Why Canadian National Railway’s Carloads Rose
Canadian National Railway’s carloads
For the past few weeks, Canadian National Railway’s (CNI) carloads have been following a rising trend. In the week ended January 14, 2017, overall volumes rose 13.2% on a YoY (year-over-year) basis. In the same week, railcar volumes rose to ~63,000 units from ~56,000 units in the comparable week of 2016.
CNI’s railcars, excluding coal and coke volumes, rose 12% in the second week of 2017. CNI’s volumes in the reported week rose in tandem with Canadian railroads’ overall.
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Is coal important for Canadian National?
Canadian National’s coal carloads, including coke, rose 21.5% in the second week of 2017. The company moved ~8,000 coal and petroleum coke railcars that week, compared with 6,500 in the same week of 2016. The percentage drop in CNI’s coal volumes was almost in tune with the percentage fall reported by Canadian Pacific (CP) in the same category.
It’s worth noting that ~4% 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 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 investors could consider investing in the iShares US Industrials ETF (IYJ). Major US railroads make up 5.6% of the portfolio holdings of IYJ.
Frontrunners and laggards
In the week ended January 14, 2017, the major advancing commodity groups were as follows:
- lumber and wood products
- petroleum and chemicals
The major commodity groups that reported declines were the following:
- primary forest products
- pulp and paper products
- nonmetallic minerals
- grain mill products
- metal products
In the next part, we’ll take a look at Canadian National Railway’s intermodal traffic.