UPDATE 1-Railcar lease rates near record highs -GATX

HOUSTON Thu Oct 24, 2013 3:53pm EDT

HOUSTON Oct 24 (Reuters) - Railcar leasing company GATX Corp says it sees lease rates for railcars that haul crude oil remaining at or near record highs despite a pullback in shipments earlier this year because of higher U.S. oil prices.

Lease rates for general purpose cars, or those that haul light-sweet or diluted Canadian heavy oil, fell about 10 percent in the third quarter, Chief Executive Brian Kenney told analysts during the company's third-quarter earnings call on Thursday.

But he added that overall rates have risen 500 percent in the last three years, "so we're still very positive. The tank car market rates are still at or near record highs."

The late spring and summer slowdown in moving U.S. crude via rail came as U.S. oil prices rose, eroding a sharp discount to London's Brent. Double-digit discounts prompted a boom in crude movements by train because they were wide enough to absorb extra transportation costs.

Railroads and analysts say that discount has somewhat rebounded, prompting such shipments to pick up.

Railcar lease rates also have jumped in tandem with the crude by rail movement, with per-month costs as high as $2,500 to $3,000, reminiscent of rates charged during the ethanol-by-rail boom in the mid-2000s.

Without saying what GATX's lease rates are, Kenney said some lease rates for railcars in the industry are falling, but those declines largely involve short-term leases of six months to two years. GATX focuses on locking in higher rates for longer leases, and the average lease term for all railcar types during the third quarter was more than five years.

"We will have revenue increases even if rates have peaked at this point in time," he said.

There are about 316,000 tank cars in North America, 79 percent of which are owned by lessors like GATX, the company said in a recent investor presentation. The rest are owned by shippers.

GATX controls 23 percent of the leasing market, second to Chicago-based Union Tank Car, a unit of the Marmon Group, which is controlled by Warren Buffett's Berkshire Hathaway Inc .

Others with smaller shares of the market include railcar manufacturer Trinity Industries Inc and GE Capital Rail Services, a division of General Electric Co.

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