OREANDA-NEWS. Rail car leasing company GATX said it allowed a customer to return 200 tank cars in crude service before term expiration in exchange for a $10mn penalty payment.

GATX said it negotiated a deal with the "good customer," which it did not name, to pay the penalty while the customer agreed to lease 100 new high-pressure tank cars. Meanwhile, GATX was able to relet the returned cars.

"It actually turned out to be a net positive," chief executive Brian Kenney said.

GATX executives said on their first quarter earnings call today that lease rates virtually across the board are deteriorating faster than previously anticipated, and the company's own lease price index, a weighted average considered representative of its 124,000 North American fleet, is expected to turn negative this year and could be negative for 2016 as a whole.

Oversupply in several categories, especially coal- and crude-related cars, coupled with "mediocre demand" and higher railroad efficiency that cuts down on transit times have caused rates to fall, GATX said.

Amid falling rates, the company has pushed its average lease term down to 34 months — 45 excluding the heavily depressed coal car market. The fleet-wide average renewal term was 43 months in the fourth quarter and 59 months in the first quarter of 2015.

GATX's fleet utilization for all cars except boxcars was 98.9pc as of 31 March, down a tick from 99.1pc at the end of 2015 and 99.3pc at the end of March 2015.

GATX reported a $69.3mn profit in the first quarter, compared with $62.2mn in the same period of 2015.