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Week 14: US Freight Rail Traffic Offers a Ray of Hope

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Part 6
Week 14: US Freight Rail Traffic Offers a Ray of Hope PART 6 OF 16

Union Pacific: Unloading Freight Volumes in Week 14 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 8, 2017, UNP’s overall railcar volumes rose 8.0% YoY (year-over-year) to more than 92,000 units. Railcar volumes, excluding coal and coke, rose 5.1% YoY to almost 73,000 units compared to more than 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 13: US Freight Rail Volumes on a Growth Trajectory.

Union Pacific: Unloading Freight Volumes in Week 14 of 2017

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Why coal carloads matter

In the 14th week of 2017, Union Pacific’s combined coal (ARLP) and coke carloads rose an impressive 20.0% 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 8, 2017, included the following:

  • grain
  • iron and steel scrap
  • metals and products
  • crushed stone, gravel, and sand
  • stone, clay, and glass products

The major falling commodity groups were as follows:

  • metallic ore
  • petroleum products
  • grain mill products
  • primary forest products

In the next part of this series, we’ll assess the position of UNP’s intermodal traffic in the week ended April 8, 2017.

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