Union Pacific’s intermodal traffic
In the week ended August 6, 2016, Union Pacific’s (UNP) overall intermodal traffic declined by 7.4%, as compared to the corresponding period of 2015. Trailer traffic declined by 41%, and container traffic fell by 5.4% that week. The company moved more than 72,000 containers, as compared to 78,000 one year ago.
As compared to rival BNSF, Union Pacific’s intermodal volumes declined by more than three times in the week ended August 1, 2016. The company’s trailer traffic declined by almost three times the fall reported by BNSF in the same category.
Why is intermodal important to UNP?
For all Class I railroads, intermodal growth assumed significance following the headwinds related to energy commodity prices. UNP’s intermodal volumes accounted for 38.4% of total volumes, while intermodal revenues contributed nearly 20% in 2015.
The company’s intermodal volumes are specifically impacted by the pace of transpacific trade in the Chinese market. The other factors include retail stockpiles and retail demand. Higher stockpiles and lower demand negatively impact all railroads’ intermodal traffic. Usually, the intermodal segments of railroad companies compete with long-haul trucking companies such as J.B. Hunt (JBHT), Swift Transportation (SWFT), Knight Transportation (KNX), Hub Group (HUBG), and XPO Logistics (XPO).
Investors in the transportation sector can invest in the iShares US Industrials ETF (IYJ). Major US railroads make up 5.5% of IYJ’s portfolio holdings.
In the next part of this series, we’ll go through BNSF Railway’s (BRK-B) rail traffic.