Union Pacific: Behind the Freight Volume Rise in Week 15
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 15, 2017, UNP’s overall railcar volumes rose 7.1% YoY (year-over-year) to more than 91,000 units. Railcar volumes, excluding coal and coke, rose 3.3% YoY to almost 71,000 units compared to 69,000 units in the same week of 2016.
If you want to compare this week’s freight volume data with the previous week’s, you can visit Market Realist’s Week 14: US Freight Rail Volumes on a Growth Trajectory.
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Why coal carloads matter
In the 15th week of 2017, Union Pacific’s combined coal (ARLP) and coke carloads rose an impressive 23.0% YoY. In 4Q16, UNP witnessed a 6.0% fall in coal revenues. However, 2017 has given the company as well as the entire sector some hope, given the upward momentum in coal prices. As a result, many research firms have started factoring in coal growth to railroads’ price targets.
Coal’s (CNX) share of UNP’s total revenues totaled 14.4% in 4Q16 compared to 15.3% in the same period in 2016. UNP 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 recently affecting coal output.
Rising and falling commodity groups
The rising commodities in the week ended April 15, 2017, included the following:
- iron and steel scrap
- crushed stone, gravel, and sand
- stone, clay, and glass products
- grain mill products
- primary forest products
The commodity groups that lagged behind in the week are the following:
- metallic ores
- petroleum products
- metals and products
- waste and nonferrous scrap
- nonmetallic products
In the next part, we’ll review Union Pacific’s intermodal traffic in Week 15 of 2017.