BNSF Railway (BRK-B) operates in the Western US and competes with Union Pacific (UNP). BNSF Railway’s total railcars for the week ended July 30, 2016, fell by 2%, to 101,000 units, as compared to more than 103,000 units in 2015. Carloads excluding coal declined slightly YoY (year-over-year) to ~60,000 railcars from nearly 61,000 railcars in 2015. In total, the fall in BNSF’s overall carloads was less than the decline reported by reporting US and Canadian railroads for the week.
Why coal matters to BNSF
BNSF Railway’s coal and coke railcars declined by 4.4% in the week ended July 30, 2016, on YoY basis. For UNP, the decline was 17%. Notably, coal transportation contributed nearly 22% of the company’s freight revenues in 2015, and 90% of all BNSF’s coal tons originated from the Powder River Basin, or PRB, of Wyoming and Montana.
Major coal producers operating in the PRB include Alpha Natural Resources (ANR) and Peabody Energy (BTU). But Peabody filed for Chapter 11 bankruptcy protection in the US on April 13. Environmental concerns and competition from natural gas (UGAZ) have hampered incremental coal shipment prospects for coal producers (ARLP) in 2016, and it looks as if the trend won’t reverse any time soon.
Progressing and regressing commodity groups
The main front runner commodities for the week ended July 30, 2016, were:
- metallic ores
- farm (no grain)
- lumber and wood
The commodities that witnessed a backward movement included:
- forest products
- sand and gravel
- stone, clay, and glass
In the next part, we’ll examine the details of BNSF Railway’s intermodal traffic.