Behind the Slump in CSX’s Carloads



CSX’s carloads

CSX Corporation (CSX) is a major operator in the eastern United States and competes with Norfolk Southern (NSC). In the week ending June 11, 2016, CSX’s carloads excluding coal and coke declined by 8.3% YoY (year-over-year), which is somewhat higher than NSC’s carloads excluding coal and coke.

In all, CSX hauled more than 68,000 carloads in the reported week of 2016, as compared to more than 79,000 carloads in the week ending June 13, 2015. We should note that CSX’s 14.4% fall in total railcars was steeper than the 8.7% fall reported by US railroads for the same week.

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Why do coal carloads matter?

CSX’s coal and coke railcars declined by 32% YoY in the week ending June 11, 2016—double NSC’s decline for the same period. Coal accounted for 16% of CSX’s total volumes and 19% of its total revenues in 2015.

According to the EIA (US Energy Information Administration), the Appalachia region’s coal output is expected to fall by 9% in 2016. But the agency expects total coal production to increase by 2% and stabilize in 2017. CSX mainly connects coal mining operations in the Appalachian mountain region.

The eastern US railroads have cited the shift from coal to natural gas (UGAZ) among electricity generation plants as one of the reasons for the fall in utility coal transportation. The coal tsunami has affected major coal producers in the US, including Alliance Resource Partners (ARLP), CONSOL Energy (CNX), and Peabody Energy (BTU). Due to the sharp decline in coal prices, Peabody filed for Chapter 11 bankruptcy protection in the US on April 13.

Bull and the bear commodity groups

Commodities that posted major gains for CSX in the week ending June 11, 2016, included the following:

  • grain mill products
  • crushed stone, sand, and gravel
  • waste and non-ferrous scrap
  • motor vehicle and parts

The main bear commodity groups were grain, farm products (excluding grain), iron and steel scrap, petroleum and petroleum products, and metallic ores. But we should note that intermodal volumes have been on a bumpy ride in the past few quarters for all Class I railroads.

We’ll look at CSX’s intermodal traffic in the next part.


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