Which Commodities Drove Union Pacific’s Carloads in Week 11?
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 March 18, 2017, UNP’s overall railcar volumes rose 5% YoY (year-over-year) to ~88,000 units.
Railcar volumes excluding coal and coke rose 1.9% YoY to over 69,000 units, compared to ~68,000 units in the same week of 2016.
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Why coal carloads matter
In the 11th week, UNP’s combined coal (ARLP) and coke carloads rose an impressive 18.3% YoY. Although UNP’s coal revenue fell 6.0% in 4Q16, 2017 has brought some hope for the company given the upward momentum in coal prices.
Coal’s (CNX) share of the company’s total revenue was 14.4% in 4Q16, compared to 15.3% in the same period a year ago. UNP’s coal revenue depends on coal shipments originating in the southern PRB (Powder River Basin).
According to the EIA (U.S. 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.
Rising and falling commodity groups
The rising commodities in the week ended March 18, 2017, included:
- iron and steel scrap
- metals and products
- crushed stone, gravel, and sand
- primary forest products
The major falling commodity groups were as follows:
- metallic ore
- petroleum products
- motor vehicles and equipment
- grain mill products
In the next article, we’ll assess the position of UNP’s intermodal traffic in the week ended March 18, 2017.