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Why Did CSX’s Carloads Slump in the Last Week of July?

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CSX’s carloads

CSX Corporation (CSX) is a major operator in the Eastern US and competes with Norfolk Southern (NSC). In the week ended July 30, 2016, CSX’s carloads excluding coal and coke fell by 3.3%—almost the same as reported by NSC. Overall, CSX hauled ~73,000 carloads last week, as compared to nearly 79,000 carloads in the week ended August 1, 2015. That represents a 7.3% fall in weekly carloads on a Y0Y (year-over-year) basis.

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Why coal carloads matter

CSX’s coal plus coke railcars declined by 18% in the week ended July 30, 2016, which was slightly higher than the fall recorded by Norfolk Southern in the same category. Coal previously accounted for 16% of CSX’s total volumes and 19% of its total revenues.

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

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

The bull and the bear commodity groups

The commodity groups that posted significant gains in the week ended July 30, 2016, include:

  • grain
  • chemicals
  • crushed stone, sand, and gravel
  • waste and non-ferrous scrap

The prominent laggard commodity groups were grain mill products, farm products (excluding grain), petroleum and petroleum products, and pulp and paper products.

Continue to the next part for a look at CSX’s intermodal traffic.

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