Unloading Union Pacific’s Carloads in Week 17 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 29, 2017, UNP’s overall railcar volumes rose 2% YoY (year-over-year) to more than 89,000 units. Its railcar volumes, excluding coal and coke, were down 1% YoY to almost 70,000 units, compared with 70,600 units in the same week of 2016.
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Why coal carloads matter
In the 17th week of 2017, Union Pacific’s combined coal (ARLP) and coke carloads rose 14.0% YoY. In 4Q16, UNP witnessed a 6.0% fall in coal revenue. 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 revenue 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 April 29, 2017, included the following:
- iron and steel scrap
- crushed stone, gravel, and sand
- stone, clay, and glass products
- nonmetallic minerals
- metals and products
Commodity groups that lagged behind in the week included the following:
- metallic ores
- petroleum products
- grain mill products
- primary forest products
In the next article, we’ll review Union Pacific’s intermodal traffic in week 17.