a rail boxcar is a versatile, enclosed freight car commonly used on North American railroads. It can carry diverse freight including everything from beer and grain to appliances and pallets.

Boxcars became popular because they can transport any type of good: loose loads like coal and grain, heavy equipment, and even livestock. Another benefit of boxcars is that they can get a larger amount of goods to and from various locations quicker than trucks can.

Brief Overview of Boxcars

What is a boxcar? | Transportfolio

Boxcars first appeared in the 1830’s when Mohawk & Hudson Railroad started covering their rail cars to protect goods from the harsh Upstate New York winters. In order to differ from English design, U.S. boxcars were wider and taller.

In 1870, the industry adopted general interchange agreements, meaning that boxcars could now go outside their previous territory and onto other railroads. Since then, boxcars have continued to increase their dimensions and have transported goods all across the United States (via American Rails).

The Reasons Behind Declining Railroad Boxcars

4 Reasons Behind Declining Railroad Boxcars | Transportfolio

Railroads love boxcars for their efficiency and their ability to transport any type of good. However, many shippers request specialized shipping methods for their goods, therefore boxcars are an unattractive option for them.

Furthermore, the government mandates that boxcars be removed from service when they are 50 years old. These combined factors mean that about 57% of the current boxcar fleet will be retired in the next 15 years, and orders for new boxcars stand at only 0.49% of all freight car orders.

Let’s look more in depth at the reasons boxcars fleets are declining.

  • Shifting Capacity: The current boxcar fleet consists of 115,000 cars; 65,276 boxcars will retire over the next 15 years. But new technologies, such as newer boxcars with higher freight capacities, are slowly replacing the older versions. At the same time, this isn’t an absolute solution; older infrastructure can’t handle the larger freight cars, especially in the northeast.
  • Rise of Privately-Owned Boxcars: Railroads own more than 75% of all boxcars; the average age of these boxcars is close to 30 years. Privately-owned boxcars account for 22% of the market, and boxes have an average age of 19 years. It appears that railroad companies do not foresee a need to increase their ownership or increase their orders for new boxcars in the near future. In fact, they provide incentives and reduced rates to those who use private freight cars instead of using the railroad’s fleet.
  • Changing Industry Needs: Fewer industries today—especially paper, beer, plywood, and metals—still rely on boxcar use. Products that have traditionally shipped by boxcars are now being moved on newer types of freight cars that are more efficient. Lumber is now shipped on center beam flat cars, which can haul more product per car than boxcar, and are easier to load and unload. Auto manufacturers have moved manufacturing facilities closer to suppliers, making trucks a more economical transportation choice.
  • Decreasing Number of Shipments: Boxcar fleets are shipping a decreasing number of shipments. In the last 10 years, rail ton-mile shipments have decreased 42% for lumber/wood, 42% for motor vehicles and parts, and 13.2% in pulp and paper. In addition, railroads find boxcars less attractive than unit trains. Boxcars cost $135,000 each, and they have higher dwell times and lower turns than much more profitable unit trains—large trains with similar equipment that go point to point without stopping.

The Future for Boxcars

Uncertain Future for Boxcars | Transportfolio

The full effect of the rail boxcar decline might not be felt for another decade. One big unknown is whether the retirement of the U.S. boxcar fleet is following the same pattern as the decrease in boxcar demand. It’s unlikely that railroads will stop serving boxcar shippers, but they may underinvest in boxcars, whether intentionally or because they decide to invest in other types of equipment, as was the case when they saw a surge in demand for tanker cars during the U.S. oil boom.

While the loss of boxcars will undoubtedly be very impactful to some shippers and industries, it doesn’t appear it will affect companies equally. Those who can ship with widely-used boxcar equipment and can adapt to the newer 60’ cars vs. the older 50’ cars will likely see less impact.

Companies are likely to see more impact if the equipment used is unique, or the corridors they need to serve lose capacity to an extent that leaves their business short.

At this point, it does not seem clear where potential loss of capacity will be most disruptive, with the exception of those shippers who are already keenly aware of the uniqueness of their situation. It seems today that capacity retirement and replacement may keep pace with the nationwide carload demand.

How to Prepare for the Boxcar Decline

What Should Companies Do to Prepare for the Boxcar Decline? | Transportfolio

The prudent approach is to watch this wave a bit more to discern if it will settle or crash on the shore. Those heavily in this mode are actively working to extend the mandatory retirement age and collaborate with the railroads to help increase the car utilization to get the most out of the aging fleet for as long as possible.

At this time, we do not yet see a clear mode shift issue that will challenge Intermodal or truck demand. The appropriate action today seems to be maintaining a line of sight to this as it unfolds and the effect on other modes.

Final Thoughts

Final Thoughts | Transportfolio

For more information, check out the Surface Transportation white paper focused on the declining boxcar fleet and the effects it will have on other transportation modes in the United States. This white paper was developed in partnership with CyBIZ Lab at the Iowa State University College of Business; students read publicly available information, talked to C.H. Robinson customers, and interviewed representatives from TTX.

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