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Kansas City Southern’s Coal Carloads Offered a Surprise

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Nov. 20 2020, Updated 4:31 p.m. ET

Kansas City Southern’s carloads

In the week ended July 9, 2016, Kansas City Southern’s (KSU) total railcars were down 5.8% compared with the corresponding period last year. In the reported week of 2016, KSU hauled ~23,000 railcars against nearly 25,000 during the same period in the previous year. Even the carloads other than coal and coke registered a fall of 9.7% in the reported week of 2016.

The fall in KSU’s carloads in the week ended July 9, 2016, was lowest among all the reporting Class I railroads. You should note that KSU’s freight transportation prospects are also linked with the movement of overall Mexican railcar units.

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Are coal carloads important to KSU?

In the week ended July 9, 2016, Kansas City’s coal and coke railcar units were up 12.2% on a year-over-year basis. In the same week, KSU hauled ~5,000 units of coal and coke against 4,400 plus units in the week ended July 11 last year.

Utility coal, other coal, and petroleum coke accounted for 7.4% of KSU’s total revenues in 2015. Plus, the utility coal and petroleum coke carloads represented ~11% of total 2015 carloads. Even though percentage-wise, this figure may not be significant, it’s important given the company’s relatively small scale of operations.

The company moves coal originating from the Powder River Basin in Wyoming and coal mined in the Midwest US. Coal producers operating in that region like Alpha Natural Resources (ANR) and Peabody Energy (BTU) have anticipated weak coal shipments in 2016. BTU filed for Chapter 11 bankruptcy protection in the US on April 13. Black Hills (BKH) also operates in the same region but doesn’t produce coal commercially.

Investors who want exposure to the transportation sector can invest in the iShares US Industrials ETF (IYJ). All major US railroads make up 5% of the portfolio holdings of this ETF.

Commodity groups

For the week ended July 9, 2016, main commodity groups in the green zone were:

  • motor vehicles and equipment
  • waste and non-ferrous scrap
  • food and kindred products

The major commodities in the red zone were:

  • grains
  • pulp, paper, and allied products
  • chemicals
  • petroleum products
  • metals and products

You can compare this week’s rail data with data from the previous week in Why Freight Rail Traffic Rose in the Week Ending July 2.

For more information on major US railroad (XLI) stocks, visit Market Realist’s railroads page. In the coming part, we’ll take a look at the intermodal traffic of Kansas City Southern.

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