Did Union Pacific See Growth in Freight Volumes in the 13th Week of 2017?
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 April 1, 2017, UNP’s overall railcar volumes rose 10.8% YoY (year-over-year) to nearly ~92,000 units.
Railcar volumes excluding coal and coke rose 6.3% YoY to almost 73,000 units, compared to ~68,000 units in the same week of 2016. Investors interested in comparing this week’s freight volume data with the previous week’s data can visit Market Realist’s Week 12: North American Freight Rail Traffic on the Fast Track.
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Why coal carloads matter
In the 13th week of 2017, Union Pacific recorded an impressive 32.2% rise in combined coal (ARLP) and coke carloads. In 4Q16, Union Pacific witnessed a 6.0% fall in coal revenues.
However, 2017 has brought some hope for the company and the entire sector, given the upward momentum in coal prices. As a result, many research houses have started factoring in coal growth to the railroads’ price targets.
Coal’s (CNX) share of the company’s total revenues totaled 14.4% in 4Q16, compared to 15.3% in the same period in 2016. Union Pacific receives much of its coal revenues from 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 April 1, 2017, included:
- iron and steel scrap
- metals and products
- primary forest products
- stone clay and glass products
The major falling commodity groups were as follows:
- metallic ore
- petroleum products
- grain mill products
In the next article, we’ll assess the position of UNP’s intermodal traffic in the week ended April 1, 2017.