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How Union Pacific’s Carloads Compare with the Overall Industry

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Union Pacific’s carloads

Union Pacific (UNP) competes with Berkshire Hathaway’s BNSF Railway (BRK-B) in the Western US. In the week ended August 6, UNP’s total railcars declined by 6.5% to 97,000 units from ~104,000 units in the corresponding week of 2015.

Railcars excluding coal and coke fell by 3.9%, and the fall in UNP’s other-than-coal volumes was significantly higher than the fall reported by rival BNSF. However, the fall in carloads for the company was on par with the fall reported by US railroads for the same week.

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Why coal carloads matter to UNP

UNP’s combined coal (ARLP) and coke carloads fell by 13% on a YoY (year-over-year) basis, and UNP’s coal revenues have declined by 22% during the last year. Importantly, coal’s (CNX) share of the company’s revenues was almost 16% in 2015. UNP’s coal revenues depend on upon coal shipments originating in the Southern Powder River Basin, or PRB.

According to the US government, PRB production has declined over the past few years, mainly due to recession and competition from natural gas. PRB coal output is expected to fall significantly in 2016 for the first time since 1998. Competition from natural gas (UGAZ) due to low natural gas prices have been one of the main factors affecting coal output recently.

Advancing and declining commodity groups

Commodities in the green zone in the week ended August 6, 2016, were:

  • grain
  • stone, clay, and glass products
  • waste and non-ferrous scrap
  • lumber and wood products

The commodity groups in the negative territory were metallic ores, primary forest products, petroleum products, and motor vehicles equipment.

In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended August 6, 2016.

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