uploads///CP Carloads

What Took a Toll on Canadian Pacific’s Carloads?

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Aug. 17 2016, Updated 9:04 a.m. ET

Canadian Pacific’s carloads

Canadian Pacific (CP) registered a fall of 8% in total railcars in the week ended August 6, 2016. The company hauled more than 30,000 railcars that week, as compared to more than 33,000 railcars in the corresponding week of 2015.

CP’s railcars excluding coal declined by 6.8% to settle at just over 24,000 units in the latest reported week of 2016, as compared to 26,000 in the corresponding week last year.

The company received 70% of revenues from Canada and 30% from the US last year. CP’s coal carloads declined by 12.7%—almost half the fall reported by rival Canadian National (CNI) in the reported week of 2016.

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Why coal carloads matter for 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 Vancouver. 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 the shift of coal-fired power plants to natural-gas-based electricity. US steel producers’ capacity utilization has not seen marked improvement in the recent quarter. However, TCK has issued slightly high production guidance for 2016 compared to last year. 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 that year as compared to 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 Canadian grain, US grain, potash, and forest products were up in the reported week of August 6, 2016. On the contrary, fertilizer and sulfur, chemicals and plastics, crude and, metals and minerals, and automotive declined.

Now let’s go through Canadian Pacific’s intermodal traffic.

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