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Canadian Pacific’s Carloads Fell despite a Rise in Coal Volumes

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Canadian Pacific’s carloads

Canadian Pacific (CP) registered a 5.5% fall in total railcars in the week ending September 17, 2016. The company hauled 31,000 railcars in the same week—compared to ~33,000 railcars in the same week last year. Even Canadian Pacific’s railcars excluding coal fell 6.7% and settled at 25,000 plus units in the latest reported week of 2016—compared to nearly 27,000 units in the same week last year.

Last year, the company received 70% of its revenues from Canada and 30% from the US. Canadian Pacific’s coal carloads rose marginally—in contrast to the sharp fall of 18.6% reported by rival Canadian National—in the week ending September 17, 2016.

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Why coal carloads matter?

Coal accounted for 10% of Canadian Pacific’s revenues and 12.3% of its carloads last year. Canadian Pacific mainly transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada starts primarily from Teck Resources’ (TCK) mines in southeastern British Columbia.

Since last year, coal’s production and demand has been under pressure due to depressed prices, environmental concerns, and a shift from coal-fired power plants to natural gas–based electricity generation. Even US steel producers’ capacity utilization hasn’t seen marked improvement in the recent quarter. However, Teck Resources 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 Canadian Pacific in 2016 or a lower contraction in the company’s coal volumes in the same year—compared to its peers.

All of the US-born Class I railroads make up the portfolio holding of the WisdomTree Earnings 500 Fund ETF (EPS).

Frontrunners and the laggers

Commodity groups such as US grain and forest products rose in the week ending September 17, 2016. On the other hand, Canadian grain, US grain, fertilizer and sulphur, chemicals and plastics, crude, metals, and minerals, and automotive fell in the same week.

In the last part of this rail traffic series, we’ll discuss Canadian Pacific’s intermodal traffic.

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