Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from John Hecht with JMP Securities.
John Hecht - JMP Securities
Good morning guys, thanks for taking my questions. I just wanted to drill down into the pricing increase during the quarter. It was up from last quarter, and it was a pretty healthy number. In thinking about the change from last quarter, some of your comments about, you know, getting, you know I guess comps if you will, are going to become tougher. What should we expect going forward, and then also what happened in the market to cause an increase from last quarter?
Bob Lyons
John, it’s Bob Lyons. I think that it’s driven more by the 17% in Q3 versus the 14% in Q2, is actually driven a bit more by the level of the expiring rates, and was particularly low in Q3 versus Q2. So you see the percentage increase between the two quarters, that’s really the main driver of the change. Going forward, as Rhonda mentioned, you know, we expect through, as we get through 2008, the expiring rates will continue to move up, and then we’ll be renewing cars that have been put on during a better environment, so the comparables will get a bit more challenging, but you know, that’s the phenomenon we’ve been talking about for quite some time.
Brian Kenney
I’d add that if you talk about general pricing, you have to say general because it is, it does differ on a car type basis, but generally freight car absolute lease rates have been coming down over the last couple of quarters, and tank car rates are hanging in there, if you want to think about it on an absolute basis on renewal.
John Hecht - JMP Securities
And the other deep type I’d like to get from you guys on this, you know, I guess, headlines out there talking about some of the ethanol glut, and how many idle cars might be associated with that, is that taking its time, is that working through the system in an orderly fashion, or would that cause potential bit of volatility in pricing in the coming months?
Brian Kenney
I think it will cause some volatility in pricing in the coming months. If you look, if we take a minute here and look at the production and how it’s ramped up over the last five years, say, I mean, in 2001, ethanol production was 1.7 billion gallons, that’s tripled by 2006, and 2007 will be up close to 7, so a lot of production, a lot of capacity coming on, there’s another, depending on what you listen to, 120 plants under construction with another $6 billion at capacity, so a lot of supply, a lot of capacity being built, and demand certainly hasn’t kept pace for a variety of reasons, and seen the price of ethanol fall because of that.
- To read the full transcript on Seeking Alpha, click here »
