Decoding Carloads of Union Pacific in Week 18
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 May 6, 2017, UNP’s overall railcar volumes rose 7% YoY (year-over-year) to more than 89,700 units. Its railcar volumes, excluding coal and coke, rose 4.5% YoY to more than 70,100 units, compared with 67,100 units in the same week of 2016.
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Why coal carloads matter
In the 18th week of 2017, Union Pacific’s combined coal (ARLP) and coke carloads rose 16.5% YoY. In 4Q16, UNP witnessed a 6.0% fall in coal revenues. However, 2017 has given Union Pacific and the entire sector some hope, given the upward momentum in coal prices. As a result, many research companies have started factoring coal growth into railroad companies’ price targets.
Coal’s (CNX) share of UNP’s total revenue totaled 14.4% in 4Q16, compared with 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 affecting coal output recently.
Rising and falling commodity groups
Rising commodities in the week ended May 6, 2017, included the following:
- primary forest products
- crushed stone, gravel, and sand
- stone, clay, and glass products
- metals and products
Commodity groups that lagged behind in the week included the following:
- metallic ores
- petroleum products
- motor vehicle and equipment
- grain mill products
- iron and steel scrap
In the next article, we’ll review Union Pacific’s intermodal traffic in week 18.