Insight into Union Pacific’s Intermodal Volumes
Union Pacific’s intermodal volumes
In the week ended December 10, 2016, Union Pacific’s (UNP) overall intermodal traffic rose 1.4% on a year-over-year basis. Trailer traffic fell 2.5%. Container volumes rose 1.6% in our reported week.
In that same week, the company moved around 73,000 containers against ~72,000 in the week ended December 12, 2015. UNP’s percentage rise in intermodal volumes matched the rise reported by US railroads.
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Why is intermodal important to UNP?
For all Class I railroads, including Union Pacific, intermodal growth assumed significance after the headwinds related to coal made its transportation unattractive. In 3Q16, UNP’s intermodal volumes accounted for 38.0% of its total volumes, while intermodal revenues contributed nearly 20.0%.
The company’s intermodal volumes are specifically impacted by the pace of transpacific trade in the Chinese market. Other factors include retail stockpiles and retail demand. Higher stockpiles and lower demand negatively impact all railroads’ intermodal traffic.
In addition, the collapse of Hanjin Shipping, a South Korean shipping company, has affected the intermodal businesses of major US Class I railroads. That’s mainly due to the denial of service by major ports worldwide. These ports feared that if they allowed Hanjin ships, they wouldn’t get paid due to the financial condition of this South Korean shipping giant.
Usually, the intermodal segment of all railroads competes with long-haul trucking companies such as J.B. Hunt Transport Services (JBHT), Swift Transportation (SWFT), Knight Transportation (KNX), and XPO Logistics (XPO).
Transportation sector–specific investors can invest in the iShares US Industrials (IYJ). All major US railroads make up 5.6% of the portfolio holdings of IYJ.
For a comparison of our reported week’s traffic data with the previous week, refer to Freight Rail Traffic for the Week Ended December 3.
More information on US major railroad stocks, be sure to refer to Market Realist’s railroads page.
In the next part of this series, we’ll look at the rail traffic for UNP’s archrival, BNSF Railway (BRK-B).