2025 Railcar Revolution: Scrap, Save, or Strategize?
2025 Railcar Revolution: Scrap, Save, or Strategize?
Remember our 2021 blog that tackled the age-old question: should you scrap a railcar or sell it for resale? If you need a refresher, you can revisit it here. But let’s fast forward. A lot has changed in the railcar world since then and it’s time to update that advice. With railcar supply at a critical low and new challenges reshaping the industry, let’s dig into why this dilemma is more relevant than ever.
Where Did All the Railcars Go?
Some perspective. Back in 2021, the railcar market was a mixed bag of storage yards brimming with unused railcars, many of which were destined for the scrapper. The headlines painted a grim picture as railroads and lessors rushed to clean house, offloading older covered hoppers, coal cars, and tanks. This spring-cleaning spree was partially fueled by sky-high scrap metal prices. It was also driven by the push to replace aging assets with newly built railcars.
Of the 1.6 million railcars in the North American fleet, roughly 70% were (and remain) privately owned by shippers, lessors, banks, and others. The decisions these car owners made during this period on which cars to keep, which to scrap, and which to replace rippled through the market and laid the groundwork for some of today’s challenges.
A Perfect Storm of Supply and Demand
Builders and lessors seized the opportunity to refresh their fleets, but the aftermath left a supply gap that’s hard to ignore. The surge in scrapping railcars collided with rapidly increasing new car replacement costs and a strong uptick in demand. Fast forward to today, and you’ll find that hunting for specific railcars like a 4750-cube-covered hopper, a bulkhead flatcar, or an idle mill gondola can be like looking for a needle in a haystack.
Back then, private shippers, however, were less eager to jump on the scrapping bandwagon. For them, railcars weren’t just revenue generators, they were mission-critical tools for moving products, managing inventory, and keeping supply chains humming. Their decision to hold onto aging railcars may have been a saving grace for the industry; at least in the short term.
2025 Trends in Railcar Management
As we kick off 2025, new trends are emerging that will influence the railcar landscape. Scrap prices aren’t near the high rates of 3-4 years ago, but they remain “good”, relatively speaking. Pricing volatility remains but scrap partners are available to support the decision to scrap railcars. Similar to 2021, we anticipate seeing a high volume of end-of-railroad interchange life (EOL) railcars being scrapped in 2025. This will continue to be a mix of all railcar types but a large number of gondolas (the old coal workhorse: flat bottom gondolas now used for scrap), covered hoppers (the fleet favorite ~4750 cube covered hoppers), a mix of flatcars and out of date open top hoppers (think small cube in rock service and high cube in coal/coke service). We also anticipate that many car owners have or will determine their “obsolete” and/or “uneconomical to operate” railcars should be scrapped. These are
railcars coming off lease, moving to or sitting in storage, or requiring repairs that don’t fit the traditional model to repair, repurpose and redeploy. We anticipate the industry will scrap large counts of coal railcars (hoppers, gonds, combos) that aren’t yet out of interchange life but are considered obsolete. We also anticipate the continued scrapping of the finicky small cube-covered hopper built for sand and a barrage of tank cars.
Strategizing the Dilemma
We’re hearing from a lot of shippers who are considering their options so here’s some suggestions. Consider this advice even if you’ve made a decision but haven’t pulled the trigger yet. Here’s the current reality: scrap metal prices are still “good” but railcar demand far exceeds supply. If you’re pondering whether to send your old railcars to the scrapyard, consider these points:
1. Older Railcars Are Still Useful: Even aging, end of railroad interchange life, or damaged railcars can find a productive second life in niche markets with a bit of creative marketing and the right industry connections. By exercising some sweat equity, you might find more than you bargained for by saving that railcar. A qualified partner like Tealinc can help you accomplish these goals.
2. Hold Tight to Surplus Railcars: With cycle times plateaued and ongoing service challenges from Class 1 railroads, having extra capacity can help you weather the storm. If you’re considering a lease renewal, storing cars can be in your favor – even for the near term.
3. Special Cases: There is absolutely a reason to sell, trade, scrap, and replace those end of interchange life and/or obsolete railcars. Upgrading your railcar fleet can revitalize your logistics plan and support instant maintenance and “uptime” savings. Just be sure you’ve got a solid plan of when old railcars are rolling out and new railcars are rolling in.
Let’s Find a Home for Your Railcars
In all the strategizing and planning, you’ll certainly find good news. Most railcars, even those that seem at the end of their life, still have value. Whether they need a bit of TLC to find a new lease on life or a complete transformation, we’re here to help. And if scrapping truly is the best option, we’ll make sure the process is seamless and cost-effective. We’ll even buy your railcars, manage the out of service freight and repair headaches, and either re-purpose your railcars for you or manage the scrapping directly with one of our exceptional scrap partners.
The Bottom Line
Railcars are more than just assets; they’re the backbone of your supply chain and a key driver of your business’ logistics success. So, before you reach for the torch, reach for the phone. Let’s explore all the possibilities and keep your railcar fleet working for you.
Contact us today, and let’s find the best path forward for your railcar fleet.
Warm regards,
Nate Chilton, Director- Railcar Leasing & Sales, and Leasing
Tealinc LLC
Mobile: (815) 762-0184
www.tealinc.com | nate@tealinc.com
