Best of the Week
Most Popular
1.Will UK Interest Rate Rises Crash House Prices? - Nadeem_Walayat
2.Full on Crash Alert for Major World Stock Markets... - Clive_Maund
3.Gold And Silver Market Bottoming? Big Rally Imminent? Reality Check Says NO - Michael_Noonan
4.The Coming Silver Price Rally Will Outperform All Previous Ones - Hubert_Moolman
5.The Trigger For The Upcoming Stock Crash - Harry_Dent
6.Imploding Department Store Results - James_Quinn
7.Dr. Copper is Speaking, are you Listening? ... - Rambus_Chartology
8.Pandemonium in the Stock Market, Dow falls 1,000 points in a week - EWI
9.Asia's Whirling Dervish of Devaluations Has Encircled China's Exports - Keith_Hilden
10.China Weakens the Yuan; Rattles Global Stock and Financial Markets - Gary_Dorsch
Last 5 days
Take Advantage of Record-High Auto Sales… Before This Bubble Bursts - 1st Sept 15
Pondering Hitler's Legacy - 1st Sept 15
Mainstream Media Goes Berserk - 1st Sept 15
Your Decisive Stock Market Plan to Follow Whilst Most Investors Shiver With Fear - 1st Sept 15
Are There Stock and Financial Markets Investing Opportunities For The Remainder Of 2015 - 1st Sept 15
Crude Oil Price Forecast 2015 and 2016 - 1st Sept 15
REPO Window Hidden $Trillion QE Monthly Volume - 31st Aug 15
Silver and Warnings From Exponential Markets - 31st Aug 15
Stock Market Calls Fed’s Bluff - 31st Aug 15
Why Some ETFs Led the Stock Markets Down Last Week - 31st Aug 15
Stock Market Collapse - Take The Opportunity To Bail Before It’s Too Late! - 31st Aug 15
The Most Important Market Chart on The Planet - 31st Aug 15
Stock Market 50% Retracement - 31st Aug 15
Stock Market Crash Red Alert for 2nd Downwave... - 31st Aug 15
Independant Scotland 1 Year on, UK Civil War If the SNP Fanatics Had Succeeded - 30th Aug 15
Gold’s 7 Point Broadening Top - 30th Aug 15
The Day the Stock Market Shook the Earth: Takeaways From the Dow’s 1,000-Point Drop - 30th Aug 15
Gold Price Rally Marked by Short Covering - 30th Aug 15
Aging Stocks Bull Market - 29th Aug 15
Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market? - 29th Aug 15
The Stocks You Should Be Buying After the Market Drop - 29th Aug 15
How I Learned to Stop Worrying and Love Market Fluctuations - 28th Aug 15
China's Yuan Devaluation: Why It Was "Expected" - 28th Aug 15
Stocks Go Nuts But the Question Remains – Will the Rally Stick? - 28th Aug 15
Fed’s Stock Market Levitation is Failing - 28th Aug 15
The Eight Energy Systems Driving The Stock Market Rout - 28th Aug 15
Silver Sold, then Squeezed - 28th Aug 15
U.S. Economic Fundamentals 'Look Good' - Bullard of St. Louis Fed - 28th Aug 15
Stock Market Margin Calls Mount - 28th Aug 15
Einstein, Physics, Gold and The Formula To End Economic Decay - 28th Aug 15
The 10 Best Stocks for Options Trading Plays in This Market - 28th Aug 15
Economics of a Stock Market Crash - 28th Aug 15
Currency Wars Detonate; Gold Refuses to Budge - 28th Aug 15
UK Immigration Crisis Hits New Record, Trending Towards Becoming a Catastrophe - 28th Aug 15
The Ultimate Cash-Management Guide - 27th Aug 15
Why a Fed Rate Hike Could Be a Blessing for Gold Prices - 27th Aug 15
Why Devaluing the Yuan Won't Help China's Economy - 27th Aug 15
Stock Market Trend & Trade Signal Of the Decade - 27th Aug 15
Keep Your Eye On the Gold and Silver Bear - 27th Aug 15
Refugees Expose Europe’s Lack Of Decency - 27th Aug 15
How to Profit from China's Currency War - 27th Aug 15
How China's Currency Policies Will Change the World - 27th Aug 15
Chinese Medicine not Impressing Dr Copper - 27th Aug 15
Novel Biotech Novel Technology Platforms with Dramatic Growth Potential - 27th Aug 15
China Stocks Bear Market Crash, Are We Near the Bottom Yet? - 27th Aug 15
Stock Market Crash Black Wednesday Rally Crushes the Bears - 26th Aug 15
VIX Shorts Being Squeezed While SPX Prepares for Another Decline - 26th Aug 15
Why China's Economy is Deteriorating - 26th Aug 15
Citizenship as a Weapon: Travel Controls and What You Can Do About It - 26th Aug 15
Gold and Silver - How To Manipulate a Market - 26th Aug 15
How to Make a Quick 20% When the Stock Market Crashes - 26th Aug 15
Why We Can’t Handle A Stocks Bear Market - State Budgets Will Implode - 26th Aug 15
Stocks Bear Market, Is This 1929 All Over Again? - 26th Aug 15
The One Trading Strategy You Needed for Stock Market Crash - 26th Aug 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Stocks Slide

China Year of the Snake… U.S. Year of the Tank Car

Companies / Sector Analysis Feb 13, 2013 - 08:45 AM GMT

By: Investment_U

Companies

David Fessler writes: In China, 2013 is the Year of the Snake. According to the website HanBan.com, this means that 2013 should be a year of steady progress and attention to detail. Focus and discipline will be necessary in order to achieve goals.

In the U.S., 2013 might well be called the Year of the Tanker Car, particularly if you are an oil producer in the Bakken or the Eagle Ford shale formations.


If you happen to live near a major rail line in Texas or the Dakotas, you’ve probably seen a train like the one below. It’s what’s known as a “unit train”. A unit train transports a single product or unit.

Photo courtesy of Dakota Plains Holdings, Inc.
In this case, the Canadian Pacific Railway engines are pulling tanker cars full of crude oil. They were loaded at the Dakota Plains Holdings, Inc. (NASDAQ:DAKP) transloading facility in New Town, North Dakota.

New Town just happens to be in the heart of the Williston Basin, also called the Bakken shale oil field. But the engines (if it wasn’t for the snow) could just as easily be Union Pacific Corporation’s (NYSE:UNP). The tanker cars could also just as easily be from a transloading facility in Texas’ Eagle Ford shale oil field.

Regardless, you can expect to see more unit trains like this one… a lot more. Crude oil from U.S. shale deposits is being pumped out of the ground in ever-increasing volumes. It has now outstripped the ability of existing pipelines to carry it.

Historically, 90% of crude oil shipments have been transported around the U.S. via pipelines. In the case of the Bakken, there are few existing pipelines. A number of new ones are in the planning stages, but they can take years to build.

East and Gulf coast refineries would love to get their hands on the inexpensive West Texas Intermediate (WTI) crude. They’re currently forced to pay the higher prices for the internationally priced Brent. It can sell for as much as $25 per barrel more than WTI.

That big differential between Brent and WTI has made crude transportation via rail very attractive. Right now, the only economically viable way to get this surplus crude from fields to refineries on the East and Gulf coasts is by rail.

Crude oil trains have been increasing in number since the BNSF Railway pulled the first one from EOG Resources, Inc.’s (NYSE:EOG) Stanley, North Dakota Terminal.

As you can see from the graph below, courtesy of the Energy Information Administration (EIA), tanker car shipments have dramatically increased in just the last year.

2012 saw a record increase in crude oil production, and a marked decrease in coal use. This is reflected in the movement of these two commodities by rail. Crude oil and related products were responsible for the largest increase in commodity rail car loadings in 2012.

Not surprisingly, coal had the largest decline. This was due to increased use of natural gas for power generation. However, coal is still king of carload shipments. It accounted for 41% of all carloads. This compares to 4% for all petroleum products combined.

It’s the growth of petroleum that’s absolutely stunning. In 2009, crude oil and related products made up just 3% of all carloads in the oil and petroleum products class. In 2012, that number jumped to 38%. The Association of American Railroads reported that nearly 171,000 carloads of crude were moved by rail in 2012.

Playing the Rail-Crude Connection
There are several ways for investors to play the oversupply of WTI crude. The most obvious would be an investment in one of the major rail carriers serving the Bakken or the Eagle Ford shale oil fields. But rail stocks carry a wide range of commodities.

Most major railroads haul coal. Many will be hard pressed to offset the drop in coal shipments as natural gas is the fuel of choice for new power plants.

A more subtle way to play the increase in crude shipments by rail is by investing in tank car manufacturers. Right now, there is a backlog of 40,000 tank cars on order from the top three manufacturers. If you order a tank car today, you’ll wait 18 months to take delivery.

The Union Tank Car Company is a privately held subsidiary of Marmon Holdings. Marmon is owned by Berkshire Hathaway Inc. (NYSE:BRK.A), Warren Buffet’s empire. Union is working flat out to meet its tank car order commitments.

A better way to play
the tank car boom would be to invest in a few shares of Trinity Industries, Inc. (NYSE: TRN). It sells a wide range of products, including wind towers, tanks and rail cars. One of its divisions also operates a barge leasing business.

Trinity’s rail car business is doing extremely well. So well, in fact, that it’s currently in the process of converting several wind tower manufacturing plants into rail tank car manufacturing facilities.

But the best tank car manufacturing play of all is going through the roof. Its manufacturing capacity is sold out through the end of 2014. This company’s stock is up 38% in a little over five months.

They’ll be announcing earnings in the next several weeks. I expect them to exceed analysts’ estimates for the coming quarter and likely for the rest of this year and next. Out of respect for my existing subscribers, I can’t give you the name of this company.

My Peak Energy Strategist newsletter contains the name of this tank car manufacturing powerhouse, along with a number of other great energy companies I follow in my Peak Energy Portfolio.

Right now, 14 of my 15 stocks are showing positive gains with 10 posting double-digit gains.

Click here to learn more about my Peak Energy Strategist newsletter and the name of this tank car manufacturer that could easily double in the next 12 – 18 months.

Good Investing,

by, Investment U Senior Analyst

http://www.investmentu.com

Copyright © 1999 - 2013 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History