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Canadian Pacific’s Carloads: Even Coal’s Rise Failed to Stop the Decline

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Canadian Pacific’s carloads

Canadian Pacific (CP) registered a fall of 7.3% in total railcars in the week ended July 23, 2016. The company hauled ~23,000 railcars, as compared to more than 25,000 railcars in the corresponding week of 2015. CP’s railcars excluding coal declined by 11% and settled at nearly 23,000 units in the latest reported week of 2016.

Notably, the company received 70% of its total revenues from Canada and 30% from the US in 2015. In sharp contrast with rival Canadian National (CNI), CP’s coal carloads actually rose by 7.6% in the week ending July 23, 2016.

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Why coal carloads matter to CP

Coal accounted for 10% of revenues and 12.3% of carloads for CP last year. CP, by and large, transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily from Teck Resources’ (TCK) mines in southeastern British Columbia.

In the past year, coal production and demand have been under pressure due to depressed prices, environmental concerns, and shifts in coal-fired power plants toward natural gas electricity generation. But TCK has issued a somewhat high production guidance for 2016. If this goes according to plan, we should see either more coal hauling by CP in 2016 or less contraction in the company’s coal volumes as compared with peers.

Notably, all US-born Class I railroads have exposure in the WisdomTree Earnings 500 Fund ETF (EPS).

Frontrunners and backbenchers

Commodity groups such as US grain, fertilizer, and sulphur and forest products rose in the week ending July 23, 2016. But Canadian grain, potash, chemicals and plastics, crude, and metals and minerals declined.

You can compare this week’s rail data from the previous week in How Did Rail Traffic Fare in the Week Ending July 16.

In the next and final part of this week’s rail traffic series, we’ll check in with Canadian Pacific’s intermodal traffic.

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