Propane Tank Car Volumes See Shift to Seasonal Cyclical Trend
Rail shipments of propane are seeing a shift to seasonal swings. The trendline of rail propane shipments was once a steadily rising trend. Rail shipments were required to clear propane and butane from shale plays. If the shale play had enough production, natural gas liquids pipelines were likely in the future to carry product to processing centers or export docks. That buildout was mostly at the end of the last decade and pipelines have siphoned off the rail traffic.
This shift is starkly revealed in data from the Department of Energy. What about normal butane? That commodity has always seen a strong seasonal trend. Demand for butane rail shipments drops in the summer and rises in the winter.
The 2019-2020 season appears to be the first indication of the new market action for propane. That is shipments rise in the winter (green circles) and fall (red circles) in the summer. Tank-car sublease rates dropped to historic lows as the market faced declining shipments and an oversupply of tank cars.
Tank car sublease rates stabilized for the 2020-2021 season and started to rise as the fleet shrank to handle the shifting demand.
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Commentary provided by PLG Sr. Consultant, 30-year veteran business journalist and founder of analytics firm that tracks rail car leasing rates, Clifton Linton.
