Coal Volume Declines Limit the Rise in Canadian National’s Carloads
Canadian National’s carloads
For the past few weeks, Canadian National Railway’s (CNI) carloads have been positive compared to 2015. In the week ended December 24, 2016, or in the 51st week of the year, overall volumes rose 22.4% on a YoY (year-over-year) basis. Railcar volumes rose to ~61,000 units from 50,000 units that week.
CNI’s railcars excluding coal and coke volumes rose 26.4% in the week ending December 24, 2016. Overall Canadian railroad volumes rose 25%, and CNI’s railcar volumes rose in tandem.
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Is coal important for Canadian National?
Canadian National’s coal, including coke carloads, fell 3.2% in the 51st week of 2016. The company moved 6,300 coal and petroleum coke railcars that week, as compared to 6,600 in the comparable week of 2015. The percentage fall in CNI’s coal volumes came in contrast with the positive change reported by Canadian Pacific (CP) in the same category.
It’s worth noting that ~4.0% of CNI’s total revenue in 3Q16 came from coal transportation. Coal’s contribution to the company’s total carloads was a mere 6.7% that quarter. We can thus surmise that CNI might be better positioned to avert coal’s headwinds than peers Norfolk Southern (NSC), CSX (CSX), Union Pacific (UNP), and Kansas City Southern (KSU).
Transportation sector-specific investors might consider investing in the iShares US Industrials ETF (IYJ). Major US railroads make up 5.8% of the portfolio holdings of IYJ.
Frontrunners and laggards
In the week ended December 24, 2016, the major advancing commodity groups were as follows:
- food and kindred products
- forest products
- metals and minerals
Major commodity groups that reported a fall were as follows:
- non-metallic minerals
- waste and scrap materials
- farm products
- grain mill products
In the next part, we’ll take a look at intermodal traffic for Canadian National Railway.