These Commodity Groups Boosted Union Pacific’s Carloads Last Week
Union Pacific’s carloads
In the Western United States, Union Pacific (UNP) competes with BNSF Railway, which is owned by Berkshire Hathaway (BRK-B). In the week ended February 25, 2017, UNP’s overall railcar volumes grew 5.4% YoY (year-over-year) to ~95,000 units.
Railcar volumes, excluding coal and coke, slumped 1.2% YoY to more than 70,000 units, as compared to ~71,000 units in the same week of 2016. (If you want to compare this week’s freight volume data with the previous week’s, check out Market Realist’s Tracking Rail Traffic for the Week Ended February 18.)
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Why coal carloads matter
In the eighth week of 2017, UNP’s combined coal (ARLP) and coke carloads rose a staggering 30% YoY. Although UNP’s coal revenue fell 6.0% in 4Q16, fiscal 2017 has brought some hope for the company, given the upward momentum in coal prices.
Coal’s (CNX) share of the company’s revenue was 14.4% in the same quarter, as compared to 15.3% in the same period one year ago. UNP’s coal revenue depends on coal shipments originating in the Southern PRB (Powder River Basin).
According to the EIA (US Energy Information Administration), PRB production has fallen over the past few years, mainly due to the recession and competition from natural gas. In 2016, PRB coal output fell significantly for the first time since 1998. Competition from natural gas (UGAZ), primarily resulting from reduced natural gas prices, has been one of the main factors affecting coal output recently.
Advancing and declining commodity groups
The advancing commodities in the week ended February 25, 2017, included:
- metals and products
- iron and steel scrap
- farm products, except grain
- grain mill products
The major commodity groups in negative territory were as follows:
- metallic ores
- primary forest products
- petroleum products
- waste and nonferrous scrap
- pulp, paper, and allied products
In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended February 25, 2017.