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Current Issues and Trends Affecting the Railcar Market

Explore the latest trends, challenges, and opportunities in the railcar market, including fleet utilization, precision scheduled railroad (PSR) initiatives, average train length impact, train innovations, and steel pricing.

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Current Issues and Trends Affecting the Railcar Market

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  1. Current Issues and Trends Affecting the Railcar Market Southeast Association of Rail Shippers (SEARS) Robert E. Pickel Jr., Senior Vice President, Marketing and Sales, National Steel Car N.A. Inc. Hilton Head Island, SC, September 11, 2019

  2. Company Overview About NSC Company Overview To Design the Best To Build the Best Passion Vision Commitment To Be the Best • Founded in 1912, National Steel Car Limited (“NSC” or the “Company”) is North America’s largest single site railcar manufacturer, with the ability to produce over 12 different car types and over 76 models. • Capacity to manufacture up to 16,000 cars annually. • The Company is known throughout the industry for superior quality, reliable and innovative designs, and industry leading engineering and manufacturing capabilities. • NSC is certified to AAR M-1003 and the only North American car builder certified to ISO 9001-2015 standards. • NSC is also a multi year recipient of the prestigious TTX Excellent Supplier Award

  3. Company Overview Products Tank Intermodal Cars Open Top Hopper Covered Hopper Flat Cars Box Cars Centrebeam Cars Gondolas Coil Cars Auto Racks With over 100 years of manufacturing experience, NSC builds all types of railcars. 3

  4. North American Fleet By Group (000’s) Source: RAILINC 2019 4

  5. North American Fleet Cars, by Age and Type Source: RAILINC 2019 5

  6. North American Fleet Cars, by Age and Gross Rail Load (Revenue-Earning Fleet) Source: RAILINC 2019 6

  7. North American Fleet Fleet Utilization (% of Fleet in Use) • Nearly one quarter of the North American fleet is unutilized as of June 2019. • Utilization is expected to further decrease in the second half of 2019. • Related to lower than expected loadings and higher service performance. • Less cars are required to move the same amount of freight. Dotted line indicates historical average. Source: FTR 2019 7

  8. North American Fleet Fleet Utilization-Top 10 Equipment Type Code (Revenue-Earning Fleet) Source: RAILINC 2019 8

  9. North American Fleet Deliveries Outlook Source: FTR 2019 9

  10. North American Fleet Railcars Deliveries vs. Economically Derived Demand Source: FTR 2019 10

  11. North American Fleet Orders, Deliveries and Backlog Source: RSI ARCI Committee 11

  12. North American Fleet Orders, Deliveries and Backlog by Car Type Source: RSI ARCI Committee 12

  13. Precision Scheduled Railroad (PSR) 13

  14. Precision Scheduled Railroad (PSR) • Higher utilization of cars • Demand for higher capacity/per car capacity • Freight rates per car favor higher capacity cars • Higher utilization of equipment leads to increased miles and attendant maintenance • Increased number of cars in storage 14

  15. Average Train Length 15

  16. Average Train Length Impact • Operating longer trains is a part of strategic planning for Class 1 railroads • Increase fuel efficiency and reduce the number of crew required • Fewer shorter trains running • Increased trucking competition incentivises railroads to increase efficiency • Longer trains lead to capital improvements on tracks, longer sidings • Adding DP locomotives can help improve safety and reduce braking response time • Long trains can block upwards of 4-5 crossings concurrently • Strategies need to be implemented to reduce blockage time and increase emergency response times Source: GAO-19-443 Rail Safety 16

  17. Average Train Length Impact • Higher buff/draft forces increase stresses in the car structure • Forces are cyclic loads and may reduce fatigue life of cars • AAR buff/draft design loads are 350,000 lbs. Sheer plate cars are 500,000lbs. 1.8 Load factor applied. • AAR design loads in place for many years (S-286 adopted in 2002) • May not reflect loads seen in today’s longer trains. 17

  18. Train Innovations • Lighter Gondola designs (3,000-5,000lbs) for greater efficiency • New design for Woodchip Gondola cars • Shortest Covered Hopper cars • 55’ 8” LOPF Grain Hopper • 45’ and 47’ LOPF Potash Hoppers • 67’ LOPF Plastic Pellet Hopper • 42’ LOPF Stainless Steel Covered Hoppers 18

  19. Steel Pricing CRU Plate and Coil Rates Source: CRU Indices, August 2019 19

  20. Steel Pricing Scrap Steel Trend Source: AMM, August 2019 20

  21. Material Pricing PPI Railway Maintenance of Way Equipment and Parts, Parts for All Railcars, and Other Railway Vehicles Source: FRED-Federal Reserve Bank of St. Louis 21

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