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Will Surge in US Freight Rail Traffic Continue?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Part 10
Will Surge in US Freight Rail Traffic Continue? PART 10 OF 17

Why Kansas City Southern’s Carloads Jumped

Kansas City Southern’s carloads

In the week ended March 11, 2017, Kansas City Southern’s (KSU) total railcars rose 21% from the corresponding week of 2016. In the reported week, KSU hauled ~25,000 railcars as compared to ~21,000 units in the week ended March 12, 2016. Carloads other than coal and coke rose impressively 16% YoY (year-over-year).

KSU’s recent growth in coal and coke carloads has been remarkable. The company’s coal and coke carloads rose a staggering 57% in the tenth week of 2017. The company hauled ~4,000 railcars of coal and coke as compared to 2,500 carloads in the corresponding week of 2016.

Why Kansas City Southern&#8217;s Carloads Jumped

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If you’d like to compare this week’s freight volume data with the previous week’s, check out Market Realist’s Week Ended March 4: Was US Rail Traffic on the Right Track?

Are coal carloads vital to KSU?

Utility coal, other coal, and petroleum coke accounted for 9% of KSU’s total revenue in 2016. The share of these commodities’ carloads out of total carloads was 11.7% in 2016. Although the percentage may not seem significant, it’s noteworthy given the company’s small scale of operations.

The company moves coal originating from the Powder River Basin in Wyoming and coal mined in the US Midwest. Coal producers operating in that region, which include Alpha Natural Resources (ANR) and Peabody Energy (BTU), anticipated weak coal shipments in 2016. Black Hills (BKH) operates in the same region but doesn’t produce coal commercially.

Investors interested in the transportation sector could consider investing in the iShares US Industrials ETF (IYJ). Major US railroads make up 6.2% of IYJ’s portfolio.

Advancing and declining commodities

In the week ended March 11, 2017, the following commodity groups advanced:

  • metallic ores
  • chemicals and products
  • petroleum products
  • metals and products
  • motor vehicles and equipment

Major commodities that fell during the week include the following:

  • grain
  • crushed stone, sand, and gravel
  • grain mill products
  • pulp, paper, and allied products

In the next part, we’ll focus on KSU’s intermodal volumes.

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