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Sans Coal, Kansas City Southern’s Total Carloads Shine

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Kansas City Southern’s total carloads

In the week ended September 24, 2016, Kansas City Southern’s (KSU) total railcars fell 3.2% compared to the corresponding period last year. In the reported week of 2016, KSU hauled ~26,000 railcars, compared to 27,000 railcars during the same period in 2015.

However, carloads other than coal and coke rose 0.3% in the reported week of 2016. According to the carload data KSU has reported so far in 2016, the company’s carloads have fallen the least compared to its Class I peers. KSU’s exposure to emerging market Mexico has helped it to push its volumes up.

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Why coal carloads are important to KSU

In the week ended September 24, 2016, Kansas City’s coal and coke railcar units fell 15.6%. In the same week, KSU hauled 5,000 units of coal and coke, compared to ~6,000 units in the corresponding week in 2015.

Utility coal, other coal, and petroleum coke accounted for 7.4% of KSU’s total revenue in 2015. Utility coal and petroleum coke carloads represented ~11% of the company’s total 2015 carloads. Although this amount may not be significant percentage-wise, it holds importance given the company’s relatively small scale of operations.

The company moves coal originating from the Powder River Basin in Wyoming and coal mined in the US Midwest. Coal producers operating in that region, including Alpha Natural Resources (ANR) and Peabody Energy (BTU), have anticipated weak coal shipments in 2016. Black Hills (BKH) also operates in the region, but it doesn’t produce coal commercially.

Transportation sector–specific investors can invest in the iShares US Industrials ETF (IYJ). All major US railroad companies make up a combined 5.5% of IYJ’s portfolio holdings.

Rising and falling commodities last week

For the week ended September 24, 2016, the main commodity groups in the green were as follows:

  • grain
  • chemicals and allied products
  • stone, clay, and glass products
  • motor vehicles and equipment
  • iron and steel scrap

The major commodities in the red were as follows:

  • crushed stone, sand, and gravel
  • grain mill products
  • food and kindred products
  • lumber and wood products, except furniture
  • petroleum products

In the coming article, we’ll take a look at Kansas City Southern’s intermodal traffic.

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