What’s Driving the Decline in Canadian Pacific’s Carloads?
Canadian Pacific’s carloads
Canadian Pacific’s (CP) total carloads fell 11.2% in the week ended January 7, 2017. The company hauled more than 26,000 railcars that week, as compared to ~29,000 in the corresponding week of 2016. CP’s railcars excluding coal fell 8.9% to settle near 21,500 units in the first week of 2017, as compared to ~24,000 railcars in the week ended January 9, 2016.
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Canadian Pacific normally receives 70% of its revenue from Canada and 30% from the United States. CP’s coal carloads fell 20.5% to 4,600 railcars, which was, in percentage terms, almost the same as reported by Canadian National (CNI) in the week ended January 7, 2017.
Why coal carloads matter to CP
Coal accounted for 10.6% of Canadian Pacific’s (CP) revenue and 12.3% of its carloads in 3Q16. The company mainly transports metallurgical coal meant for exports through Metro Vancouver’s port. Its coal traffic in Canada begins primarily from Teck Resources’ (TCK) mines in southeastern British Columbia.
For the past year, coal’s production and demand have been under pressure due to depressed prices, environmental concerns, and a shift from coal-fired power plants to natural gas-based electricity generation. US steel producers’ capacity utilization didn’t see a marked improvement in the recent quarter either.
The commodity groups of US grain and potash rose in volume in the week ended December 17, 2016. Volumes of Canadian grain, forest products, crude, and automotive fell during the same week.
In the final part of this series, we’ll take a look at the changes in Canadian Pacific’s intermodal traffic.