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How Major US Railroads Fared in 2Q17

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Part 3
How Major US Railroads Fared in 2Q17 PART 3 OF 11

This US Railroad Saw Highest Rise in Coal Revenue in 2Q17

Coal is a key segment for US railroads

In the earlier part of this series, we discussed 2Q17 revenue changes for the major US railroads. Here, we’ll take a look into the coal revenues of these railroads.

This US Railroad Saw Highest Rise in Coal Revenue in 2Q17

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The above graph shows that the smallest Class I US railroad, Kansas City Southern (KSU), posted the highest rise in 2Q17 revenues. The company’s coal revenues rose 74.2% to $49.3 million from $28.3 million in the second quarter of 2016.

2Q17 coal revenues of Eastern US railroads

Major Eastern US railroad Norfolk Southern (NSC) reported a 32% rise in coal revenues in the second quarter 2017. Its revenues rose to $447 million compared with $339 million on a year-over-year basis. Higher seaborne coal pricing led to the enhanced competitiveness of US coal in offshore markets. This, in turn, led to a rise in NSC’s export coal volumes.

CSX’s coal revenues in the reported quarter were up 27% to $530.0 million from $416.0 million in the same quarter a year before. Higher coal consumption in CSX-served coal-fired power plants and a robust demand for the US metallurgical coal led to the rise in CSX’s coal revenues in 2Q17.

Western US railroads’ coal revenues in 2Q17

Union Pacific (UNP) registered a 25% rise in coal revenues to $619.0 million in 2Q17. The rise was on account of a 17% rise in coal carloads. Robust exports on the West Coast and higher natural gas prices improved sentiments for the Western US coal, in turn benefiting UNP. BNSF Railway’s (BRK-B) coal revenues in the reported quarter jumped 39.2% to $912.0 million in 2Q17 from $655.0 million in 2Q16. The 20% rise in coal shipments backed by higher usage of utility coal boosted the company’s coal revenues.

The lowest rise in coal revenues of 11% came from Canadian Pacific Railway (CP) in 2Q17. Coal revenues accounted for ~10% of CP’s 2Q17 revenues. CP’s arch rival in Canada, Canadian National Railway (CNI), reported a 33% rise in coal revenues. Notably, coal revenues and coal carloads account for ~5% of CNI’s total revenues and overall carloads, the lowest in the peer group.

EIA’s coal outlook

According to the US EIA’s (Energy Information Administration) short-term coal outlook released on August 8, 2017, “EIA expects growth in coal exports to slow in the coming months, with exports for all of 2017 forecast at 70 MMst, 17% above the 2016 level. The increase in coal exports contributes to an expected 58 MMst (8%) increase in coal production in 2017. In 2018, coal production is forecast to increase by 10 MMst (1%).”

The Trump Administration’s views on clean energy revived a sense of optimism among US coal (UGAZ) producers. The President’s declaration of the US’s exit from the Paris climate deal was a welcome move from the coal miners’ perspectives. Having said that, the revival of coal’s past glory seems a distant dream.

In the next section, we’ll cover the intermodal revenue change of these railroads.

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